Deutsche Börse Group s Best Practice Guide Communicating Sustainability to Investors. 6 May 2015, Paris

Transcription

1 Deutsche Börse Group s Best Practice Guide Communicating Sustainability to Investors 6 May 2015, Paris

2 Deutsche Börse Group 2 Rationale to develop a Best Practice Guide to Corporate Sustainability Disclosure Deutsche Boerse strives to improve transparency in capital markets We organize regulated markets characterized by integrity, transparency and safety Investors require a more holistic corporate reporting We spoke to various mainstream as well as SRI investors and stated a growing demand from national and international investors to consider key environmental, social and governance aspects in their investment decisions Support corporates in effective capital market communication The idea is to bundle international best practices in corporate sustainability disclosure and to provide the market insight of notable investors to our listed issuers 2

3 Purpose of the Best Practice Guide Deutsche Börse Group 3 The guide explains the rationale for sustainability disclosure and thus facilitate voluntary sustainability reporting bundles international best practice in corporate sustainability disclosure provides practical useful guidance complements international standards The guide does NOT provide mandatory procedures for capital market communication replace existing reporting standards and guidelines constitute an exhaustive list of issues to be considered to raise corporate transparency The idea is to support corporates in effective capital market communication by promoting a more holistic reporting concept 3

4 Deutsche Börse Group 4 Benefits of Corporate Sustainability Disclosure. A growing number of investors, in particular large institutional investors committed to creating long-term value for their customers, look for a more complete picture of organizations. Companies that anticipate and manage opportunities associated with sustainability trends are better equipped to succeed in highly competitive market. The consideration of sustainability aspects can thus result in organizational strength which may translate into improved investment returns. Sustainability reporting forces companies: to early identify emerging risks from an holistic/integrated perspective to develop appropriate mitigation strategies for improving the company s ability to manage environmental, social and governance aspects of its business operations A more holistic reporting perspective provides confidence and trust and it completes the picture of the company 4

5 Identified Best Practice Recommendations Deutsche Börse Group 5 Structure of Guide: I. Disclosure content: Picture the top-down approach Consider stakeholders requirements Provide material information II. Reporting principles: Prefer quantitative data Refer to international/national standards Focus on risk and return approach Each best practice recommendation includes a concrete example to provide useful orientation, in particular for non/new ESG-reporters 5

6 Deutsche Börse Group 6 Management Summary: The Best Practice Guide on sustainability reporting aims to encourage companies to adopt a holistic reporting perspective The guidelines were developed by market participants for market participants and therefore focus on the capital market perspective The Guide bundles internationally valid reporting usances including selected best practice examples With seven recommendations, it offers structured instructions for an intelligent and above all efficient handling sustainability topics in capital market communications and is therefore especially suitable for small and medium-sized companies as well as reporting novices Adherence to the Guide is voluntary; it contains no specifications on topics/indicators because the selection and weighting of particular ESG issues itself provides important information to investors/analysts 33_going_being_public/10_products/Communicating_sustainibility/Communicating_sustainibility.pdf

7 Deutsche Börse Group 7 Deutsche Börse Group acting as role model with respect to own ESG performance and disclosure Publication of Integrated Report since 2012 High quality ESG Reporting (GRI A+, verified by KPMG) Service provider with focus on HR relevant KPIs In addition to requested data according to GRI 3.1, DBG publicly reports detailed data on our workforce including its composition, promotions, turnover rate, investment in trainings, etc. as well as information on voluntary employee benefits Intensified investor communication Improved rating results leading to presence in major sustainability indices

8 Contact Julia Taeschner Deutsche Börse AG Mergenthalerallee Eschborn Germany Phone +49-(0) Kristina Jeromin Deutsche Börse AG Mergenthalerallee Eschborn Germany Phone +49-(0)

9 Back-up 9

10 Recommendation 1: Picture the top-down approach Key messages Deutsche Börse Group 10 It is the Board s responsibility to define and to report key topics / key performance indicators (KPIs) that reflect the company s economic, environmental, social and governance impacts. Concentrate on a few, management-relevant controlling figures. Prioritisation / valuation of KPIs by management highlights the company s unique selling points. Link to corporate strategy as well as impact on company s financial results / profit & loss statement must be clearly described (= ESG value drivers). Cascade sustainability down from Boardroom into day-to-day business allowing stakeholders to perform comprehensive decision making. Investor Relations should promote a complete picture of the company, covering all economic, environmental and social aspects.

11 Deutsche Börse Group 11 Recommendation 2: Consider Stakeholders Requirements Key messages Variety of stakeholders (may include shareholders, employees, customers, consumers, NGOs etc.) formulate a great deal of requirements. Analysis of stakeholders concerns and interests offers guidance for identifying the content of sustainability reporting, however focus on investor needs. Make sure to actively manage disclosure content (instead of a reactive approach). Do not underestimate importance of sustainability ranking and rating agencies / research providers the majority of investors buy sustainability data to fill their individual evaluation tools. List of sustainability ratings / data services (incl. short description of scope / specifics): -Bloomberg ESG -GMI rating -imug / eiris -MSCI -Oekom research -Sustainalytics -RobecoSAM -Vigeo Clarify which data sources major shareholders of the company preferably use / consider in their investment decisions and prioritise resources accordingly.

12 Recommendation 3: Provide Material Information Key messages Deutsche Börse Group 12 More information does not necessarily mean better transparency: disclose material information that may influence the assessment of the company s ability to create and sustain value ( Less can be more ). Scope, weighting and granularity of topics in sustainability reporting may vary due to company s unique characteristics (business model, operating environment), industryspecific trends as well as the level of company s sustainability performance. Ideally, provide complete set of key performance indicators at the same time / in the same document ( Vision = Integrated Reporting). Choose language of investors, provide information in form of a management summary, with key messages, listed in a table / bullet points. Investors prefer a reporting that demonstrates the linkages between an organization s strategy, governance as well as financial performance and ESG aspects strictly focusing on core business activities. Visualize sustainability information in the company s corporate presentation.

13 Deutsche Börse Group 13 Recommendation 4: Focus on Risk-and-return Approach Key messages Corporate sustainability disclosure should reveal the company s ability of an effective, comprehensive risk management and risk mitigation as well as the company s ability to identify sustainability related opportunities and prospects for future growth and its unique selling points Be as specific as possible, highlight measures to mitigate risks / leverage opportunities, include valuation of management. As a result, the risk and return profile of the stock may change.

14 Recommendation 5: Prefer Quantitative Data Key messages Deutsche Börse Group 14 Quantitative data is better than qualitative data as it can be compared to similar data from other organizations. Data should be condensed and easy to find if necessary, add useful explanation that helps stakeholders to assess the relevance / impact. Ideally, define also specific measurable ESG targets. Investors are not only interested in past sustainability performance but also in corporate guidance with respect to expected industry trends and corporate strategy to face upcoming challenges. Explain changes in the selection / development of KPIs compared to previous years and ideally, provide benchmark data.

15 Deutsche Börse Group 15 Recommendation 6: Refer to International / National Standards Key messages KPIs should be defined based on company s unique characteristics, ideally according to industry usance / financial reporting principles (method, scope, granularity, basis of consolidation etc.). For comparability matters, investors encourage companies to adopt internationally / nationally accepted sustainability reporting frameworks. List of international/national standards: -Global Reporting Initiative (GRI) -United Nations Global Compact -International Integrated Reporting Council (IIRC) -DVFA / EFFAS KPIs for ESG -Sustainability Accounting Standard Board ( industry-specific accounting standards) -ISO guidance on social responsibility -Deutscher Nachhaltigkeitskodex (DNK, German Sustainability Code ) -OECD framework -Transparency International