Ethical Funds, Canada’s largest SRI mutual fund company, is expressing concern that social issues are being ignored in a major review of disclosure requirements.
Last year, Ontario passed a motion mandating consultation on best practices in environmental, social and governance (ESG) disclosure standards. In response, the provincial securities regulator announced plans to conduct a compliance review of corporate governance disclosure and develop guidance for issuers on compliance with existing environmental disclosure. However, the OSC made no mention of integrating social disclosure in the review process, Ethical notes in its monthly newsletter.
“It goes without saying that enhancing environmental and governance disclosure is desirable, but we believe that social risks are just as material to investors – and in more ways than one,” Ethical says. Companies should be reporting to shareholders and other stakeholders on their own social impacts, both positive and negative, Ethical adds.
“But they also need to report to investors on social and community issues that could impact on the value of the company, by affecting its reputation or license to operate. This crucial second aspect of "S" appears to have received less attention in the recent consultations.”
For example, Ethical points to its campaign asking Enbridge to explain to investors the legal and regulatory implications of Aboriginal opposition to its Northern Gateway pipeline. In a recent report on the oil sands sector, Ethical’s researchers highlighted ongoing First Nations litigation against provincial and federal governments claiming inadequate consultation and possible breach of treaty rights in their management of development in the oil sands area.
“At a time when stock exchanges around the world are beginning to take steps to mandate sustainability reporting, leaving out the "S" in ESG disclosure –and failing to consider the impact of society on the company - could leave investors in Canadian companies exposed to significant risk.”
Ethical’s monthly newsletter.
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