COVID-19 has also reinforced and brought new prominence to the importance, both to shareholders and stakeholders, of the “S” in ESG.
2 Use what you already know. While most reporting frameworks are converging on the TCFD framework, issuers can still make use of the guidance provided by the GRI, CDP and the Corporate Reporting Dialogue’s Better Alignment Project in order to identify information and data already in their possession that may be used to make TCFD-aligned Climate Disclosure. 199 3 Two heads are better than one. In considering how to strengthen and implement issuers’ ESG and climate change strategies, consider retaining experienced advisers who can assist with cost- efficient ESG assessments, including the often complex modelling needed for climate-related scenario analysis. Even issuers with several years of Climate Disclosure under their belts can benefit from a fresh set of eyes. Having expert advice can provide much-needed clarity on an issuer’s materiality assessment of a wide range of ESG-related risks, including the process used to prioritize such risks.
4 Address social factors. Beyond climate-related risks and disclosures, as well as the focus on the host of governance issues over the past decade, issuers must carefully consider the social factors relevant to their businesses, if they have not yet done so, having regard to the key risks and opportunities, and their long-term strategies and plans. These factors include, but are not limited to, human capital and human resources, ethical practices, and diversity and inclusion. Issuers should also be prepared to be able to clearly articulate their broader corporate or social purpose, and how their policies and practices promote those long-term goals. 5 Provide transparent disclosure. As we discussed in past Davies Governance Insights reports, significant improvements can be made by many issuers to improve the clarity and transparency of their disclosure on ESG issues, as well as the entity-specific risks facing them. Rather than 15-page lists of generic risk factors contained within annual information forms or annual reports, consider the core ESG- related risks and opportunities facing the issuer, applying existing securities law materiality standards for these purposes. Where possible, aim to quantify the risks and potential outcomes for investors, particularly with respect to climate- related risks.
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Governance Insights 2020
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