EFFAS Commission on ESG

Archive for January, 2009

EFFAS partnering with major European CSR Initiative

Wednesday, January 21st, 2009

An important industry initiative was launched on March 2006: the “Alliance” among European Commission and companies that aims at making Europe a pole of excellence in Corporate Social Responsibility.

Several working groups (Laboratories) have been activated under the framework of the Alliance in order to tackle relevant issues as they have been identified by the EU Commission. Of particular interest for investment professionals is the Laboratory “Corporate Responsibility and Market Valuation of Financial and Non Financial Performance” (short: the LAB) which is exploring a new model to reduce the gap between investors and companies in the communication of non financial performance.

The Lab aims at demonstrating links between a wide range of environmental, social and governance factors and the financial performance through a filter of core non-financial value drivers. It aims to explain drivers of the long-term value of companies. The ultimate aim of Lab is to develop a European framework for company and investor dialogue.

Gunter Verheugen, Vice President of the European Commission said:

 “Allow me to single out one laboratory whose work has particularly caught my attention: the laboratory on the valuation of financial and non-financial performance. I hope that the work of this laboratory can contribute to a quiet revolution in the way that enterprises who wish to can measure and communicate their non-financial performance, allowing investors and other stakeholders to use such information in their decision making processes. There is indeed no other powerful incentive to consider the strategic role of corporate responsibility than an investor able to value the role that it plays for the future prosperity and sustainability of a business.”

For years, EFFAS has had a strong position in developing standards for the reporting of extra-financials. With its Commission on Intellectual Capital (CIC) and its Commission on ESG (CESG) EFFAS not only has been instrumental in communicating the needs of investment professionals in capital markets to corporates but has also provided practical advise in the form of Key Performance Indicators and interactive data formats. Thus, EFFAS has helped to enhance the integration of extra-financials in classic investment methods.

EFFAS CESG has now joined a partnership with the Lab. CESG’s work on KPIs for ESG has been acknowledged by the Lab as an important cornerstone to Lab’s mission. In the past months EFFAS has supported the Lab with conducting focus groups with investment professionals and companies across Europe to deepen its understanding of the needs and requirements of investment professionals around non financial performance and to test the developing model.

The Lab has launched an open consultation to seek feedback on the framework, an emerging set of principles and recommendations for implementation from companies, investors, trade and sectoral bodies, accounting organisations and other key stakeholders. The interim consultation report “Valuing non-financial performance” and feedback form are available online at www.investorvalue.org. The closing date is 28 February 2009.