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In this paper, the second in the series, we rank the
world’s stock exchanges based on the extent to
which their large listed companies are disclosing
the seven “first generation” sustainability indicators:
employee turnover, energy, greenhouse gases (GHGs),
lost-time injury rate, payroll, waste and water.
As in last year’s ranking, we find that corporate
sustainability reporting practices diverge sharply
across the world’s equity markets. European stock
exchanges once again performed favourably,
accounting for eight of the 10 top ranked exchanges,
but this belies the incredible catch-up process
that is unfolding in emerging markets: emerging
markets-based stock exchanges are on track to
overtake their developed-world counterparts in
terms of quantitative sustainability disclosure
performance by 2015.
While corporate sustainability disclosure can
be driven by many factors, we find evidence
that successful disclosure practices are closely
associated with a specific policy permutation.
Nine of the 10 top ranked exchanges are located
in countries with sustainability disclosure policies
that are mandatory, prescriptive and broad—what
we refer to as “super policies.” Of the 10 bottom-
ranked exchanges, nine are based in countries
with no super policies in place.
Corporate sustainability reporting is important. It
is structurally and intellectually consistent with
the general trend towards increasing corporate
transparency. It provides a more complete picture of
a company’s social and environmental impacts. And
it gives investors an additional source of information
that can be mined—and potentially exploited in the
context of portfolio management.
The great slowdown that we have discovered in
quantitative corporate sustainability reporting is
therefore triply problematic. Closing the existing
disclosure gap will almost certainly require
intervention by policymakers.
Yet this is hardly a straightforward task. Sustainability
data often falls into a “grey zone” insofar as financial
materiality is concerned, which can give companies
scope for legally circumventing disclosure requirements.
And for some stock exchanges, sustainability
disclosure policy may be at cross-purposes with
their business model.
Beyond these considerations, policymakers of all
stripes are often burdened with a complex and
almost overwhelming set of policy tools that can
be used to drive corporate reporting practices.
For policymakers that are looking to overcome
these barriers, this paper provides insight into
relevant disclosure trends, clear analysis about
which policies are working, and a framework to
begin the process.
Executive Summary
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