As the ESG space becomes more sophisticated, ESG disclosure becomes more complex. With a staggering number of reporting frameworks, initiatives and questionnaires, issuers and investors alike are struggling to understand how these elements interact.
In April 2020, Millani conducted a perception study of Canadian institutional investors to understand their view on the potential impact the COVID-19 pandemic would have on ESG. The study predicted that ESG will be here to stay. It specifically emphasized that markets were seeing the connection between financial value and the social topics that were rapidly being brought forward by
the pandemic, and that investor engagement on these topics would likely increase, to better understand the strategy and management of these topics. During the summer of 2020, MAC conducted a similar survey with its members. Mining companies agreed that there is a growing interest from investors on social topics and believed that their current operational approaches to these topics were effective. The survey also underscored a lack of alignment on the level of disclosure being provided: investors are requesting additional context to social disclosure but are facing challenges taking into account data provided by mining companies, which is often facility and issuer-specific.
Part of the disconnect between investors and mining companies seems to stem from the fact that the former seeks the “Why?” behind the data, whereas the latter had previously been focused on providing the “How?”. As investors are implementing more and more proprietary models to assess ESG topics, the need for raw data from corporate issuers is growing. That being said, investors are also looking for context to understand the trends behind the data. This context helps investors understand why the topic itself and the data being measured are important to the company – in other words, why they are material.
As part of an ongoing roundtable series, Millani Inc. and MAC brought mining companies and a group of Canadian institutional investors together to dig deeper on the perceived disconnect between issuers’ disclosure, and investors’ disclosure needs.