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16 - Institutional Investors as the Primary Users of Sustainability Reporting

from Part III - Integrating Sustainability in Financial Markets Regulation

Published online by Cambridge University Press:  30 January 2025

By
Gaia Balp  and
Giovanni Strampelli
Edited by
Kern Alexander ,
Matteo Gargantini  and
Michele Siri
Kern Alexander
Affiliation:
University of Zurich
Matteo Gargantini
Affiliation:
University of Genoa
Michele Siri
Affiliation:
University of Genoa
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Summary

A fundamental pillar of the European Commission’s Strategy for Financing the Transition to a Sustainable Economy, harmonized sustainability reporting is functional to giving substance to a company’s sustainability endeavors, to identifying a shared classification system for sustainable activities, to tackling greenwashing, and to helping institutional investors meet the disclosure obligations they, in turn, are imposed on by the SFDR. While institutional investors remain the main users of corporate sustainability disclosures, yet sustainability reporting facilitates interaction between investors and other stakeholders, such as NGOs, as a lever by which to enhance stakeholders’ voice and overcome the limited ability of broadly diversified institutions, especially passive fund managers, to actively monitor portfolio firms and reduce systematic portfolio risk. In order for EU sustainability reporting to deliver on its promises, two factors are crucial. First, the current fragmentation of non-financial reporting standards based on different frameworks and, particularly, on diverging notions of materiality, should be overcome. Second, an adequate balance between the narrative and quantitative dimensions of sustainability reporting should be struck in order not only to make sustainability disclosures meaningful for its users, but also to allow for mutually connecting, and achieving coordination between, financial and non-financial information.

Keywords

institutional investorscorporate purposegreenwashingharmonization of non-financial disclosurefinal users of non-financial informationdouble materialityrisks of information overloadcomparability in sustainability information
Type
Chapter
Information
The Cambridge Handbook of EU Sustainable Finance
Regulation, Supervision and Governance
 , pp. 431 - 448
Publisher: Cambridge University Press
Print publication year: 2025

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