UK’s major listed companies given ESG scorecards – and it doesn’t look good
‘Management of emissions’ and ‘air pollution’ are the biggest ESG risk factors for the UK’s largest listed companies, according to new research by reinsurance firm Chaucer.
On average the UK’s largest listed companies scored just 13.7 and 14.3 out of 100 for ‘management of emissions’ and ‘air pollution’, respectively.
On the positive side, listed companies performed best on involvement in the ‘armaments industry’ and ‘diversity & inclusion’, scoring 87.8 and 79 respectively.
Across all ESG risks, the UK’s largest listed companies scored 66.8 out of 100, higher than smaller listed firms which averaged 52.
Chaucer’s Simon Tighe said the low scores reflected the lack of ESG disclosures in the UK.
“The reason why so many major listed companies achieve low ESG rankings is that they aren’t disclosing enough data – which is the equivalent to them falling at the first fence,” Tighe said.
“If UK listed businesses are going to achieve a high ESG rating then they are going to have to take the initial steps of publishing data that allows stakeholders to measure their performance. If they fail to do that they will achieve a low ESG rating almost by default,” Tinghe continued.
Companies are facing increasing pressure, both from regulators and governments, to improve ESG disclosure.
From 6 April last year, over 1,300 of the UK’s largest companies are required to report on climate-related risks and opportunities. The rules were introduced under recommendations from the Taskforce on Climate-related Financial Disclosures.
The UK is currently considering plans which would require firms to publish their plans for transitioning to net zero. Additionally, in the recently released green finance strategy, the government announced its intention to begin a consultation on the best way to regulate ESG ratings providers.
Looking forward, Tinghe warned that businesses that failed to improve their ESG disclosure would face “significant challenges”.
“Corporates that have not been forthcoming with disclosures risk sending a message to investors that their ESG risks are not managed properly, putting off ESG-focused investment funds and business partners,” he said.
Chaucer’s scorecard, produced alongside ratings agency Moody’s, uses up to 158 metrics to evaluate the ESG performance of a business, based on its disclosures.