In response to its “Consultation Paper on Sustainability Reporting,” DWS has written a comment letter to the Trustees of the IFRS, pushing for a coherent ESG reporting standard that goes beyond climate-related data and is based on double materiality. This means not only disclosing information about how sustainability issues impact companies, but also how companies affect society and the environment.
In DWS’s letter to the IFRS, Francesco Curto, Head of Research, warns that the current ESG framework is already failing investors with many demanding increasing disclosure about how their capital is being used – yet we face significant challenges in delivering this information. Today, investors are increasingly interested in assessing the impact that capital has on the world (inside-out), rather than only assessing the implications that externalities associated to the issue of sustainability had on a firm (outside in), an approach that was more common until 2019. Furthermore, recent DWS research indicates that without a global ESG accounting standard, ESG investing will fail a large part of the investment community.
Curto explains: “Equity investment ought to be long-term in nature but long-term investors and humanity face many urgent challenges because accounting standards have not kept up with times”. Therefore DWS asks the IFRS to act with urgency.
- Recommend to focus on reporting on double materiality of sustainability from the onset. It is essential given what investors and clients are demanding.
- Believe that non-financial reporting needs to be fully auditable with management made accountable. Non-financial reporting is as important as financial reporting, which is why a gradualist approach is likely to fail
- Argue that the boundary between financial and non-financial reporting is already blurred and not delivering on non-financial reporting means not delivering on the objectives defined by IASB in Article 2 of its constitution.
Marco Ferber, Head of Integrated Reporting commented: “Reporting is where all company performance and activities come together. It is becoming consensus that non-financial reporting is as important as financial reporting, and as a result, also needs to be fully auditable with management made accountable.”
Full details and recommendations can be read in DWS’s complete comment letters (item 503 and item 528), which are publicly available on the IFRS website.
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About DWS Group
DWS Group (DWS) is one of the world's leading asset managers with EUR 759bn of assets under management (as of 30 September 2020). Building on more than 60 years of experience, it has a reputation for excellence in Germany, Europe, the Americas and Asia. DWS is recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, which guides our investment approach strategically.
DWS wants to innovate and shape the future of investing: with approximately 3,400 employees in offices all over the world, we are local while being one global team. We are investors – entrusted to build the best foundation for our clients’ future.