Banks should expect greater scrutiny of their non-financial reporting disclosures in the future given that the coronavirus has caused investors and other stakeholders to focus sharply on business sustainability post COVID-19 lockdowns.
Tim Dring, EY’s Oeania and Capital Markets Leader, says that while recent developments in getting sustainability reporting more global in one set of reporting standards are ‘fluid’, he says that companies such as banks are being forced to look ever more closely at sustainability issues.
A part of this move to reporting sustainability more fully and to the satisfaction of investors, Dring asserts, is to communicate the value of the entity in all of its forms.
“The COVID-19 pandemic has also reinforced a focus on sustainability as a means towards resilient recovery. This is more than just a reputational imperative. Investors and customers are increasingly using environmental, social and governance metrics to determine a business’s value, considering not only its resiliency against short-terms shocks, but also how its purpose aligns to long-term value creation,” Dring says.
“So, while this was already on the banks’ agendas, we can expect to see it moving even higher up the priority list post-pandemic.”
Dring told Banking Day that there were a series of issues that take up that space referred to as sustainability reporting, with cybersecurity being among the critical issues on which people are focused.
He notes that there will need to be a focus on transparency and consistency in reporting progress being made in performance in areas that are usually regarded as being non-financial.
Dring’s remarks comes as the global body charged with the setting of international accounting standards, the IFRS Foundation, consulting with stakeholders worldwide on the best way to revise its constitution to incorporate a new standard setting body.
The speed at which the IFRS Foundation is moving is in part the result of pressure from global regulators who have decreed that a single sustainability framework is essential.A top priority for the new standard setting body once it is created is a sustainability reporting standard on climate reporting.