Over recent years, a consensus has formed between corporates, financial institutions, investors, governments and regulators: environmental disclosure is a market necessity. It has been proved to raise corporate financial performance, boost resilience and — most critically — direct financial flows toward the Paris Agreement goal of limiting temperature rises to 1.5°C.
However, the mainstreaming of environmental, social and governance (ESG) disclosure has gone hand-in-hand with a rise in reported confusion around the growing ecosystem of related ratings, indices and tools, as well as accusations that companies are ‘greenwashing’ by making false claims about their environmental performance. Combined, these phenomena are detracting from the fundamental purpose of disclosure: to allow better capital allocation.
