The UK’s corporate governance watchdog should explore ways to increase transparency in corporate reporting of company contributions towards the UN’s Sustainable Development Goals (SDGs), according to recommendations from an independent advisory group.
The group’s report, Growing a culture of Social Impact Investing in the UK, details a number of recommendations—among them a call for companies to reveal how they perform against the SDGs.
The report resulted from a perceived lack of progress in enabling individuals to make social impact investments.
It said: “Having looked into the reasons why the UK is not fulfilling its potential for social impact investing, the advisory group has concluded that none are insurmountable.
“In fact, there is a real opportunity to build on a history of social impact innovations in the UK and contribute actively to global sector leadership.
“Achieving these aims will require a sustained commitment to creating a culture of social impact investment and savings across UK financial services, its regulatory and supervisory institutions and in government.”
Elizabeth Corley, vice-chair of the advisory group, said: “Our aim in undertaking this work was to broaden discussion and encourage wider debate around social impact investing to catalyse an increased focus on developing the market.”
The report’s reference to the SDGs will be seen by many as a call for companies to integrate the goals into their corporate strategies.
“The Department for Business, Energy and Industrial Strategy should explore, with the FRC, how best to encourage UK business to increase transparency on the contribution business makes towards the achievement of the UN SDGs,” said the report.
“Separately, in regard to the FRC consultation on companies’ strategic report, the FRC should explore ways in which material information, useful to wider stakeholders, can be reported in the context of the UN SDGs.”
The report also called for better reporting of non-financial outcomes for the financial services industry.
“Industry should work with the Investment Association (IA) and CFA Society UK to develop consistent good practice and set common standards for social impact investing. This would include determining processes and reporting, potentially using the SDGs as a framework.”
The report called directly on companies to “embed positive social impact in business as usual”. This, the report said, would increase the number of “investable” companies for social impact investors to target.
It said: “More consistent outcome reporting linked to UN Sustainable Development Goals will improve investor understanding and help boost confidence in the strategic relevance of non-financial measures over time.”
The Financial Reporting Council (FRC) welcomed the report. In a statement it said: “The UK is a global leader in social impact investment. This report highlights opportunities for the FRC to improve public trust in business by promoting greater understanding of the broader social benefits generated by business and investors.”
The FRC will consult on changes to the UK Corporate Governance Code in the near future including, it said, a need for companies to “link corporate governance to purpose,” and engage with wider stakeholders. The consultation will include questions about the UK Stewardship Code for investors, among them the extent to which the concerns of wider stakeholders are embedded in engagement and monitoring by investors.
The FRC said that, as part of a recent consultation on the Strategic Report—a requirement of company annual reporting—it had “encouraged” companies to “consider the impact of their activities on a wider group of stakeholders and those matters that contribute to the long-term success of a company”.