Towards decision-useful investor sustainability disclosure

This report:

• informs policy makers about the current state of investor sustainability disclosure and highlights the importance of integrating sustainability factors;
• identifies key challenges data users and disclosing entities are facing with existing disclosure regulations and frameworks;
• offers practical steps that policy makers can take to address these challenges and improve the decision usefulness of disclosure, with case studies demonstrating how different stakeholders have responded.

It supports the development of disclosure frameworks that effectively inform investment and policy decisions in the context of heightened sustainability-related risks. By outlining key principles of decision-useful reporting, and identifying converging trends in disclosure topics and structures, the research also helps policy makers and regulators advance global alignment efforts.

Policy recommendations to address challenges of investor sustainability disclosure

PRI research revealed that, while government and non-government sustainability disclosure frameworks show progress in aligning on responsible investment objectives, disclosure topics and fund-naming rules, there is a growing mismatch between investors’ data needs, what disclosure frameworks and regulations require and entities’ capacity and resources to prepare disclosure.

We make seven policy recommendations to address these challenges.

1. Layered disclosure system: combine mandatory baseline disclosures with opt-in regimes to balance the need for a level-playing field and flexibility to accommodate varied investment objectives. 
2. Balance rule-based and principle-based approaches: embedding principles of proportionality and flexibility in standardising disclosure and enhancing credibility.
3. Drive global alignment: engage in international standard-setting, adopt globally recognised indicators and support emerging economies to align with global standards.
4. Reduce reporting burden: streamline implementation, enhance policy consistency and cohesion, and build capacity, especially for small- and medium-sized entities (SMEs) and disclosing entities based in emerging markets.
5. Enable feedback loops: foster two-way communication between data users and disclosing entities to improve quality and relevance.
6. Support data users: build capacity and develop the right infrastructure and tools to enable asset owners and retail investors to access and use data.
7. Integrate disclosure into a holistic policy framework: link sustainability disclosure with broader policies to ensure transparency enables efficient capital allocation and to deliver real world value.

The purpose of investor sustainability disclosure

Well-designed investor sustainability disclosure frameworks should support investors by:

• ensuring institutional investor clients have access to relevant information in relation to selecting, monitoring and engaging with investment managers. This enables clients to: hold their managers to account for managing material sustainability-related risks, opportunities and impacts; align investment with their sustainability preferences; and reduce risks of greenwashing.
• helping investors meet their own disclosure requirements and compare themselves with peers. This enables institutional investors to better fulfil their duties and demonstrate alignment with best practice standards.

To assess the effectiveness of current disclosure frameworks in supporting these use cases, we ran workshops, conducted stakeholder and signatory interviews and undertook a landscape review of disclosure frameworks and standards across PRI signatory regions. Investor data needs and the related challenges have been grouped into three categories:

• Relevance – the data collected through sustainability disclosure is not always relevant to the users’ needs. Furthermore, it is unclear how some of the disclosed data is used.
• Accessibility and availability – the absence of a standardised digital format impedes the effective flow of information through the financial system and limits its incorporation into relevant processes. Similarly, data is not always understandable to the intended users, given their capacity and expertise.
• Quality: comparability and credibility – fragmented requirements across jurisdictions and entity types mean data users may discover gaps that limit their ability to make comparisons across all relevant entities or activities.

Additional challenges in the current sustainability-related disclosure landscape relate to the implementation burden – including entities sometimes being required to report similar data multiple times – and entities’ capacity to report and integrate data into decision-making. These challenges are exacerbated by those outlined above.

About the research

The content of this paper is based on the analysis and synthesis of:

• workshops – 38 PRI signatories participated in interactive discussions across six workshops;
• signatory interviews – 18 PRI signatories were interviewed;
• stakeholder interviews – 12 stakeholders across regulators, financial institutions and data service providers were interviewed;
• landscape review and analysis – 169 sustainable finance disclosure frameworks were reviewed, with a focus on key PRI signatory regions.

This paper provides a snapshot of the sustainable finance reporting landscape as of December 2024. Due to its broad scope, specific geographic nuances may not be fully represented across all jurisdictions. While the research engaged with a diverse range of stakeholders through interviews and workshops, the sample may not extensively capture all market perspectives, particularly those from smaller entities and emerging markets.