Article: Attracting Investment by Disseminating ESG Disclosures

Research is increasingly showing that investors are looking toward disclosures on Environmental, Social and Governance metrics today to provide information on how a company will provide value in the long term. In a study undertaken by Konstantonis et al (2018) it has been identified ‘Companies committed to ESG are finding competitive advantages in product, labor, and capital markets, and portfolios that have integrated “material” ESG metrics have provided average returns to their investors that are superior to those of conventional portfolios, while exhibiting lower risk’. There is also growing evidence that even the economic downturn has not reduced the investment in ESG funds in both the US and European markets (S & P Global (2020)).

Whilst investment into companies with strong ESG metrics is growing, it is seen that the trickle-down effect into emerging markets is slow. In the IFC-PBC webinar on ‘Responsible Business Conduct: The Value on Transparency’, it was stressed that in emerging markets there is a lower access to quality data as disclosure is less advanced – and this is the main reason for not attracting foreign investment.

In many emerging economies, where capital markets are the main driver for reporting – ESG metrics are increasingly on the stock listing requirements (IFC, 2019). In this regard, the PSX has recognized the importance of disclosure on non-financial issues in its Annual Reporting Awards, awarding points for disclosures on gender representation and companies who report on at least 2 SDGs. In Pakistan, it is also important to recognize that  companies that export goods are also disclosing on environmental and social metrics.  Companies in the textile sector are increasingly disclosing on their gender metrics, environmental stewardship and labor standards. Hence, it can be suggested that export orientated businesses are using  globally recognized metrics to report on data.

On the other hand, disclosure by companies in Pakistan also shows a confusion between philanthropic donations under the umbrella of corporate social responsibility (CSR) in Pakistan and reporting on sustainability metrics. Whilst the SECP’s CSR Voluntary Guidelines identify a management approach to CSR, it is left to the organization to define CSR (SECP, 2013).  Whilst the sustainability investment landscape has grown multifold globally since the publishing of the CSR Voluntary Guidelines – it seems that companies in Pakistan still have a confusion towards the importance of aligning sustainability with the business model.  Research related to the options for sustainable investment financing in Pakistan, also identify a need to move from the closed CSR agenda to a broader, sustainable development agenda (GIZ, 2019).

The information required for investing needs to be robust and comparable for investors to look inward for investing in Pakistan’s private sector. It can be daunting though for companies to start reporting as there are multiple frameworks which can be used. Some frameworks are principles based whilst others require reporting on specific metrics. The International Integrated Reporting Council (IIRC) begins with the aligning of the business model with the 6 capitals. This starting process is found to be tricky for most businesses globally. In a recent review, the ACCA has identified a gap still exists in linking the multi-capital approach with value creation – which shows that guidance is still needed at a global level. In terms of disclosing on ESG metrics, the Global Reporting Initiative (GRI) has an approach which is popular globally. A survey by the PwC, highlights  globally 73% of companies report using the GRI Standards whilst  only 18% of companies develop reports using the IR Framework (PwC, 2018). Comparably in Pakistan, The Baseline Survey on Sustainable Development and SDG Reporting among listed Companies in Pakistan’ identified only 17% of companies report using the GRI standards in Pakistan and 9% use the IR Framework respectively. Hence a gap exists in how companies are disclosing in Pakistan as compared to global good practices.

A good sustainability report essentially reflects how the organization creates value in the long term.  It identifies and focuses transparently on issues that are material to a variety of stakeholders. The narrative is based on data that is robust and transparent. There is also a growing emphasis on how companies are responsible for their supply chains. With regards to these requirements and the multiple approaches to reporting available as good practice, it can be recommended that companies use the ‘Beyond the Balance Sheet – IFC Toolkit for Disclosure and Transparency’ as guidance. This toolkit focuses on enabling companies to either report on how to sustainability is embedded in the business strategy or to report on managing sustainability risks and opportunities alongside business strategy. It also provides a comprehensive approach to definitions of sustainable development and material issues. ( For further information on the toolkit watch the IFCPBC Webinar on Responsible Business Conduct: The Value of Transparency’)

With respect to disclosure indicators, there are a multitude of indicators which companies can report on. Another trend which is being seen is that sector specific indicators are being identified. This is to assist companies in reporting on indicators which can help companies report and manage the non-financial material risks for their organization. It has also been identified that these risks will also be different from country to country. Companies in Pakistan face reputational challenges due to a phenomenally low ranking in World Economic Forum’s annual Gender Gap Index. This does not reflect the numbers of gender participation and the efforts undertaken in many of the steps being undertaken in the private sector. Whilst this may not be a risk in other South Asian countries, the lack of disclosures on gender can deter investment.

As the trend for investment in socially responsible investments increases, there is a need to focus on better reporting and disclosure in Pakistan. An important step has been the recognition regarding this trend in the SECP’s updated Code of Corporate Governance for Listed Companies(2019) which requires listed companies to adopt a ‘comply or explain’ approach to the development of both policy and implementation of ESG in the organization.  The updated Code puts the onus on companies to highlight issues and report to the board to consider and make decisions on ‘implementation of environmental, social and governance and health and safety business practices including report on corporate social responsibility activities and status of adoption/compliance or Corporate Social Responsibility (Voluntary) Guidelines 2013 and any other regulatory framework as applicable’ (SECP, 2019). With this change, it is anticipated disclosure will improve to be comparable to global good practices.


International Finance Corporation (2019) Beyond the Balance Sheet: IFC Toolkit for Disclosure and Transparency Accessible here

World Economic Forum (2019) Global Gender Gap Report 2020 Accessible here

Securities and Exchange Commission of Pakistan (2013) Corporate Social Responsibility Voluntary Guidelines 2013

Securities and Exchange Commission of Pakistan (2019) Code of Corporate Governance for Listed Companies 2019

PwC (2019) SDG Reporting Challenge 2018:  From promise to reality: Does business really care about the SDGs? Accessible here

Kotsantonis, Sakis, Christopher Pinney, and George Serafeim. “ESG Integration in Investment Management: Myths and Realities.” Journal of Applied Corporate Finance 28, no. 2 (Spring 2016): 10–16.