Council of Institutional Investors

Non-Financial Disclosure

Mainstream investors, as well as a broad range of other market participants, are coalescing around the notion that the future of corporate reporting involves standardized disclosure of non-financial metrics that give users the ability to monitor practices and performance related to long-term sustainability. 

CII's member-approved Statement on Corporate Disclsoure of Sustainability Performance states :

Investors increasingly seek decision-useful, comparable and reliable information about sustainability performance in corporate disclosures in order to better understand how nonfinancial metrics can impact business and profitability. CII believes that independent, private sector standard setters should have the central role in helping companies fill that need. Market participants, non-governmental organizations and governments can aid the success of these standard setters by supporting their independence and long-term viability, attributes of which include: stable and secure funding; deep technical expertise at both the staff and board levels; accountability to investors; open and rigorous due process for the development of new standards; and adequate protection from external interference.
CII encourages companies to disclose standardized metrics established by independent, private sector standard setters along with reporting mandated by applicable securities regulations to better ensure investors have the information they need to make informed investment and proxy voting decisions. CII believes those standards that focus on materiality, and take into account appropriate sector and industry considerations, are more likely to meet investors' needs for useful and comparable information about sustainability performance. CII also believes that over time, companies should obtain external assurance of the sustainability performance information they provide.
When evaluating proposals to enhance company disclosure, CII considers the following factors, as guided by the member-approved Statement on Company Disclosure:
  • Materiality to investment and voting decisions
  • Depth, consistency and reliability of empirical evidence supporting the connection between the disclosure and long-term shareowner value
  • Anticipated benefit to investors, net of the cost of collection and reporting
  • Prospect of substantially improving transparency, comparability, reliability and accuracy
CII generally supports required corporate disclosure of:
  • Climate change risk metrics
  • Diversity of the board and executive officers 
  • Key workforce metrics
  • Political spending
Many companies already disclose standardized sustainability data on a voluntary basis using one or more sustainability frameworks. The CII Research and Education Fund publication, Sustainability Reporting Frameworks: A Guide for CIOs, describes some of the key differences among prominent frameworks. CII recognizes that various frameworks co-exist in part because they fundamentally serve a variety of objectives. Yet many companies and investors share a strong desire for streamlined metrics that would bring greater comparability and ease of implementation.

Securities regulators generally have three options in advancing standardized non-financial reporting. They can designate an outside organization to set standards, write and adopt reporting rules themselves, or they can take a hybrid approach. Commissioner Allison Herren Lee, while serving as acting chair, floated the idea of a U.S. standard setter. Current chair Gary Gensler indicated in his confirmation hearing that he supports disclosure rooted in materiality to a reasonable investor, but did not commit to whether disclosure on material sustainability matters should be handled by a third party recognized by the SEC, the SEC itself, or a combination.  The second and third options appear more likley outcomes than the first, given that internally-sourced reporting suggests the agency will move swiftly following a soliciation period to require new disclosure on climate and other ESG issues.  

Outside the U.S., momentum toward the establishment of a new standard setter for sustainability disclosure is well underway. In late 2020, the International Financial Reporting Standards (IFRS) Fo undation proposed a new standard setting board known as the International Sustainability Standards Board (ISSB) that would publish global sustainability reporting standards. CII's letter (with an attachment) in response to the consultation acknowledged that a global set of high quality sustainability standards could be helpful to investors and that the IFRS Foundation could play a role in developing such standards—if it secured sufficient independent funding and ensured a prominent role for investors in the governance and standards-setting activities. The IFRS Foundation published a summary of the feedback from the September consultation and is now seeking feedback on amendments to its constitution that would allow for the creation of the ISSB. The International Organization of Securities Commissions (IOSCO), which sees an urgent need to improve the sustainability reporting, has welcomed the estblishment of the ISSB.
May 1, 2021 Wachtell, Lipton, Rosen & Katz update on "materiality" in America and abroad 
Dec. 17, 2020 CII letter to IFRS Foundation on Sustainability Reporting
Attachment: Responses to Questions for Consultation in the IFRS Foundation Consultation Paper on Sustainability Reporting
June 11, 2020 CII responses to European Commission consultation on Non-Financial Reporting Directive review
May 21, 2020 CII letter to World Economic Forum regarding sustainability disclosure consultation
May 3, 2020 CII letter to the SEC Investor Advisory Committee on public company disclosure considerations and shareholder engagement/virtual shareholder meetings in the Covid-19 pandemic context
February 1, 2017 Academic paper on material sustainability ratings and firm performance