By Alexandria Grace C. Magno, Reporter
INVESTORS are placing greater scrutiny on companies’ plans for managing business risks and disruptions, as sustainability assessments move beyond carbon emissions to include resilience, transition strategies, and impacts on communities, according to ESGpedia Vice-President Jozsef Acabo.
He said investors are increasingly examining how companies would respond to risks such as energy disruptions and geopolitical tensions, as well as the financial and nonfinancial effects these could have on their operations.
“Investors are really being careful,” he said in an online interview with BusinessWorld.
“One of the things that we’re seeing as an element of investors to score investments and identify sound investments would be the resiliency in, say, an energy crisis, for example,” he said.
“What would be the impact of that financially and nonfinancially? If there is a real impact based on your industry, then what’s your transition plan, for example, and where are you now?”
He said geopolitical risks have added to investor scrutiny of companies’ resilience and preparedness. “All the more now, it’s being driven by geopolitical tensions and wars,” he said.
“It’s not just financial and investment returns, but also what’s the impact on the community,” he also noted.
The information investors seek differs depending on the company and industry, he said, but businesses seeking investment need to consider what prospective investors want to see in their sustainability disclosures.
Mr. Acabo said sustainability disclosures could be particularly relevant for listed, large, and mid-sized companies seeking to attract investors.
“One of the venues and vehicles for you to be attractive as an investment would be your disclosures,” he said. “Because that represents what the company is all about.”
The increased focus on risk management comes as Philippine companies prepare for wider adoption of sustainability reporting standards.
Mr. Acabo said companies have stepped up preparations over the past year as reporting requirements become clearer.
“Especially now that there’s already a timeline with Memorandum 16 for adopting IFRS (international financial reporting standards). So, what’s happening right now, as we see in the Philippine corporate setting, they’re now moving towards increased adoption of reporting structures.”
He said companies are also working to improve the quality and organization of sustainability data so that disclosures can eventually undergo external assurance.
“And then ensuring that the data they will report will be going towards becoming audit-ready,” he said.
Companies are at different stages of preparation, Mr. Acabo said, with some reviewing existing reporting systems and others putting in place processes for collecting sustainability information.
“The Philippines is improving drastically because the awareness to adopt the IFRS reporting framework is already in place,” he said.
“It’s a matter of them strategizing and planning how they would put the systems in place and how they will become ready in the next two or three years.”
READINESS
Mr. Acabo said the Philippines continues to trail some regional markets in broader sustainability readiness despite progress in reporting policies.
“If we compare with other neighboring countries, we’re still lagging behind, but it’s not too far away because our policies align with the other peers,” he said.
He cited Singapore, Malaysia, and Hong Kong as markets with more developed sustainability ecosystems.
“For example, Singapore, Malaysia, I should say Hong Kong as well. But the ability to provide the ecosystem that boosts that readiness is the part that we’re a bit lacking,” he said.
Mr. Acabo said the Philippines already has the policy framework, but greater coordination among companies, financial institutions, and supply chains would be needed to move from disclosure requirements to implementation.
“So we have policies already. Now, the next step should be, or at least what we think was working with the other neighboring countries, would be the collective collaboration of the private sector,” he said.
He said this would involve companies working more closely with suppliers and financial institutions, including through financing programs supporting sustainability initiatives.
“When you have that ecosystem, plus the help of financial institutions to bring together more programs for sustainability and more access to, say, financing to promote sustainability initiatives, if that will increase, therefore the adaptability and the readiness is going to be on the next step, which is execution,” he said.
Mr. Acabo said financial institutions, companies, and their supply chains have begun working more closely on sustainability initiatives, but broader implementation is still developing.
“What I see from the Philippines, the elements and those ecosystem players — financial institutions, corporates, listed companies, and the supply chains, which are usually mid-sized SMEs — are now starting to collectively collaborate,” he said.
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