NYHFR Survey: Hedge Fund Industry Embracing Sustainability Reporting

May 23 2016 | 5:10pm ET

Sustainability reporting is increasingly moving from being a fringe issue of concern to only a handful of investors to being a mainstream concern of global importance, according to a new survey by the New York Hedge Fund Roundtable. 

Amidst growing worldwide concerns about the environmental, social and governance issues that confront businesses and the impact their activities have on their stakeholders, institutional investors are putting greater emphasis on sustainability reporting, the survey found. 

NYHFR recently held its first Sustainability Investment Leadership Conference, hosted in conjunction with the New York State Society of Certified Public Accountants, where conference attendees were surveyed about the topic.

“How a company makes its money has become a critical factor in the 21st Century, because how it makes its money will have an impact on society,” Mervyn King, former chairman of the International Integrated Reporting Council and chairman emeritus of the Global Reporting Initiative, told conference attendees. “Integrative reporting has captured the attention of people around the world… it is an idea whose time has come,” said King, who was among several high profile speakers and panelists at the conference.

Roundtable members are becoming increasingly optimistic about the merits of sustainability reporting, based on a comparison of the survey responses from a Roundtable sustainability panel last year compared to this year. Members had the opportunity to weigh in on sustainability reporting both at conference as well as through an online electronic poll.

60% of respondents from this year’s survey indicated that they believe sustainability is worth the additional time and money such reports require, up from a year ago when only 46% of respondents felt that way. Similarly, 65% of respondents think sustainability reporting is of equal importance for all companies, regardless of size, compared with 41% a year ago. 

“Though sustainability reporting and the guidelines surrounding it remain nascent areas, there is no doubt that the data within these reports is of paramount importance for understanding how well any individual company is poised to succeed over the long-term,” commented Timothy Selby, president of the NYHFR and a partner at Alston & Bird.

Other key findings include:

  • When asked whether their firms consider sustainability reporting when choosing where to invest, 54% of respondents said it is a factor, while 46% said it is not something they worry about. 
  • 60% of respondents believe sustainability reporting is worth the added costs and time, compared with 46% of respondents who were asked this same question a year earlier. Meanwhile, 31% think it is still too early to know whether investors will eventually hold it against companies that don’t report on their sustainability efforts, compared with 49% of respondents a year ago. 
  • 9% of respondents believe the focus on sustainability will be short lived, compared with 5% of respondents a year ago.
  • Asked whether integrated sustainability reporting could ever become a common practice among companies without regulatory involvement, 49% of respondents said the issue has become important enough among investors that companies now realize it is in their best interest, compared with 46% of respondents to this same question a year ago; 26% of respondents think consistent, high quality reports will not happen without regulatory involvement, and 25% of respondents think that regulatory requirements are the only thing that will bring about market-wide sustainability reporting.
  • When asked whether sustainability reporting will become more or less important within the next decade, 43% of respondents think investors are putting enough emphasis on such reports that companies that don’t produce them will risk the loss of investor support, 20% think investors remain uncertain about how such reporting can translate to stronger long-term performance companies.
  • 33% of respondents think sustainability reports will need to become more uniform and concise before they become a critical factor for investors. 4% felt that sustainability reporting is merely a fad that is unlikely to gain long-term traction, compared with 3% of respondents a year ago.
  • 45% of respondents said they would be more likely to embrace sustainability if it focused more on things like building a company’s reputation, community involvement and good employee relations versus environmental issue like global warming; 9% said they would be less likely to embrace the concept; and 46% said their opinion of such reporting would remain unchanged.

Each NYHFR survey includes an interesting bonus question, which this month centered on the always-entertaining 2016 U.S. presidential election. With the field of presidential hopefuls significantly narrowed, Roundtable members were asked who they felt would be elected in November: 

  • 54% of respondents believe Hillary Clinton will be the next president
  • 39% believe it will be Donald Trump
  • 5% believe it will be Bernie Sanders 
  • 2% think it will be John Kasich.

Of the respondents to this survey, 20% were fund managers, 12% were allocators, 18% were risk management or trading, 32% were service providers, 14% were CPAs, and 4% were other industry participants.

The New York Hedge Fund Roundtable is a non-profit organization focused on promoting ethics and best practices within the alternative investment industry. The membership consists of investors, fund managers and other industry professionals who regularly meet to discuss current issues within the industry and connect with peers.

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