A key challenge for investors lies in accurately measuring and quantifying sustainability performance. "Mandatory metrics would make it easier to assess whether progress is being made towards a more sustainable society. They would also reduce the risk of greenwashing, i.e. unsubstantiated claims made about the environmental merits of certain investment products," comments SFI Professor Philipp Krüger, SFI Senior Chair and Professor of Responsible Finance at the University of Geneva. His latest findings on the issue of sustainable finance metrics have just been published in an SFI Public Discussion Note that is well worth reading. 

Regulators have a responsibility

According to Krüger, much of the divergence between current metrics for sustainable finance can be attributed to variations in measurement and definitions. Because sustainability is, at least to some extent, a normative and subjective concept, definitions of various sustainability issues are likely to continue to diverge in the future, unless regulators dictate how companies and investors should report on specific sustainability issues, for example by establishing a set of generally accepted disclosure requirements and metrics. At the same time, he notes, "the different sustainability approaches that currently coexist not only contribute to overall confusion, but place a large reporting burden on companies and institutional investors." If companies and institutional investors had to respond to many different reporting standards, there would be a duplication of effort in providing information, leading to welfare loss and avoidable costs, he warns. "In this regard, regulatory measures aimed at harmonization and standardization could be useful and perhaps even required."

Read the complete press release in French I German I Italian.