How CFOs can convert sustainability data into investor trust

Concerned about climate change, more investors are now incorporating information around sustainability into their due diligence processes. Their demands have created a complex challenge for CFOs and their companies: ensuring that sustainability data is trustworthy and transparent enough to meet investor expectations.

As CFOs, finance teams, and organizations work to address this challenge, they'll navigate various stages of maturity and action. But where should finance leaders begin? Here are four steps that can lead to meaningful—and measurable—progress.

1. Establish goals, set commitments, and construct a timeline. Even if the organization feels minimal regulatory pressure, now is the time to address issues with sustainability data. Companies also need to figure out where to focus their efforts. How can the business be most effective in reducing its carbon footprint? The United Nations' Sustainable Development Goals (SDGs) include 17 global objectives that may help CFOs and others decide where the organization can have the most impact.

2. Create mechanisms for tracking progress on sustainability targets. To ensure sustainability efforts don’t fall by the wayside, CFOs and others should consider establishing regular meetings. To effectively identify barriers and gaps—are there pockets of the business that overlook leadership’s mandate?—it may be helpful to analyze the structures and leaders in place. Additionally, they might want to establish more effective management systems for collecting, maintaining, and reporting on the data.

3. Make sure the data is independently verified. Having both a third-party and internal audit of sustainability data can convey a simple but powerful message to prospective investors: the company doesn’t treat sustainability as merely a check-the-box exercise. Instead, senior management aims to provide comprehensive and transparent disclosures. Investors likely have internal models for verifying this kind of data to catch any attempts at greenwashing or making questionable claims about eco-friendliness. However, investors’ internal models may not be aligned with all of the company’s sustainability efforts. Presenting them with carefully considered, analyzed, and verified data makes it simpler for investors to decide on putting their dollars into it.

4. Provide clear, transparent, and consistent reporting to stakeholders. Beyond communicating your sustainability goals, it’s essential to be transparent to all stakeholders (including the media) about the steps the company takes to meet its climate goals. But the time to take this on is now—when trust is key, expectations are heightened, and additional regulations haven’t yet rolled in.

To continue learning more about how to report on sustainability in a manner that builds trust—and why failing to do so could lead to rising operating expenses and borrowing costs, while putting a dent in your company’s brand reputation—download the full article below.