Sustainability reporting and why it has become essential for faith-consistent investing

Faith-based asset owners aspire to invest in alignment with their beliefs, teachings and values, seeking to create a just and sustainable world characterised by social cohesion, prosperity for all, and environmental health. Central to this mission are principles that guide values-based investing: avoid companies that do not reflect the organisation’s values, engage with companies to prompt change, and invest for impact. Yet to implement these principles effectively, investors need reliable information about corporate practices and performance. This is where sustainability reporting becomes essential for assessing a companies’ alignment with sustainability principles.

The foundation of informed decision-making

Sustainability reporting tracks corporate progress in fulfilling environmental and safety metrics, alongside comprehensive data on social governance, labor practices, and community impact. For faith-consistent investors, these reports serve a dual purpose: they help identify companies making insufficient efforts to achieve sustainability goals, and they hold companies accountable for fulfilling sustainability commitments. As the saying goes, "what's measured gets managed"—and what gets reported enables informed stewardship.

The transparency provided by sustainability reporting has become important for faith-consistent investors with resources to engage with companies to encourage adoption of sustainable business policies and practices. Without comprehensive reporting, such engagement efforts would lack the foundation necessary for meaningful dialogue and measurable progress.

A transformation in corporate disclosure

The business landscape has undergone a meaningful transformation in sustainability reporting. Most mainstream companies are now producing sustainability reports, reflecting a fundamental shift in how corporations view their responsibilities to stakeholders.

The numbers tell an impressive story: a record 93% of Russell 1000 companies published a sustainability report in 2023. This trend demonstrates that sustainability reporting has moved from optional to standard in the corporate world.

Moreover, sustainability reporting is very high among developed market companies outside the US, particularly in Europe and developed Asian markets. This global adoption reflects the universal recognition that transparent environmental, social, and governance (ESG) disclosure has become integral to modern business practice.

Navigating the standards landscape

While the proliferation of sustainability reporting represents significant progress, it has also created challenges. The accounting firm EY estimated in 2022 that there were 600 different ESG reporting bodies and guidelines globally. However, clarity is emerging from this complexity, as the Global Reporting Initiative and the International Sustainability Standards Board are becoming the two dominant entities providing frameworks for consistent, comparable disclosure.

This standardisation serves faith-based investors well, as it enables more effective comparison of companies' sustainability performance and creates clearer benchmarks for engagement efforts. When companies report using consistent frameworks, investors can more readily identify both leaders and laggards in their investment universe.

The strategic imperative for faith-consistent investors

For faith-consistent investors, sustainability reports represent more than mere information—they are strategic tools for implementing values-driven investment approaches. These reports enable investors to move beyond exclusions to embrace the more transformative aspects of faith-consistent investing: engagement and impact investing.

By analysing sustainability reports, faith-consistent investors can identify companies that align with their values around stewardship, justice, and care for creation. They can also identify organisations where engagement might prove productive, focusing their advocacy efforts where they can achieve meaningful change. This approach reflects the wisdom found across faith traditions about the importance of working collaboratively to address systemic challenges.

Furthermore, sustainability reporting helps faith-consistent investors address externalities, which are the systemic risks that traditional investment approaches often overlook. Climate change, social inequality, and governance failures—the types of issues documented in sustainability reports—can have significant impact on long-term investment performance. By incorporating sustainability data into investment decisions, faith-based investors can potentially enhance their returns while advancing their values.

A call to action: assess your asset managers

The widespread availability of sustainability reports creates both an opportunity and an obligation for faith-consistent investors. With nearly all major companies now providing detailed ESG information, there is no excuse for faith-based asset owners and their asset managers to ignore this relevant data in their investment processes.

Faith-consistent investors should therefore assess the extent to which their asset managers analyse and consider corporate sustainability reports in their investment decision process. This assessment goes beyond surface-level inquiries about ESG integration—it requires understanding how asset managers systematically incorporate sustainability data into security selection, portfolio construction, and ongoing monitoring.

The questions faith-based investors should ask are both specific and demanding:

• How do asset managers evaluate the quality and consistency of sustainability reporting?

• What weight do they give to sustainability metrics in their investment decisions?

• How do they use sustainability reports to identify engagement opportunities?

• Do they have processes for escalating concerns when companies' sustainability performance falls short of expectations?

This due diligence represents a fundamental responsibility for faith-based investors committed to aligning their investments with their values. In an era when sustainability information is abundant and accessible, accepting asset management approaches that ignore or minimize this data amounts to a failure of stewardship.

The time for faith-based leadership in sustainable investing is now. By demanding that asset managers meaningfully integrate sustainability reporting into their processes, faith-based investors can drive systemic change while staying true to their deepest convictions. Every conversation with an asset manager about sustainability integration becomes an opportunity to advance both faithful stewardship and long-term value creation.

The data is available. The frameworks are established. The only question remaining is whether faith-based investors will seize this moment to ensure their investments truly reflect their values and contribute to the just, sustainable world they seek to create.