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More than 50 major investment firms and professionals have joined the Social Investment Forum in calling on the Securities and Exchange Commission to require publicly traded companies to report annually on a range of environmental, social and corporate governance matters.

The organisations are asking the SEC to require companies to report annually on a cohesive set of sustainability indicators in accordance with the most up-to-date reporting framework of the Global Reporting Initiative and on other material ESG matters as they come to light.

In the letter to SEC chairman Mary Schapiro the investors said: "The present global economic crisis has made it readily apparent that our existing system for corporate reporting has failed shareholders. We believe that robust sustainability reporting could have mitigated some of the impacts of the financial crisis. These types of disclosures would have promoted longer-term thinking by investors and corporations, and earlier detection of predatory lending and other destructive business practices. There is a tremendous opportunity to learn from these gaps and to construct a system of safeguards to protect investors. We are confident that mandatory sustainability reporting will contribute significantly to rebuilding public trust in corporations as well as the agencies regulating them in the wake of the present crisis."

SIF chief executive Lisa Woll says: "Despite the growing evidence that companies' management of environmental, social and governance issues is material to their financial performance and sustainability over time, this reporting is not happening today, and enforcement of existing disclosure requirements in the US is lacking. That is why SIF, representing investors who encourage corporations to improve their practices on environmental, social and governance issues, is asking the SEC to require sustainability reporting for publicly traded companies."

Among the signers is Ceres, a coalition of investors and environmental groups that has been working with many of the nation's largest investors to persuade the SEC to issue guidance on ESG disclosure companies should be providing.

"Institutional investors need standardized, comparable reporting on ESG risks and opportunities to integrate this information into their investment decision-making," says Ceres president Mindy Lubber. "Only with clear SEC guidance on ESG matters can investors avoid costly financial risks in their portfolios."

The Interfaith Center on Corporate Responsibility, a coalition of nearly 300 faith-based institutional investors representing over USD100bn in invested capital, also endorsed the proposal.

ICCR executive director Laura Berry says: "For nearly 40 years, ICCR members have advocated for deeper, broader disclosure of environmental, social and governance issues, recognizing their materiality as indicators for predicting future value and as proxies for sound management practices. As the SEC responds to the challenge of financial reform, disclosure by companies of sustainability risks and investor analysis of the impact of these factors on future valuation of publicly traded securities is essential to enhanced share performance across all sectors of corporate activity."

The proposal notes that several trends are converging that speak directly to the need for a mandatory ESG disclosure rule in the US:

• An increasing number of investors are integrating ESG factors into their investment decisions and requesting greater disclosure from companies through voluntary initiatives and shareholder proposals;
• Recent legal opinions have come around to the position that consideration of ESG factors in the investment process is not only permissible but also arguably mandatory for fiduciaries;
• Several governments and regulators outside the US - including those in France, Sweden and the UK - already require corporations to disclose various ESG factors; and
• A mounting volume of literature points to links between ESG factors and corporate financial performance

The submission to the SEC tracks the rise of investor interest in ESG issues. One example it cites is the more than 560 global investment institutions with more than USD18trn in assets under management that have signed onto the United Nations Principles for Responsible Investment since 2005. As signatories these investors pledge, among other things, to incorporate ESG issues into investment analysis and decision-making processes.