Major bank Westpac (ASX:WBC) has been rated by The Global ESG Monitor (GEM) as the ASX’s best stock and among the world’s best stocks on ESG reporting.

ESG stands for Environmental, Social and Governance and collectively represents several metrics to measure a company’s performance and impact on such matters.

While ESG awareness among investors has increased, reporting is typically voluntary and there is no “one size fits all” framework.

But some stocks do go above and beyond and GEM found that Westpac was the best ASX stock on ESG reporting. It was also the fifth highest scoring stock in the world and highest non-European.

The next “best” ASX stock on ESG reporting is oil and gas giant Woodside (ASX:WPL) followed by a three-way tie between packaging stock Amcor (ASX:AMR) and large cap miners Newcrest (ASX:NCM) and South32 (ASX:S32).
 

Here’s a list of the best ASX stocks on ESG as judged by GEM…

Rank Code Company Sector Points
1 WBC Westpac Financial 47
2 WPL Woodside Energy 42
3 NCM Newcrest Materials 40
4 S32 South32 Materials 40
5 AMC Amcor Industrial 40
6 ANZ ANZ Financial 38
7 NAB NAB Financial 37
8 WOW Woolworths Consumer 35
9 QBE QBE Consumer 35
10 DXS Dexus Real Estate 34

 

The list may raise eyebrows with Westpac (ASX:WBC) last year confessing to breaches of anti-money laundering and counter-terrorism financing (AML/CTF) laws and copping a $1.3 billion fine.

Another three of the top five are in resources and energy – sectors one may argue cannot be ethical because of environmental impacts.

The study’s other co-author, Mark Paterson, is also head of Melbourne-based communications firm Currie.

“What we’re doing is analysing the reports, we’re analysing what companies say they are doing, not what companies are actually doing,” he told Stockhead.

“So really, talk versus walk – we’re analysing their statements of intent. It’s not a review of what actually happens but it does give you an indication of where there are warning signs to keep an eye on.

“Companies with low scores aren’t saying as much about what they’re doing and as a result people might see that as a sign they need to look even harder at those companies’ performance on ESG.”

 

More work to be done on ESG reporting

The report also painted a sobering picture on how companies have to come on ESG reporting. Some of the key findings included:

  • Only 26 per cent of ESG reports reports provide a methodology for reporting
  • 19 per cent provide formulas, approaches or calculation methods on how ESG data is gathered
  • Only 41 per cent disclose when ESG objectives are not met

Looking specifically to Australia:

  • 76 per cent of reports do not disclose details about how stakeholders are identified
  • 41 per cent do not report how they engage stakeholders
  • 38 per cent do not provide a list of stakeholder groups

However Australian companies are credited for stating ESG objectives or targets and including glossaries for ESG terms (something that only happens in 30 per cent of reports globally).

European companies dominated the global list with the top firms being multinational fashion retailer Inditex, Spanish financial services firm Santander, German chemical company BASF and Italian banking group Intesa.

Paterson told Stockhead this is because Europe mandates ESG disclosure more than any other region in the world thereby forcing companies to be more transparent.

Ariane Hofstetter (CEO of research firm KOHORTEN who co-authored the report) also put this down to ESG being largely voluntary outside Europe but added that the lack of global standardised metrics for ESG was another impediment.

“The sooner this is addressed the clearer the companies’ progress on managing ESG risks will be,” she said.