By confusing potential clients, the lack of standardisation of sustainable data is likely to cost the sustainable industry hundreds of billions of potential asset inflows. It also propagates a false narrative that one needs to be an expert in order to invest sustainably.

Sustainable non-financial information is, for the most part, unregulated and its creation is thus subject to the whims of individual companies. Given the lack of standardisation, it does not require an overly cynical mindset to hypothesise that companies may flatter themselves and be selective in the data they choose to disclose. With sustainable investing swelling in popularity, an ever-increasing amount of assets are dependent – to a greater or lesser extent – on this imperfect data.

This problem is known and, thankfully, there are moves afoot to address the issues. At the end of 2020 five sustainability framework and standard-setting institutions of international significance co-published “a shared vision of the elements necessary for more comprehensive corporate reporting and a joint statement of intent to drive towards this goal”. While the intention behind the initiative is admirable, the starting point of no less than five frameworks lays bare the extent of the existing fragmentation.

It is increasingly evident that the financial industry has failed to self-regulate on the topic of sustainability reporting, and it therefore may be necessary for regulators to intervene. Here the EU has taken the lead and, building upon the Non-Financial Reporting Directive, has sought to increase corporate sustainability reporting requirements as part of its wider sustainability action plan.

As regulators now circle sustainability reporting, it is important for them to build upon existing industry practices and not further muddy the waters by creating entirely new and conflicting standards.

If regulators are unwilling to anoint a ‘winner’ from the current voluntary frameworks, they could do worse than return to the supermarket for inspiration. Nutritional information, prevalent on packaged foods, provides a perfect template of a good disclosure regulation. As a result, consumers can nearly instantly tell which foods align with their dietary habits and preferences. This is a straightforward client experience that is sadly lacking potential sustainable investors.