Abstract:
Corporate Social Responsibility (CSR) has become increasingly significant in the business world as companies have recognised their long-term success is linked to their social and environmental contributions. Responding to stakeholder pressures, companies are disclosing sustainability information through sustainability reports. While these documents are used to provide details of a company’s sustainability initiatives, their quality and depth vary. Some companies may opt for superficial disclosures, while others delve deeper. Transparency in these reports is crucial as it reflects the quality of CSR communication and strengthens stakeholder relationships.
This study investigates how investors perceive the transparency of sustainability reports, employing a quantitative method through investment style analysis over 13 years. The portfolios were evaluated based on ESG transparency scores. The findings demonstrate a link between the clarity of ESG reporting and stock returns, highlighting the strategic importance of ESG transparency for corporate management. Clear reporting is shown to influence investment decisions, underscoring transparency's role not only in financial success but as a core ethical commitment. The study advocates for businesses to actively promote high ESG transparency as a means to encourage long-term growth and sustainability.
