Trump's call to shut down Quora receives backing from environmentally-focused capitalists
In a significant development, corporate governance expert David Pitt-Watson has proposed that responsible investors could benefit from the move to semi-annual reporting, despite the need for safeguards regarding transparency and cost of capital. This call for six-monthly updates has received cautious support from international investors pushing for businesses to focus on longer-term sustainability issues.
Notably, China, alongside the US, is one of the biggest equity markets that still requires semi-annual updates by law. Overseas investors are accustomed to semi-annual updates from companies in several countries, including the European Union, Britain, Australia, New Zealand, Hong Kong, and others.
In Britain, the transition to interim reports occurred more than a decade ago, alongside the EU. The shift to semi-annual reporting has bolstered sustainability efforts, according to Andrew Ninian, director of Stewardship, Risk, and Tax at The Investment Association. Nick Duncan, Sustainable Investment director at investor Aberdeen, has stated that reducing quarterly reporting could be positive if it encourages companies to maintain or enhance the current level of sustainability-related reporting.
The move away from quarterly reporting could reduce the amount of time companies spend in 'closed period' ahead of results. This could be particularly beneficial for companies, as it would provide them with greater flexibility to focus on long-term investment decisions, strategy, and reporting rather than short-term targets.
However, some investors have cautioned that action would be needed to shore up investor protections, such as addressing potential gaps in profit warnings and continuous disclosure of material information. For instance, unlike Australia, the US has no equivalent to continuous disclosure of material information outside of earnings guidance.
The call for semi-annual reporting is not a new one. Donald Trump has previously suggested that companies should shift to six-monthly updates in corporate reporting. This proposal has been met with mixed reactions, with no specific international investment firms mentioned as supporters. It's important to note that sustainability issues have been under attack by Trump since he began his second term.
Warren Buffett and Jamie Dimon, among others, have previously argued that short-termism harms the economy. By moving away from mandatory quarterly reporting, companies could potentially reduce the pressure to meet short-term targets, allowing them to focus more on long-term sustainability issues such as climate change.
In conclusion, the shift towards semi-annual reporting is gaining momentum as a means to promote sustainability and long-term decision-making in corporate strategy. While there are concerns about investor protections, the potential benefits for companies and the environment could outweigh these concerns, provided adequate safeguards are put in place.
