The European Commission's proposal to enhance business transparency on social and environmental matters has been welcomed by the National Association of Pension Funds (NAPF).

If approved, the news rules will change the annual reporting requirements of any European Union (EU) companies with more than 500 employees.

To help provide investors with information about a company's development and performance, companies would need to disclose information on their policies regarding environmental matters, social and employee-related aspects, respect for human rights, anti-corruption and bribery issues, and diversity on the boards of directors.

David Paterson, NAPF head of corporate governance, said: "These changes will help investors like pension funds get a much clearer picture about the long-term sustainability of a business.

"Too often at present, investors can study a company's financials but they cannot understand and compare vital non-financial parameters that gauge social and environmental issues.

"Long-term and non-financial risks - including environmental concerns, social factors and governance – can be connected with a company's 'licence to operate' and will have a financial impact down the line, so they should be reported meaningfully to shareholders."

Paterson added: "Reporting is an important catalyst for change that contributes to the long-term health of a business and consequently our capital markets."

First published 17.04.2013

monique_simpson@wilmington.co.uk