ABSTRACT
This chapter provides an overview of sustainability reporting from a capital market perspective. The chapter illustrates how the capital market’s view on sustainability reporting has gone from skeptical to more positive. We will highlight the ongoing process of developing the new landscape of sustainable finance where the capital market is undergoing a fierce development to be able to assist in the transformation towards more sustainable businesses. In this process it is vital for companies to enhance the value relevance, credibility and comparability of sustainability reporting in order to be considered relevant in a capital market perspective. The chapter begins with a presentation of the actors in the capital market as well as their different roles and their relationships with sustainability reporting. Section 11.2 introduces the basic differences between a shareholder focus and a stakeholder focus. Then, in Section 11.3, we discuss how companies and the capital market gradually have adopted an increased focus on corporate social responsibility and sustainable business. Section 11.4 presents how this increased focus has resulted in sustainability rankings and sustainability indices. Section 11.5 highlights studies exploring if there is any relationship between being a sustainable business and financial strength. In Section 11.6, we take a closer look at the ongoing development of a new sustainable finance landscape and how various regulations and initiatives aim at enhancing corporate disclosure. Finally, research is presented on how the relationship between sustainable business and various financial performance measures looks.
