Investors should be asking companies for better disclosure on their tax practices, to further understand if and how companies and their boards identify and respond to taxrelated risks, and government and other stakeholders’ expectations.

At a minimum, this requires companies to disclose meaningful information on tax policies employed and policy/ governance frameworks. Additional confidence can then be derived from transparency around tax payments, provided such disclosure is adequate to allow investors to properly assess how the company’s tax strategy is being realised in practice. The level of disclosure should be appropriate to the structure of each company’s own business and should help the audience avoid misinterpretations.

Transparency and disclosure are not necessarily the same thing: you can get more disclosure but it won’t necessarily be useful or meaningful.

Kate Elliot, Rathbone Brothers PLC

Investors should also consider engaging with policy makers and standard setters. Government policies and international regulations are at the heart of this debate and can implement change across the globe.

It is important for investors engaging with companies on tax matters to build a common understanding of what responsible tax planning means and what are good corporate practices.

François Meloche, Bâtirente

The PRI will be collecting feedback from the investment community and other stakeholders on this engagement guidance. Further dialogue between investors and companies will be facilitated as means of furthering this work, and defining investor expectations.

The PRI will also be collecting signatory feedback on, and exploring options for, public policy engagement. Academic research on the risks posed by aggressive tax planning to shareholder value is a new field with room for further work, and this will be explored by the PRI’s Academic Network.

As part of the PRI’s work on integrating ESG analysis into financial analysis of companies (integrated analysis), tax issues will be included in a range of case studies showcasing examples of risk to valuations.

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