The Aftermath of Rana Plaza: Sustainable Fashion Organizations

By Lauryn Power, G&A Institute Analyst-Intern

The issues of sustainability and just labor rights in the fashion and clothing industry were brought to the world’s attention in April 2013 by a tragic event in Dhaka, Bangladesh. On April 23, 2013, cracks were found in an eight-story factory building known as Rana Plaza, which hosted factories for many different industries. Many workers were sent home.

Then, on April 24th garment workers and managers were fighting over whether workers should go into the building and work. Workers were threatened with withheld pay if they did not work that day, so they ultimately went in.

A few hours later the building collapsed, killing over 1,100 people and severely injuring over 2,500.

The Rana Plaza collapse stands as a turning point in how the fashion industry worked with their supply chains. For decades before, incidents and disasters had been coming to light with little worldwide recognition or change on the part of clothing and fashion brands, which had a ‘don’t ask’ policy.

This event shifted the world’s attitude towards brands’ unwillingness to check their supply chains and forced them to take a more active role in how their supply chain is run.

Those workers were killed in the name of “cheap clothing.” Rana Plaza was found to be overcrowded with people and machines, set up in dangerous locations threatening the structural stability of the building. Over 29 major fashion brands were implicated in this incident. The entire world was watching this event unfold and raised questions of who is to blame and how this could have even occurred.

Soon after the collapse, Bangladesh instituted the Accord on Fire and Building Safety which over 200 brands signed. It set up plans for stricter fire and safety inspections, compensation from brands to improve factory conditions, banned brands from working with factories that did not comply, and set up anonymous reporting for workers.

28 major fashion brands came together to form the Alliance for Bangladesh Workers and set action plans for new inspection training and protocols.

Both of these accords did make major changes to factory standards, and over 130,000 safety violations were uncovered and corrected. Many factories had to provide more unobstructed ways of exit and were forced to remove gates which had been in place to keep workers on factory floors. Over 50 factories were shut down completely, and these initiatives protected over two million workers.

While these programs made major changes for garment factory workers, they often seemed more like bringing these factories up to the bare minimum standards. In the years since, many non-profits and other organizations have centered their goals around providing factory workers with just labor rights and supporting those in need.

Moving Forward

Fairtrade International is one of the most well-known nongovernmental organizations working towards “just labor rights.” This organization is co-owned by more than 1.8 million farmers and workers who strive to ensure that consumer goods across many industries are made in accordance with rigorous ethical standards.

Their key priorities span across all workers’ rights including child labor and forced free labor, mitigating climate change impact for workers, decent livelihoods, protection of the environment, and gender equality. Thus, they implement strict standards for all products which attempt to be Fair Trade Certified™.

For textile certification, workers must be paid living wages, understand their legal rights to allow them to unionize, have elected representatives to voice concerns, have safe working spaces, and have reasonable working hours. Fairtrade works with hundreds of fashion brands including Ralph Lauren, PACT, Patagonia, Athelta, and J. Crew.

Many other organizations were founded to focus on one specific issue within the garment industry. The Sustainable Apparel Coalition (SAC) attempts to unify all these issues and help brands track and fix them within their own operations. Their goal is to develop a sustainable consumer goods business model based on collaboration between organizations and expert leadership.

SAC works with Higg Co and the Apparel Impact Institute to set their foundations and goals for brands, using the Higg index which takes into account many factors including climate change, water and chemical usage and just labor rights. SAC has many partners including Allbirds, Everlane, LL Bean, Levis, New Balance, Patagonia, and Walmart.

Even more organizations are seeking to force brands to focus even deeper into their supply chains by checking fiber source and hazardous chemical use. While not impossible, certain standards are difficult for brands to enforce.

For example, paying living wages is often restricted by the local government’s minimum wages. Also, many factories are producing garments for multiple brands so even if one brand was willing to simply pay more to ensure living wages, it may not be enough to cover the costs for the other brands. There is also no way of ensuring that money will filter down to workers. As a rule of thumb, consumers can look for brands who do work with Fairtrade International and SAC; I see this as a good way to try to ensure certain worker standards are being met.

Labor rights in Bangladesh have come a long way since the tragedy, but injustice is still occurring everyday. The Rana Plaza collapse wasn’t the first labor rights disaster and it likely won’t be the last. With globalization, it is easier for these types of critical issues to slip through the cracks, so there is still a lot of work to be done to create equitable and just working conditions globally.

ABOUT THE AUTHOR

Lauryn Power is a G&A Institute Analyst-Intern, currently pursuing a MS in Sustainability in the Urban and Environmental Planning department at Tufts University. She has a BS in Chemistry from the University of Virginia where she also earned a minor in Mathematics. She also received a certificate in Business Fundamentals at the McIntire School of Commerce at the University of Virginia.

She has worked in various chemistry research labs and has a scientific background on climate change. She also has experience in sustainable fashion. She interned for the U.S. Green Chamber of Commerce doing research on current issues with fast fashion globally.

Through her educational background and experiences in the industry, she hopes to work in the intersection of sustainability and business, helping corporations to improve their practices and find ways to make their business more sustainable.

Common Sustainability Reporting Standards Remain Elusive

December 21, 2021

by Bernie Kilkelly – VP and Director of Corporate ESG Disclosure, G&A Institute

Efforts by various international organizations to develop common global sustainability reporting standards continue to run into roadblocks, as different groups propose diverging approaches and methodologies to enhance ESG disclosure.

As reported by Responsible Investor (link below in our Top Stories), the G7 Impact Taskforce that was created in July (under the UK’s presidency of the G7), recently commented about reporting standards being developed by the International Sustainability Standards Board (ISSB), an even newer group launched at COP26 in Glasgow.

Rather than helping to find common ground around simplifying the alphabet soup of reporting frameworks and standards, the comments by the G7 Impact Taskforce (ITF) seemed to add to concerns that reporting standards could become more fragmented.

The ITF said it supports the approach of the ISSB, which is governed by the International Financial Reporting Standards (IFRS) body, to develop a global reporting baseline focusing on the impact of sustainability factors on company enterprise values.

But at the same time, it recommended that countries “build upon this” approach to include other impacts on stakeholders that this reporting baseline would not address.

The ITF’s comments seemed to show support for the broader “double materiality” reporting approach that focuses on the impacts of business activities on society and the environment.  The “double materiality” approach is being used by the European Union’s accounting body —  the European Financial Advisory Group (EFRAG) — to develop a new set of corporate sustainability disclosure standards.

While the ITF’s statement calls for mandatory impact accounting for businesses and investors that would include “harmonized standards,” the elusive search for a common global approach to sustainability reporting continues.

As we close out 2021 and embark on a New Year, the G&A Institute team will continue to monitor the efforts of these organizations and help you make sense of the ever-changing world of sustainability reporting and disclosure.

Best wishes from the G&A team to all for a Happy New Year!

Top Stories

It’s Here: G&A Institute’s “2021 Sustainability Reporting in Focus” Trends Report

November 30, 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Our annual in-depth review of corporate sustainability / ESG reporting trends is  available for your reading. In our 2021 report, you will find detailed analysis of the reporting trends of the S&P 500® Index companies and Russell 1000® Index companies, showing shows that ESG reporting is increasingly being adopted by mid-cap companies.

This is the 10th anniversary of G&A’s annual research on sustainability reporting trends of the largest U.S. publicly-traded companies.

Governance & Accountability Institute, Inc. was established in 2006-07 by a team who had worked together at other management consulting firms.

Since our founding we have been focused on the world of corporate disclosure and structured reporting (and trends), and the increasing transparency (voluntary or not!) of publicly-traded firms for several decades.

The adoption of Sarbanes-Oxley (SOX) package of laws and rules and later Dodd-Frank (DF) rules brought many changes to corporate disclosure in the years following their passage — and significantly shaped the work we do with our client companies.

Our firm’s launch coincided with the morphing of what had been “socially responsible investing” (SRI) into today’s “sustainable and responsible investing” and with the emergence of more cohesive forms of evaluating a company’s corporate sustainability, citizenship, social responsibility… the format we recognize today as “ESG.”

The Global Reporting Initiative (GRI) noticed our work in analyzing and publicly sharing considerable information about best practices in corporate reporting and in 2010 invited G&A to be its Data Partner for the U.S., U.K., and Republic of Ireland.

The work we did in collecting and analyzing literally thousands of corporate reports from 2010 to 2020 helped us in our work with companies, helped GRI to expand its visibility and appeal to the American corporate sector, and helped corporate managers who selected the GRI framework for their reporting.

And a special thank you to our treasured colleague Mike Wallace (then head of GRI operations in the U.S.) for helping to make this happen!

As we gathered and analyzed corporate sustainability reports, we paid close attention to the companies included in the S&P 500 Index® – the preferred benchmark for the majority of asset managers.

In 2011, we released our first report analyzing the sustainability reporting of the S&P 500 companies for the publication year 2010, which showed that just 20% published sustainability reports or disclosures.

Great progress:  Our 2021 report shows that 92% of the S&P 500 companies published a sustainability report in 2020, demonstrating that corporate sustainability reporting is clearly a best practice for the largest companies.

Two years ago, we expanded our research to the next 500 largest public companies in market cap size, as represented in the Russell 1000® Index — another very important benchmark for investors. This was a heavy lift for our research team, and for our 2021 report the COVID-19 crisis created its own headwinds.

The results of the in-depth research of our great research team are now available in the “2021 Sustainability Reporting in Focus” trends report. We will stop the backgrounding here and invite you to dive into the report to do your own analysis. It is our Top Story of the week. Please do let us know your comments and questions as you examine the trends.

Our annual reports on corporate ESG disclosure trends have wide readership and long shelf life and have proved useful in informing corporate sustainability managers as they develop their own company’s sustainability report.

It has been a long and rewarding journey for us, these past 10 years of “deep diving” on U.S. corporate sustainability / ESG reporting trends – thank you to all who have followed us as we shared the annual reports with you. And so let us know how we can improve the 2022 report – now underway!

Top Story/Stories

The World’s Eyes on the USA as FSOC Agencies Engage on Climate Risk

October 31, 2021 – As The Family of Nations gathers for COP 26 climate talks in Glasgow – the USA is back at at the table. 

What is President Joe Biden and the American delegation bringing with them to Scotland?  A big announcement from the White House just a few days ago that signals “we are serious”. Especially in regulatory and financial matters.

by Hank Boerner – Chair & Chief Strategist – G&A Institute

The gathering of the family of the world’s nations in Glasgow, Scotland for “COP 26” (the annual UN climate summit) is at hand!

There has been an increasing flow of news and opinion related to the big event as the United Nations, almost 200 sovereign governments, NGOs, corporations, and other constituencies announce a widening range of developments related to the summit now underway

In the United States, a significant announcement came in October as the Federal government’s FSOC – the Financial Stability Oversight Council “engaged on climate change”.

We’re sharing the important background with you:

You may recall that in May 2021, soon after taking office, The Biden-Harris Administration detailed the policies and actions of its “whole of government” approach to climate change in the “U.S. Climate-Related Risk Executive Order” (the “EO”) originally issued in May 2021.

The EO set out the federal government’s climate risk accountability framework and the implementation strategies for the “whole of government” approach to climate-related financial risk.

Think about the agencies affected by the EO: NASA; DoD; Labor; Interior; HHS; Education; the Federal Acquisition Council (considering GhG emissions when making buying decisions)…and many more.

The policies in the EO and in then implementation steps by Federal agencies are again in public view as President Joe Biden prepared to participate in the COP 26 meetings.

The White House reminded us of EO 14030 in a news announcement (“A Roadmap to Build a Climate-Resilient Economy”) on October 14th.

This was the backdrop for the announcement from the powerful FSOC via U.S. Treasury Department for planned measures to protect retirement plans, homeowners, consumers, businesses and supply chains, workers, and the federal government from the financial risks of climate change.

Policies and actions were outlined for us as the FSOC on October 21 at identified climate change as an emerging and increasing threat to financial stability.

To review: there are six important “workstreams” in the Federal government’s framework to address climate-related financial risk:

• Protecting the resilience of the U.S. financial system.
• Protecting life savings and pensions.
• Using Federal procurement (federal agencies are the largest buyers of goods and services in the nation).
• Incorporating the risks into Federal lending and underwriting.
• Incorporating the risks into the Federal financial management and budgeting.
• Building resilient infrastructure and communities.

In the historic May 2021 EO “financial regulation” was among the issues addressed; now we are seeing the implementation plans of the government’s Financial Stability Oversight Council (the FSOC), the member group of key regulators as the agencies of the council spell out approaches to engagement on climate change issues.

Important: the work of the regulatory agencies in the FSOC affects many aspects of the American society: the Federal Reserve System and 12 district banks; Department of Treasury; the Office of Comptroller of Currency (OCC), part of Treasury that regulates national banks; Securities & Exchange Commission (SEC); Commodity Trading Futures Commission (CTFC); and, Federal Housing Finance Agency (FHFA).

The FSOC’s new report demonstrates the Council’s and member Federal agencies’ commitment to building on and accelerating existing efforts on climate change through “concrete recommendations” to the individual member agencies.

In our conversations with corporate managers and investment professionals we often explain that after the 2008 financial crisis, the member nations of the G20 came together to address financial risk matters in the new Financial Stability Board (FSB). This is a “think tank” approach to developing policies that each G20 nation can bring back to their regulatory agencies for consideration.

The FSB created the TCFD (Task Force for Climate-related Financial Disclosure), chaired by Michael Bloomberg. Important to keep in mind: the representatives to the FSB are the Secretary of the Treasury; the Federal Reserve chair; and, the SEC chair.

Each of those regulatory agencies and their leaders are members of the Federal government’s Financial Stability Oversight Council.

Commenting on the latest developments at FSOC, former Federal Reserve chair, now Secretary of Treasury Janet Yellen noted: the FSOC report puts climate change squarely at the forefront of the agenda of [Council member agencies] and is a critical first step forward in addressing the threat of climate change…it will by no means be the end of this work…”

We share the important documents related to these development as President Joe Biden and his delegation start their conversations at COP 26. 

Top Story/Stories

U.S. Financial Stability Oversight Council Engages on Climate Change
https://home.treasury.gov/news/press-releases/jy0426

Secretary of Treasury Janet Yellen Comments
https://home.treasury.gov/news/press-releases/jy0424

From the White House: Executive Order #14030
https://www.whitehouse.gov/wp-content/uploads/2021/10/Climate-Finance-Report.pdf




The U.S.A. & the 2015 Paris Accord: Five Years On, the Largest Economy on Earth Promises to Return – With a Cabinet of Climate Change Champions Preparing for Action

December 20 2020 – published again in the blog in October 2021 as President Joe Biden travels to the Stockholm meeting of the COP 26.

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Seems like just yesterday we were celebrating the great promise of the 21st Century in 2015 – the Paris Accord. Can you believe, it is now five years on (260 weeks or so this December 2020) since the meeting in the “City of Lights” of the Conference of Parties (“COP 21”, a/k/a the U.N. Paris Climate Conference).

This was the 21st meeting of the global assemblage focused on climate change challenges.

The Promise of Paris was the coming together of the world’s sovereign states – the family of nations — to address once more what for many if not all of the states is an existential threat: climate change.

The parties agreed to a binding, universal agreement – the Intended Nationally Determined Contributions (“NDC”) to attempt to limit global warming to 2.7C by 2100.

The United States of America was [then] prominent among leading economies of the world at the Paris gathering, signaling the intention to play a significant role in addressing climate change matters. In fact, the final agreement was signed in New York City on Earth Day in April 2016.

Promises made, promises broken – in his campaigning and then almost immediately upon taking office, President Donald J. Trump said the U.S. would leave the historic agreement and nearing the end of his term in 2020 had just about completed the exit.

To the family of the world’s nations was this message: Do it without the United States of America.

Then, the recent good news: President-Elect Joseph Biden has indicated that his would be the “climate administration” beginning in January 2021 and quickly named former Secretary of State John Kerry to be his “climate czar”, the influential voice on the world stage to signal the USA is back in addressing the challenges of climate change.

Secretary Kerry was the U.S. representative to the COP 21 meetings in Paris and guided the nation’s inclusion in the Paris Agreement.

Forward to the last days of 2020: This is a climate emergency, President-Elect Biden said, and former US Senator and Secretary of State Kerry would lead the effort to elevate the nation’s response to the ever-escalating crisis, influencing policy and diplomatic initiatives on the world stage. (

Secretary Kerry will officially be on the National Security Council and report to the President of the United States after January 20, 2021.

Speaking to ProPublica, Secretary Kerry said “…the issues of climate change and human migration are intertwined… people are moving to places where they think they can live…and they will fight over places they want to move to… we will have millions, tens of millions of climate migrants…”

Come 2021, the family of nations can begin to celebrate – the United States of America will be back on the front lines in meeting myriad challenges related to the climate crisis.

As we prepared our commentary for the G&A Sustainability Highlights newsletter, President-Elect Biden named his dream team of climate change champions to lead the nation’s efforts:

Gina McCarthy, former head of the US EPA, will be the domestic climate change advisor (heading the White House Office of Climate Policy).

Governor Jennifer Granholm is the nominee to head the Department of Energy (her home state of Michigan is the home of the auto industry – she was the state’s governor).

Congresswoman Deb Haaland will be the first Native American when confirmed to be named to a cabinet post. She’s member of the federally-recognized Pueblo of Laguna, the New Mexico tribe whose 500,000 acres of land are near to Albuquerque. They refer to themselves as “Kawaik People”.  As Secretary of the Interior, she will have responsibility for jurisdiction over tens of millions of acres of tribal lands). Interior’s Department of Indian Affairs (BIA) is charged with “…promoting safe and quality living environments, strong communities, self-sufficiency and enhancing protection of the lives, prosperity and well-being of American Indians and Alaska Natives”.

Michael S. Regan, who worked in both George W. Bush and Bill Clinton administrations, and who is head of North Carolina’s Department of Environmental Quality, is Biden’s nominee to head the US Environmental Protection Agency.  He will have the daunting task for rebuilding the nation’s environmental regulations that were unraveled during the Trump Administration.

Brenda Mallory, experienced federal government attorney, will had the Council on Environmental Quality.

This is also a team, Biden and supporters point out, “that looks like America”.

Leveraging the strategies, policies, actions, and programs designed to address climate change challenges, the team and colleagues will “build back better” with green infrastructure initiatives at the core.

In the December 2020 issue we brought readers a selection of current news and opinion and shared perspectives on the Paris Accord, now five years in.

As we neared year-end 2020 much of the news was about climate, climate, climate in the context of the peaceful transition of power in this, the world’s most influential democracy.

A nation that for many years had been that Shining City on a Hill for other peoples and nations.  Will the USA be that again?

Stay Tuned to climate change crisis responses that have the potential to be at the heart of many of the new administration’s public policy-making efforts. On to year 2021…

TOP STORIES in the Newsletter Dec 20 2020

Against the above context, we share here a selection of the perspectives on the 5-Year Anniversary of the Paris Agreement.  Where we are now as we prepare for the transition year 2021 in the USA:

Springtime in North America – A Time Featuring Corporate-Investor Engagement and Proxy Voting on Critical Issues

April 20 2021   Spring is in the air!  Proxy Season 2021 getting underway.  So how did we get here?  Some history and springtime news. 

by Hank Boerner – Chair & chief Strategist – G&A Institute

Springtime comes to the USA and and the Northern Hemisphere countries with pretty flowers in bloom, trees budding, the onset of warmer weather.  And…

Asset owners and their managers participating willingly or reluctantly in the peak months of corporate proxy voting season in North America.

Typically, the corporate issuer develops the resolution(s) for voting by the shareholder base – for example, election of slate of nominees for the board and approval of the outside auditing firm.

And then… there are the resolutions prepared by the shareholders, and these are usually not to board and executives’ liking.

Thought you might be interested in some of the history of shareholder activism.  In the earlier days of shareholder activism certain “gadflies” would offer up their resolutions for inclusion in the voting (typically then, by individual investors).

Brothers John and Lewis Gilbert and a few others of similar thinking would gin up their resolution drafts and then face the challenge by the target company could be expected.

Some still around remember the ever-present at annual meeting Evelyn Davis, a Dutch Holocaust survivor with strong feelings and lots to say about how companies she invested in were being managed .

The Gilbert siblings operated “big time” in proxy season; they owned shares in 1,500 companies and attended at least 150 corporate annual meetings each year. T

They were often characterized as showmen (kicking up a storm at companies like Chock Full o’ Nuts and Mattel and other companies’ meetings.) Right after WW II John Gilbert got the SEC on the shareholders’ side; the regulatory agency started to require that companies include relevant shareholder resolutions in the annual proxy statement (of course certain conditions applied then and now).

Over time, this process became more sophisticated as many institutional owners put corporate equities in portfolios and steadily a certain number became activist investors. (

It really helped that the US Department of Labor leveraging ERISA statutes and rules  reminded US institutional investors that their proxy was an asset and voting was a clear responsibility of the fiduciary-owner.

In 1988, Assistant Secretary of Labor Olena Berg reminded pension fund managers of the “Avon Letter” that posited that corporate proxies are a pension plan asset and should be taken seriously and voted on.

One of today’s proxy voting / corporate governance experts with wide recognition and respect is California-based James McRitchie (principal of Corpgov.net).

In a communication to the US SEC in November 2018, he explained that he and other investors engage companies on ESG issues “to enhance their long-term value and to ensure corporate values do not conflict with the long-term interests of a democratic society.”

He suggested: “Corporations should welcome shareholders into the capitalist system as participants in major decision.”

In proxy season 2021, the “crisis stories” of 2020 and earlier years continue as public dialogue at least in the form of shareholder requests / demands / expectations of the companies that are in the portfolio on important societal issues.

Climate change action, racial justice/injustice, diversity & inclusion, inequality – these are high on the list for this year’s voting.

We have selected three Top Stories for you on the themes of 2021 voting. The not-for-profit Ceres organization, long active in ESG proxy voting issues, highlights the focus on science-based emissions reduction plans, and corporate policies aligned with the goals of the 2015 Paris Agreement. There are 136 climate-related shareholder-sponsored resolutions submitted to public companies as of April 2nd for 2021 voting.

The good news is that a number of these have been resolved in investor-corporate dialogues at Domino’s Pizza, Citigroup, JPMorgan Chase, and other firms. Others were withdrawn at Duke Energy, CSX, and Valero.

Climate-related themes for resolutions include “Banking on Low Carbon”, “Carbon Asset Risk”, and “Say on Climate”.

Long-time shareholder activist Tim Smith is Director of ESG Shareowner Engagement at Boston Trust Walden and member of the Ceres Investor Network. Ceres continues to track such resolutions and information is available at www.ceres.org.

The authoritative Pensions & Investments publication shares news about a new website — Majority Action’s “Proxy Voting for a 1.5 C World”.

Four key sectors are in focus: electricity generation, oil & gas, banking, and transportation, with summaries of corporate current emission targets, capital allocations and policy activity relate to climate change. (Reaching net-zero emissions by 2050 is an example of issue in focus.)

The web site offers recommendations for voting against director nominees at companies failing to implement plans “consistent with limiting global warming” by industry/sector.

In banking the web site names Wells Fargo, Goldman Sachs, and JPMorgan Chase. Issues in focus overall include Climate Change, Community Development / Investment, Gender Equality, and more.

Third – the Yield Positive web platform offers excellent background on shareholder resolutions and the current state of affairs following the dramatic events of 2020 – racial inequality highlighted by the killing of George Floyd; worker health and safety protections in the Covid pandemic; climate change issues – with examples of the resolutions coming up for vote in 2021.

These include Home Depot – Report on racism in the company; Target – Report on/end police partnerships; Wells Fargo – report on financing Paris Agreement-compliant GHG emissions cut, and more.

The 2021 spring season of corporate proxy voting and then the voting at company issues to Fall 20231 will be closely followed by business media and of course, the global investing community. We will continue to share news and perspectives about this annual exercise of “shareholder capitalism”.

TOP STORIES – April 2021

It’s Proxy Season 2021: Investors Focus on Climate Action

FYI

 

“APAC” & Corporate Sustainability Journeys – Monitoring Progress & Demonstrated Leadership on the Rise in This Vital Global Region

May 24 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

Business and financial activities in “APAC”, the Asia / Pacific Basin Region are vital to the economies of the rest of the world.

Think of the region’s leading sovereign economies…in order of magnitude, consider the impact of the economies of China, Japan, India, South Korea, Australia, Indonesia (the top economies).

These six countries are;

  • home to some of the world’s lower cost manufacturing and assembly centers,
  • sources of financing for companies and other government entities, sourcing points for many of the world’s natural resources and food and industrial ingredients,
  • sources of value-added manufactured products (such as the chips used in a multitude of consumer and business IT applications such as smartphones and electric vehicles).

The good news is that the region is also home to a growing number of corporate sustainability leadership companies. 

For example, CDP reports that “despite many challenges in 2020” companies disclosing on TCFD-aligned reporting reached a global high — and that included more than 3,000 companies in 21 Asia Pacific Region (“APAC”) countries responding to CDP for the first time…and that now account for almost a third of CDP’s global corporate responses.

ESG Leadership Progress:  The majority of the 3,000 APAC companies report having a board-level oversight on climate-related issues (79%) and say that they are beginning to integrate climate issues into business strategy.

Half say they have integrated incentives in management of climate issues, including attainment of targets.

Three of four APAC companies responding to the CDP survey say they have identified climate risk as maybe having substantive impact on their business and 60% of these are transition risk.

Climate Change Impact:  CDP in its Global Climate Risk Index 2021 found that 60% of countries most affected by climate change from 2000 to 2019 are in Asia.

McKinsey consultants estimates that the impact on labor productivity due to chronic increases in heat and humidity could cost Asia as much as US$4.7 trillion in of annual GDP by 2050.

We are sharing CDP’s recap of the survey responses for 2021 as a Top Story.

Looking at the smaller economy of the region, Sustainalytics’ manager Frank Pan focuses on ASEAN-6 nations and reports that in the context of sustainable investing moving from “niche” to mainstream, this trend is still limited those Southeast Asian countries — even though the region is an economic block with one of the world’s fast-growth rates.

The ASEAN-6 countries: Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines.

All six of these countries, Pan points out, do have some form of ESG disclosure required and the governments have guidelines to help companies in their ESG disclosures; all the nations have stock exchanges that are members of the Sustainable Stock Exchange Initiative to encourage ESG reporting by listed companies.

He points out the nature of the ESG disclosure regimes of the six nations in another Top Story selection this week.

Sustainability Reporting:  The Global Reporting Initiative (GRI) is the world leader in number of corporate reports published following the organization’s standards; while some ESG standards are designed to inform the investment community, GRI’s were developed over 30-plus years with stakeholders in mind, including providers of capital (today’s standards were preceded by GRI’s reporting frameworks, “G1 through G4”).

GRI in our third Top Story this week reports growing momentum for sustainability reporting in South Asia and especially for three target countries (India, Bangladesh, Sri Lanka).

GRI’s research examined 1,100 companies in the region; of these, 503 are in India, 320 in Bangladesh, and 284 in Sri Lanka.

The “2020 Sustainable Reporting Trends in South Asia” research found that GRI’s Standards are the most widely-used for ESG reporting across all the countries; 64% of listed companies in Sri Lanka use the standards; the number of reports published in Bangladesh increase by more than a third from 2018 to 2019; in India, 99% of organizations analyzed by GRI have integrated sustainability reporting into their management practices.

While the usual flow of content that we monitor and share in the newsletter each week at times has a focus on Asia and the Pacific Basin region and subregions, we are bringing you much more detail in these stories – where you will find more information about the above research efforts and respective organizations’ reports in the Top Stories.

TOP STORIES

The Private Equity World: Broadening Focus on Sustainability – The Blackstone Group is All In

May 17 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

The P/E world:  Private equity firms often have a pool of companies wholly owned or invested in and managed and advised by them in portfolio …this is the ambitious domain of the private equity (P/E) universe.

The leading publicly-traded P/E leaders are familiar names to institutional investors:

  • Blackstone (NYSE:BX),
  • The Carlyle Group (NASDAQ:CG),
  • Apollo Global Management (NYSE:APO),
  • Kohlberg, Kravis Roberts (NYSE:KKR).

There also well-known P/E companies not publicly-traded such as TPG Capital and Bain Capital (which owns, invests in and advises portfolio entities).

Focusing on one major P/E firm today – Blackstone Group – we see how sustainability is now being driven across the alternative investment of P/E enterprises.

Blackstone owns and manages key asset categories such real estate (owning the huge Stuyvesant Town complex in NYC), hedge funds, credit & insurance, financial advice, investment (partnering for example with Pfizer and SFJ Pharmaceuticals for therapies), and managing private equity funds and funds of funds for its investment clients.

In the Blackstone investment portfolio are companies with familiar names:  SERVPRO, Ancestry, Refinitiv, Bumble, EPL, Aypa Power.

Blackstone Group Inc has asked the top executives running portfolio companies “controlled by its private equity arm” to regularly report on ESG matters to their boards of directors, according to a news story by Reuters corporate governance reporter Jessica Dinapoli (she covers boards of directors and C-suite trends).

She writes that Reuters obtained a letter from Blackstone’s CEO (“the world’s largest manager of alternative assets such as P/E”) to portfolio companies’ CEOs that is basis of her report.

Her takeaway:  The Blackstone firm’s sustainability credibility would be boosted by portfolio companies disclosing more about their climate risk, environmental certifications, diversity & inclusion, and commitments to protection of human rights.

According to the Reuters report, the letter to portfolio companies’ CEOs advised: “ESG factors are attracting greater focus globally and demand careful attention on your part.”

The latest move by Blackstone could help to “standardize” ESG reporting across the firm’s massive global portfolio.

An accompanying story by Reuters tells us that Blackstone recently hired five managers to beef up its internal ESG team as the firm moves to drive sustainability and diversity across its broad portfolio of holdings.

Adding our perspective why this is a very important development: The company is a member of the American Investment Council (formerly, Private Equity Growth Council).

What about P/E and sustainability? 

That organization says in 2020 the P/E industry invested $24 billion-plus just in renewable and sustainability projects… “playing a critical role in the energy transition and moving our economy in a more sustainable direction.”  P/E has invested $100 billion in renewable energy since 2010 says the AIC.

The Blackstone moves to have portfolio companies “be all in” on sustainability should help to bring about much more ESG disclosure by firms not necessarily doing much reporting today (as they are tucked away in P/E portfolios)l

From experience we know at G&A Institute that when firms move out of P/E portfolio (via IPO, SPAC, acquisition by larger firm, management buyout, other means) the proactive burnishing of corporate ESG reputations can be a big plus in the divestment of today’s P/E entity.

We have the link to the Blackstone report in the Top Story this issue.

TOP STORIES

 

Special Mention – IR Magazine Focus – Our Partners, DFIN

Earth Day – Climate Week – The World Celebrates Promises and Actions to Meet Climate Change Challenges

April 21 2021

by Hank Boerner – Chair & Chief Strategist, G&A Institute

In brief – yes, this is Climate Week, being observed just about everywhere on this precious Blue Orb floating in space. 

The varied observations are “surrounding” the now-50-plus-one years of celebrating Earth Day going back to April 1970, United States Senator Gaylord Nelson of Wisconsin was the moving force behind the very first Earth Day in the United States of America.

Good news for 2021: The U.S.A. is fully “back” in climate change matters with the nation rejoining the Paris Agreement and embracing and promising to surpass the COP temperature-limiting goals. As we write this,

President Joseph Biden and VP Kamala Harris are leading a global leader virtual summit on climate change issues.

Senator Gaylord’s words in Denver, Colorado that first Earth Day continue to speak to us across the decades: “Our goal is not just an environment of clean air and water and scenic beauty. The objective is an environment of decency, quality and mutual respect for all other human being and all living creatures.”

Here we are in 2021 in the USA witnessing the dramatic expansion of the decades of Earth Day celebrations with current and future promises, pledges, and action on many fronts – in many nations as well – and among global institutions (like the arms of the United Nations and many more),

And by tens of millions of people, individuals who care about the state of humanity and state of our planet.

While considerable focus is on the Biden-Harris Administration policy declarations and actions at the Federal level (“the climate administration”), there are many more actions at the state, city – municipality and tribal levels as well in the United States.

And, across the spectrum of firms in “Corporate America” and at many asset management firms there is the rapidly-widening embrace of ESG policies and actions.

‘No doubt the digital climate summit of this week will spur internal debate in corporate suites along the lines of: What are industry and investing peers doing – what else should we be doing! What are our risks and opportunities as the world engages to move toward Net Neutrality!

In this brief post we are sharing timely updates in each of our subject/topic silos that readers find each week in the G&A Sustainability Highlights newsletter.

Reminder – there is much more related current and archived climate change content beyond the silos for you on the G&A’s SustainabilityHQ platform.  And more related content to share on G&A’s Sustainability Update blog.

TOP STORIES

Celebrating Climate Week & Earth Day 2021 – Global Leaders Gather in “Climate Summit” Hosted by the U.S. – Kumbaya for Paris Agreement Goals Refresh

April 30 2021

by Hank Boerner – Chair & Chief Strategist – G&A Institute

A highlight of the numerous celebrations of the 2021 Climate Week / Earth Day around the world was the hosting of a “global summit” of leaders from 40 nations and sub-governments, the investment community, the corporate community, NGOs, and advocates, the E.U., multilateral organizations, indigenous communities, and others – hosted this year by the United States of America.

We could describe the enthusiastic presentations and panel discussions over the two days by global participants a kumbaya gathering to refresh and update the 2015 Paris Agreement (or Accord) moments as the world leaders then set out ambitious goals to limit global warming.

The big news – the USA is back in the global effort to address climate change challenges.

President Joseph Biden and Vice President Kamala Harris were the primary hosts over the two days of digital meetings, along with former Secretary of State John Kerry (now the White House climate envoy), present Secretary of State Antony Blinken, cabinet officers, and others in the administration making presentations and leading discussions.

Sovereign leaders joined the two days of discussions to present the strategies and actions (current and planned) for their respective nations (including China, UK, Russia, France, Canada, Australia, India, Japan, Germany, South Korea, Indonesia, Mexico, South Africa, Marshall Islands, and others).

The measures sovereign governments (large and small!) are taking to address climate change challenges – with the foundation of the Paris Agreement of 2015 as guide – are sweeping; some initiatives are now in partnership with other nations (the USA and India, or EU nations and African nations, as examples).

We have included for you the Fact Sheet issued by the White House in our Top Stories for this week. “

The USA is Back” on climate issues is the general messaging of the Biden-Harris Administration, with many specifics set out during the two-day conference.

Some examples of the “whole of government” climate approaches in the United States — and an ambitious agenda for helping developing nations around the world:

  • The United States will double the nation’s target for overall reduction of carbon emissions (NDC) by 50 percent by 2030 compared to 2005 levels. This “underscores the commitment to lead a clean energy revolution”.
  • To assist other nations, a Global Climate Ambition Initiative was launched to support developing nations in establishing net-zero strategies, to be led by the US Department of State and USAID (the US Agency for International Development).
  • These efforts will need funding; the US International Development Finance Corporation (DFC) commits to achieving a net zero investment portfolio by 2040 with one-third or more of the new investments made having a “climate nexus” by FY 2023. The DFC will work with the Rockefeller Foundation to support distributed energy and other innovations offshore.
  • The USA and Canada are chairing “The Greening Government Initiative” to lead by example in helping developing nations implement their respective climate change plans to “increase resilience and mitigate emissions from their government operations and collaborating on common goals”.
  • The North American partners will seek to develop net zero economies, using 100 “clean electricity” and zero emissions vehicle fleets (as examples of climate leadership in action).
  • President Biden announced an international climate finance plan, making use of his country’s multilateral and bilateral channels and institutions to help developing countries; this will include directing the flow of capital toward climate-aligned investments and away from high-carbon investments.

There is much more for you to digest in the sweeping range of current and planned initiatives in the White House Fact Sheet in the Top Stores.

Considering the announcements from Washington DC in the context of the actions of other nations and organizations that we are sharing in the newsletter. We have news from the European Union, the Global Reporting Initiative, United Nations Global Compact, CDP (formerly the Carbon Disclosure Project), and the International Integrated Reporting Council (IIRC).

Important: We can all give a nod of thanks to the media who today are covering the many aspects of climate change challenges (and solutions) – including Forbes, Associated Press, CNN, The Guardian, and many others whose coverage of CC topics & issues we share with you each week.

Bravo, editors and journalists, for keeping us informed of the progress made as well as the societal challenges we still face.

TOP STORIES

Climate Summit

EU Regulations: Corporate Sustainability Reporting Directive