North Sea Oil & Gas – Fueling Great Accumulations of Wealth for the Long-Term Benefit of Norway’s Future Generations

The foundation for the significant progress made in so many spheres of society in the 20th Century was…Oil!  The oil-producing nations of the world amassed great wealth with the marketing of oil and petroleum-derived products; those products enabled fantastic progress to be made in industry, government, agriculture, the consumer sector…throughout our modern society.

A number of formerly categorized as “still developing nations” of the early 20th Century years became quite wealthy when oil deposits were discovered or exploited on their lands — especially countries like Saudi Arabia and the United Emirates, and Kuwait and Iran and Iraq.

North Sea oil and gas exploration would bring great wealth to certain western nations in the second half of the Century.  One of these was Norway, with significant reserves identified (and exploited) beneath the often storm North Sea waters.

A strategic decision was reached internally in 1990 — a stream of “surplus” revenues would be directed toward the country’s Sovereign Wealth Fund (SWF), officially “the Government Pension Fund” – this inflow began in 1996 and since, the SWF has become the largest Sovereign Wealth Fund in the world. (There is a separate internal fund also receiving funds for domestic investment.)

The Norway SWF invests in 77 countries; the portfolio allocation is in equities (62%), fixed-income (34%) and real estate (3%). The return on investment in 2016 was almost 7%.

The Fund states that it is a “Responsible Investor,” with a mandate to integrate responsible investment activities into the management of the fund.

Sign of the times:  In the flow of news reports and commentaries about the trend to minimize or dis-invest shares of fossil-fuel companies in investment portfolios, comes news from the Nordic nation [the advice] that the Norway SWF should scale back or drop investments in oil & gas stocks.

The Norges Bank, which manages the SWF’s US$1 trillion in AUM, advised that such a step would make Norway less vulnerable to a permanent slide in Oil & Gas prices.  About 6% of the AUM is now in the sector (in such companies as Shell, BP, ExxonMobil). Shell contributed the most to the fund’s return in 2016.

Important note:  There were holdings in about 9,000 public companies in 2016; the average holding in the world’s listed companies was about 1.3% to 2%, and up to 5% in 28 companies. (Nestle is the largest holding in a single issuer.)

In North America, holdings are in 2,268 companies; 2,107 bonds from 582 issuers; and in 400 (office & retail) properties. Oil and Gas performed best in 2016, Norges Bank reported (29%).  One investment of note is Florida-based NextEra Energy, a U.S. company “driving the transition from coal-based power to clean electricity.”

All of this is sort of inside baseball; the SWF is owned by the central government for the benefit of future generations; the Norges Bank operations are part of the government; the Finance Ministry will review the suggestions.  We will likely see important decisions taken by June 2019, according to the BBC.

It will be interesting to watch as the world’s largest Sovereign Wealth Fund and one of the world’s key responsible investors — all integral parts of one of the world’s important oil & gas countries — make decisions on fossil fuel investments going forward.

BBC highlights of the latest developments are in our Top Story this issue. And there is more detailed information for you in the Norges Bank Annual Report for 2016.

Story This Week…

Norway’s state fund ‘needs to drop oil and gas investments’
(Friday – November 17, 2017) Source: BBC – Norway’s government has been told its state-run fund should drop its investments in oil and gas stocks.

 

Seven Important Trends From Textile Exchange Conference Summed Up: The Industry Gets It on Sustainability

“Sustainability is front and center in the apparel sector” — so writes Tara Donaldson in the November 5th feature story in the Sourcing Journal in covering the Textile Sustainability Conference in October. Seven major trends were discussed at the meeting of industry execs.

Considering such things as reducing microfibers polluting our oceans or using more materials with less environmental impact or other factors, the industry focus on sustainability is creating a new vision for the apparel industry, including for brands that had not yet been on board.  Because: the consumer and industry now demand this.

And there are seven trends that illustrate the paradigm shift in the industry, with details set out by the Journal for each:

Embrace of Sustainability Development Goals (SDGs) – more companies are taking a close look at how their businesses align with these, and the October conference in Washington, DC focused on exploring what SDGs mean to the apparel sector. The SDGs provide a common vocabulary for the industry.  And the manufacturing centers are taking a closer look — like China, India, Bangladesh and El Salvador.

Better raw materials in products – slowly but steadily, brands are building products with sustainable materials; the trend is up for the year, according to the 2017 Preferred Fiber & Materials Report.

Circularity/Circularity/Circularity – companies are gearing up for more circularity (circular value chains that is!), with about one-quarter of firms developing such a strategy and more than half with a strategy being implemented.  For example, making a silk-like fiber out of orange peels.

Actions on Climate – for many firms, climate change is a major issue and more than 200 companies have set carbon reduction targets. Luxury products marketer Kering Group plans to reduce carbon emissions by 50% by 2020, for example.

Leveraging Technology for Sustainability – DNA tech is one of the “big things” with the ability to provide greater transparency and traceability for fiber (the technique is using DNA-based tags embedded in raw materials such as organic cotton).

Water — Being Better Stewards – apparel companies are “water guzzlers,” with 14-plus liters to make one cotton suit (as example).  Companies are figuring out how to go “waterless” or really cut their water usage over time in the production of apparel.

Investors and Long-Term Viability – and yes, the industry leaders acknowledge that investors “are paying heed” to sustainability and long-term business viability. A Bloomberg LP analyst laid out the importance of sustainability to the conference attendees.

There’s more for you in the Top Story on the above seven major trends.  And we include in our wrap up this week another report — about investors now paying greater attention to sustainability efforts in the apparel industry.

Note:  for the Sourcing Journal – a subscription is required — a “Free” registration will allow you access to this story, with a limit of 5 articles per month.

Top Stories This Week…

The Top 7 Sustainability Trends Coming Out of Textile Exchange
(Monday – November 06, 2017) Source: Sourcing Journal – Whether it’s circularity, reducing microfibers polluting the world’s oceans or using more materials with less environmental impact, sustainability is front and center in the apparel sector, and brands that hadn’t been on board…

All Together Now — Industries, Sectors & Professional Groups See Collective Efforts As The Way Forward for Managing Sustainability Issues

There is encouraging news as corporate executives, managers and a range of professionals get together to address the risks and opportunities inherent in sustainability matters that could affect a particular industry, sector or profession.   And, how with collective industry effort these challenges might be addressed.

Example:  Landscape architects gathered in Los Angeles to discuss designing (the heart of their work) in the era of challenges posted by climate change and global warming.  Consider that perhaps 70% of the Year 2050 global population will be living in urban areas.  And so, urban landscapes will need to (1) accommodate and support the greatly expanded population and (2) addressing the changing climate conditions that will complicate their work.

There is a video (2:29 minutes) posted with the report.  The graphic depictions of possible solutions with to climate change with experts’ narratives about the challenges are interesting to view.  Thought provoking.

Other examples are in three stories below. The vinyl and apparel industries efforts are highlighted, and we also provide a link to the text of a speech by the former Prime Minister of the Netherlands on the global need for new business models and consumption cycle.

All together now…forward!

Top Stories This Week…

Architects shape future cities for sustainability at LA gathering
(Monday – October 23, 2017)
Source: aljazeera.com – In Los Angeles, landscape architects have gathered to focus on sustainability and designing for an era of global warming and climate change at the 2017 American landscape architects conference.   with 3 minute video  materials (concrete) landscapes…

Changes Ahead for Corporate Sustainability Reporting

This is a guest post by our colleague-in-sustainability, Jane DeLorenzo.  She recently completed the on-line Certificate in Corporate Responsibility & Sustainability Strategies.  The platform is hosted by G&A Institute and developed in partnership with IntegTree LLC. This is a dual credentials course!  A certificate is issued by Swain Center for Executive & Professional Education at the University of North Carolina-Wilmington and a separate certification is issued by G&A Institute.  This commentary is prepared as part of the completion of the coursework.  We are sharing it today to broaden understanding of the state-of-sustainability reporting – present and future.  Find out more about the dual certificate program here.

By Jane DeLorenzo  October 27, 2017

Now is the time for businesses and other organizations to take a closer look at their sustainability reporting; key considerations are what they report, why, how and which standards to use.

New standards released by the Global Reporting Initiative (GRI) will take effect July 1, 2018 — so the clock is ticking.

As more global companies produce sustainability reports, the process has become more complex. Competing standards and frameworks, increasing pressures from investors and other stakeholders, and the costs and resources involved to develop such reports can be challenging – and baffling to leaders.

While GRI is positioning and advocating to be the de facto global reporting standard, companies can select other frameworks, such as those of the Sustainability Accounting Standards Board (SASB) or the International Integrated Reporting Council (IIRC).

There are important factors to consider. Organizations can opt for an integrated report that includes both financial and sustainability information, or they can issue a sustainability report that is separate from the annual financial report.

Producing no sustainability report is also an option, since all three of these standards are voluntary in the United States and most other countries. Companies should be aware, though, that stakeholders may cry foul if no report is produced.

What’s a company to do?

The Continued Evolution of Reporting

Sustainability reports tell the story of an organization’s impacts on economic, environmental and social issues. Many corporations began to examine their non-financial impacts following the environmental and social movements of the 1970s in Europe and the United States.[i]

Public outcry due to rising awareness of pollution and social inequities pushed companies to try to be more transparent. Shareowners were making the case that non-financial issues can and do impact a firm’s financial performance.

In the U.S., for example, emissions data reporting was spurred by Right-to-Know legislation and rules in 1986 that required accountability from companies that were releasing toxic chemicals into the environment.[ii]

Demand for environmental and social disclosures led to the formation of GRI in 1997 by the Coalition for Environmentally Responsible Economies (now known as CERES) and the nonprofit Tellus Institute, both based in Boston. GRI later partnered with the United Nations Environment Programme (UNEP), which had been promoting voluntary environmental reporting by companies and industry groups.

At a ceremony in 2002 announcing the move of the GRI headquarters from Boston to Amsterdam in the Netherlands, UNEP Executive Director Dr. Klaus Töpfer acknowledged GRI’s mission to develop a framework for voluntary sustainability reporting.

He commented: “An increasing number of stakeholders, including the investment community, share the goal of the GRI to raise the practice of corporate sustainability reporting to the level of rigour, credibility, comparability and verifiability of financial reporting.”[iii]

GRI launched its first sustainability reporting framework in the year 2000 and subsequently developed four versions of its guidelines (G1 through G4). Keeping current was a long-term challenge for companies reporting their corporate social responsibility (CSR) efforts. Over time it became clear that a simplified, easier-to-update standard was needed. The new GRI Standards are meant to streamline and simplify the process.

As GRI marks its 20th year, the organization is attempting to “tackle the confusion among companies about the proliferation of different reporting frameworks,” according to GRI Chief Executive Tim Mohin.[iv]

While some media reports claim GRI and SASB are competing frameworks, a 2017 article in GreenBiz, co-authored by Mohin and SASB Founder/CEO Jean Rogers, intended to dispel this perception.[v] The article states: “Rather than being in competition, GRI and SASB are designed to fulfill different purposes for different audiences. For companies, it’s about choosing the right tool for the job.”

Best Practices

Using the right tool, or standard, is the key to companies producing a successful report for their target audience.

While GRI is the widely-accepted framework for reporting sustainability initiatives to a broad audience, SASB focuses on reporting to the investor audience. This audience is interested in the link between sustainability and financial performance. Both GRI and SASB agree on a common goal: to improve corporate performance on sustainability issues.

Other organizations with similar goals include a list of initials and acronyms:  IIRC, CDP, ISO, OEDC, SDG and more. These are:

  1. IIRC (International Integrated Reporting Council) promotes integrated reporting to provide “investors with the information they need to make more effective capital allocation decisions,” according to its website.[vi]
  2. CDP (formerly known as Carbon Disclosure Project) partners with organizations to measure their carbon footprint. Many companies use CDP alongside other reporting frameworks.
  3. ISO, the International Organization for Standardization developed ISO 26000 to help organizations improve their social responsibility efforts.
  4. OECD is the Organization for Economic Cooperation and Development. Its industrial economy member countries negotiate guidelines surrounding social responsibility.
  5. SDG stands for the United Nations “Sustainable Development Goals.” UN member states adopted the 17 SDGs with 169 targets that seek to protect the planet, end poverty, fight inequality and address other social injustices.

While CSR reporting has been widely voluntary, mandatory reporting is taking effect in some countries. In the European Union, large companies (more than 500 employees and certain assets and revenues) now face mandatory disclosure of environmental and social impacts beginning with their 2018 annual reports.[vii]

The EU published its own guidelines in 2017, but it allows companies to choose among the various standards. Laws requiring CSR reporting are also in effect in South Africa, China and Malaysia. Meanwhile, a growing number of stock exchanges around the world are issuing sustainability reporting guidance and requirements.

Companies that are just beginning the process to report on their sustainability impacts should find the new GRI Standards relatively simple to use. The Standards are free to download from the GRI website (www.globalreporting.org) by registering a company name and email address. Organizations can use all or some of the Standards, but they must notify GRI of their intended use.

The new Standards are made up of three modules (or manuals): (1) the Foundation, which describes the basic reporting principles; (2) General Disclosures, which outline required contextual information about an organization and how it operates; and (3) Management Approach, which requires organizations to state how they approach their selected sustainability topics or issues.

While the content and requirements are basically unchanged from the currently-used GRI G4, the Management Approach now takes center stage. A reporting company must provide information on how it “identifies, analyzes and responds to its actual and potential impacts.”[viii]

Once a company determines its approach to a key topic, this management approach might stay the same from year to year. Also, one management approach may apply to several key topics, which should make reporting more concise. The Standards include three additional modules that are organized according to topic categories: economic, social and environment.

Focusing on material (or key) topics, rather than a long list of topics, should also make the reporting process more concise as well as more meaningful to stakeholders. In other words, less is more. The new Standards direct companies to identify their key topics and then report on at least one of the topic-specific GRI disclosures.

For example, Company XYZ determines from stakeholder feedback that the topic of waste will be included in its sustainability report. Both the new GRI standards and G4 guidelines include five disclosures on waste. The new Standards require reporting on one disclosure so Company XYZ can report more in depth on this key topic.

Previously, some companies felt compelled to report on a greater number of topics and disclosures in order to be ranked favorably by rating agencies like Bloomberg or Thomson Reuters. These ratings not only can affect a company’s stock price, but they also can influence a company’s CSR strategy.

According to a 2016 study on rating agencies, about 33 percent of companies said inquiries from sustainability analysts shaped their overall business strategy.[ix]

Implications and Conclusion

Regardless of which sustainability reporting guidelines an organization chooses, the number of companies producing voluntary or mandatory reports is growing.

The process itself can give companies a clearer picture of their impacts and progress meeting their CSR targets. These insights help companies develop strategies to identify risks and opportunities within their realm of sustainability.

Because the GRI framework has been widely accepted globally, its new Standards will likely have a strong impact on the future of reporting. But it’s also likely that the leadership of corporations will continue to take a closer look at the link between sustainability and financial performance. Consequently, other frameworks that focus on both financial and non-financial impacts could gain acceptance.

GRI, SASB, IIRC and other frameworks are all driving improvements in sustainability reporting. As GRI’s Mohin explained: “In order to be more impactful, reporting needs to be concise, consistent, comparable and current. Brevity and consistency are key to successfully managing and understanding the insights delivered by the reported data.”[x]

Reporting must consider the financial bottom line if a company is to be both profitable and sustainable. What matters is that organizations need to be mindful of their reasons for reporting and how sustainability reporting can make an impact internally and externally. Honest, balanced and transparent reporting will ultimately benefit companies, their stakeholders and society-at-large.

Author:  Jane DeLorenzo is Principal of Sustainable Options, specializing in sustainability report writing and editing, and compliance with GRI reporting.

 

 

 

 

 

 

 

# # #

The on-line Certificate in Corporate Responsibility & Sustainability Strategies provides a broad overview of key corporate responsibility challenges and strategies that will enable organizations to succeed in the 21st Century Green Economy.  The Program Developer is Nitish Singh, Ph.D., Associate Professor of International Business at the Boeing Institute of International Business at Saint Louis University with Instructor Brendan M. Keating.

Information is here:  http://learning.ga-institute.com/courses/course-v1:GovernanceandAccountabilityInstitute+CCRSS+2016/about

# # #

References:

[i] Brockett, A. and Rezaee, Z. (2015). Corporate Sustainability: Integrating Performance and Reporting. Retrieved from https://www.safaribooksonline.com/library/view/corporate-sustainability-integrating/9781118238066/chapter02.html

[ii] Environmental Protection Agency, United States. (n.d.) Timeline of Toxics Release Inventory Milestones. Retrieved from  https://www.epa.gov/toxics-release-inventory-tri-program/timeline-toxics-release-inventory-milestones

[iii] CSRwire (2002, April 22). Global Reporting Initiative Announces Move to Amsterdam. Retrieved from http://www.csrwire.com/press_releases/15359-Global-Reporting-Initiative-Announces-Move-to-Amsterdam

[iv] GRI (2017, October 4). Q&A with GRI Chief Executive Tim Mohin. Retrieved from https://www.globalreporting.org/information/news-and-press-center/Pages/QA-with-GRI-Chief-Executive-Tim-Mohin.aspx

[v] Mohin, T. and Rogers, J. (2017, March 16). How to approach corporate sustainability reporting in 2017. Retrieved from https://www.greenbiz.com/article/how-approach-corporate-sustainability-reporting-2017

[vi] International Integrated Reporting Council. (n.d.) Why? The need for change. Retrieved from https://integratedreporting.org/why-the-need-for-change/

[vii] European Commission, Belgium. (n.d.) Non-financial reporting. Retrieved from    https://ec.europa.eu/info/business-economy-euro/company-reporting-and-auditing/company-reporting/non-financial-reporting_en

[viii] GRI (n.d.) GRI 103: Management Approach. Retrieved from https://www.globalreporting.org/standards/gri-standards-download-center/gri-103-management-approach/

[ix] Sustainable Insight Capital Management (2016 February) Who are the ESG rating agencies? Retrieved from https://www.sicm.com/docs/who-rates.pdf

[x] GRI (2017, October 4). Q&A with GRI Chief Executive Tim Mohin. Retrieved from https://www.globalreporting.org/information/news-and-press-center/Pages/QA-with-GRI-Chief-Executive-Tim-Mohin.aspx

 

John Elkington Presents: “6 Ways For Business Leaders To Talk About Sustainability” in the Sustainability / Strategies Series From the Influential Harvard Business Review…

“The” voice of authority for many board members and C-suite executives is The Harvard Business Review.  Sustainability pioneer and influential thought leader John Elkington in the current “HBR” talks about the practice of “issues framing” at the highest levels of the corporation, and suggests (to leaders) that to change our usual way of perceiving, prioritizing and investing time/effort/money, that “re-framing” for social change is the wave of the future.

Note that social commentator and author George Lakoff (writing in “How to Think Like An Elephant”) suggested the theme of re-framing our reasoning and setting of priorities.  The HRB piece builds on that and takes us to the new frontier for corporate strategy-setting.

John Elkington writing in HBR sees six mainframes at work in the sustainable business space, each with strengths and limitations. These are:  (1) the Resources Frame; (2) the Time Frame; (3) the Value Frame; (4) the Design Frame; (5) the Abundance Frame; (6) the Moral Frame.

Each is described with current and historical examples, and the strengths and challenges posed as we consider the frame.  The “break” needed,  Elkington advises, is from set-in-your-ways thinking and planning and strategizing on critical issues — such as global warming — to new ways of Framing.  Greater understanding of the different mental and political “framing” currently in play is important in considering the shift.

And so, a first step is to consideration of resources and population growth and the pressure on available resources and the resilience of key eco-systems.  (The Resource Framing). Then from this to the Timing Frame.  Elkington’s suggestion is to shift from short-term to longer-term planning and strategizing and to focus on the Sustainable Development Goals with time their widely-adopted time horizon out to 2030.  And then on the other four Framings, which we recommend for your reading and thinking about.

HBR makes available reprints of this and other Elkington articles in the “Strategy & Execution” series. Check the titles in:https://hbr.org/search?term=john+elkington

As we noted up top, the HBR is really an influence in corporate boardrooms and C-Suite — think about the powerful impact of the “Shared Value” concept introduced by Professor Michael Porter in the HBR pages a few years ago.

John Elkington is Chair and “Chief Pollinator” at Volans.  He gave us such terms (now widely-used) as “Triple Bottom Line” and “People / Planet / Profits” in his earlier work. His current book is “The Breakthrough Challenge:  10 Ways to Connect Today’s Profits With Tomorrow’s Bottom Line.”

Top Stories This Week…

The 6 Ways Business Leaders Talk About Sustainability
(Wednesday – October 18, 2017)
Source: Harvard Business Review – Capitalists focus on the financial returns from capital invested, and most business leaders prioritize issues that are financially material. For anyone with a pension linked to market performance, that is a good thing. But this…

Morningstar Now Informs Investors About ESG/Sustainable Mutual Funds — And The Good News Is That ESG Funds’ AUM Continues to Grow

The authoritative voice for many investors on the always expanding mutual fund universe is the Chicago-based Morningstar organization.  The company tracks mutual fund’s in- and outflows, performance, focus and other aspects of [mutual fund] activities.

The firm began adding ESG analysis to its legendary and comprehensive analytical work last year.  About 200 mutual funds with ESG criteria were initially being monitored by Morningstar, with analysis provided by Sustainalytics. **

Now here’s an important update for you:  we are apparently on pace for a record year for ESG funds this year.  In 3Q 2017, the universe of ESG funds (equity and fixed-income) continued to grow; there were five new fund launches and net flow (funds in) that “…keep the group on track for record year of attracting new assets.”

Morningstar explains that “Sustainable Mutual Funds” experienced continued growth in assets and heavier inflow through 2016 and into 2017; Assets Under Management were about $60 billion through September.  New launches were by Brown Advisory, Essex, iShares and NuShares (four were bond funds and one, equity-focused).

Notes Morningstar:  Because many of these funds are “young,” with almost 100 lacking three-year track records, they remain small (below $50 million AUM). But the good news is that with continued new fund launches and flows in continuing, sustainable funds continue to gain traction in 3Q 2017, offering investors more choices who are focusing on ESG / sustainable portfolios.

The addition of ESG / Sustainable investing data and information to the influential Morningstar suite of services for investors was an important development, and a solid sign of ESG investing coming of age in the USA for the company’s customers.  Shortly after adding the ESG features, Morningstar made a strategic investment in Sustainalytics buying 40% of the firm earlier this year – another good sign for the sustainable investing community.

There’s good information for you in our Top Story.

There’s more news about sustainable investing here in this week’s Highlights — read on!

Keep watch: We will soon be sharing news about our new “To the Point” corporate management briefing service.  This new platform on launch will have lots of good, timely, actionable information about ESG players that influence the capital markets — and public company access and cost of capital.  For advance information, send an email to:  info@ga-institute.com

**Footnote:  Morningstar defines the ESG universe as fund that incorporate ESG criteria into their investment process (or) pursue a sustainability-related theme (or) seek measurable sustainability impact along with financial return.

Top Stories This Week…

Sustainable Funds Universe Continues to Expand
(Thursday – October 12, 2017)
Source: Morningstar – The universe of sustainable funds in the United States continued to grow in the third quarter, with five new fund launches and positive estimated net flows that keep the group on track for a record year of attracting new assets.

SEC Proposes Important Amendments to Corporate Disclosure & Reporting – Changes Are in the Wind — But Corporate ESG Disclosure Is Not Addressed in the SEC Proposals …

October 12 2017 – by Hank Boerner – Chair, G&A Institute

On October 11, 2017 important news was coming from the Securities Exchange Commission (in Washington DC) for corporate leaders and investment professionals: a comprehensive package of proposed changes (amendments) to existing rules for corporate disclosure and reporting was released for public examination and comment.

There are more than 250 pages of proposed changes and adjustments released for your reading (the document will be published now in the Federal Register for broad communication to stakeholders).

You’ll remember the April 2016 activities as SEC released a 200-plus page Concept Release that addressed a range of issues that could result in revamping the overarching parts of Regulation S-K and parts of Regulation Fair Disclosure (“Reg FD“) and other corporate disclosures required by Federal statutes.

We told you about this in our post of May 13, 2016.
Link: http://ga-institute.com/Sustainability-Update/tag/sec-concept-release/

We said then: Maybe…U.S. Companies will be required…or strongly advised…to disclose ESG Data and related business information…

There were great hopes raised when the Commission in circulating the Concept Release document devoted more than a dozen pages to discussion about ESG, sustainable investing, the possibility of “guidance” or perhaps amending rules to meet investors’ expectations that public companies would begin, expand, improve on, ESG disclosure.

Numerous investor interests provided comments to the SEC in support of the possibilities raised by SEC in the dozen pages of the Concept Release devoted to ESG et al.

The US SIF — the Forum for Sustainable and Responsible Investing, a very influential trade association of asset owners and managers — provided important input, as did the CFA Institute (the U.S.-based, global certification organization for financial analysts and portfolio managers worldwide).

Disclosure of material ESG issues was a key concern of the numerous responders in the public comment period.

This week’s development: The SEC Commission proposed amendments to existing regulations that are part of the “Modernization and Simplification of Regulation S-K,” citing a different package of legislation. (The FAST Act Modernization, which in part will the sponsors said will attempt to “prune the regulatory orchard” — this is part of the Fixing America’s Surface Transportation Act or “FAST”.)

The Commission referred to the proposals as an important step “…to modernize and simplify disclosure requirements for public companies, investment advisors and mutual fund (investment) companies under the FAST Act…”

This, said recently-appointed SEC Chair Jay Clayton, “…is the most effective way to update SEC rules, simplify forms and utilize technology to make disclosure more accessible…”

The proposed amendments were characterized as part of the overall, long-term review of the SEC’s disclosure system. Thus, the SEC said the proposed amendments reflect “perspectives developed during the staff’s broader review…including public input on the prior Concept Release.

The details are available for you in a new 253-page document, at: https://www.sec.gov/rules/proposed/2017/33-10425.pdf

You have 60 days of open comment period ahead during which to express your views on the proposals.

The proposed amendments mostly address corporate governance (G”) issues that if adopted would:

• Change such items as Description of Property**; the MD&A; Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act; Outside Cover Page of the Prospectus.

• Revise rules and forms to update, streamline and improve the SEC disclosure framework by eliminating risk factor examples listed in the disclosure requirement and revising the description of “the property requirement” to emphasize the materiality threshold**”.

Note that while “property” is usually a facility, this does not always apply to the service sectors.

• Update rules as needed to reflect changes since the rules were first adopted or last amended. (Including, “corporate governance” items, such as for Board Auditing, Compensation Committee operations.)

• Simplify the overall disclosure process, including treatment of confidential information; also, changes would be made to the MD&A to allow for “flexibility in discussing historical periods”. (The discussion on confidential info runs for pages – important to read for corporate managers involved in disclosure.)

• Treatment of subsidiaries.

• Incorporate technology to improve access to information requiring data tagging (XBRL) for items on the cover page and use of hyperlinks (HTML) by reference and in the EDGAR system.

Again – the public now has 60 days to submit comments on the proposed amendments (to such statutory authority as the Securities Act of 1933; Securities Exchange Act of 1934; Investment Company Act of 1940; and, regulations under these landmark securities protection laws of the land).

There are numerous sections within the proposed amendment document where the Commission is inviting public comment. To submit your comments, see: http://www.sec.gov/rules/proposed.shtml — file#S7-08-17

Disappointing News: There is no mention that we could find in the proposal document that addressed the many comments that were directed to the SEC staff in response to the earlier Concept Release by sustainable & responsible investor interests. And, in many investor conversations with SEC staff that acknowledged the growing importance of disclosure regarding corporate sustainability and ESG performance.

No mention of: Climate Change. ESG. Responsible Investment.

This is very troubling — no doubt members of the investment community and corporate leaders well along on their sustainability journey will be providing their perspectives to SEC — and the media, and elected officials — on this important oversight.

SEC guidance for corporate reporters regarding their ESG, sustainability, responsibility, citizenship, etc disclosures and reporting activities would be very helpful – right?  Of course, we are in a new political environment now, and perhaps that is helping to shape the agenda at the Commission as “reforms” are drafted and distributed for public consumption.

There is much more news to come when the response to the announcement begins. Stay Tuned!

P.S. – if you/your organization responds to the draft proposals, please do let G&A know so we can publicize your perspectives.

The National Geographic Can Have A Major Influence On Its Global Audience With Coverage Like This: Climate Change’s Hidden Costs

The National Geographic Society made its debut as a publishing force in 1888, introducing the natural world and faraway places to generation-after-generation, at first through the familiar yellow cover magazine (the “journal”), then on through broadcast and cable television programming, a web site, and movies.  (Remember “March of the Penguins”?)

And always, through the decades, the NG staff and contributors have kept up-to-date with world and domestic “happenings,” including wonderful places to visit and introductions to far-off cultures, explanations of geography and natural science, archeology and history — as well as reportage on serious storms, wars, civil unrest, droughts, famines, and other important touchstones of shared content to expand our personal knowledge.

NG through its communication channels reaches tens of millions of people worldwide.  And today the NG is focused on another hot topic:  climate change, and the costs (which run into the hundreds of billions of US dollars, according a report by the Universal Ecological Fund — “The Economic Case for Climate Action in the United States.”

Key assertion of the study:  Extreme weather has cost the U.S. economy at least US$240 billion a year over the past 10 years!

The study authors point out that big storms lower the long-run growth rate of the U.S. economy and that economic and human impacts ripple through the country for us for decades. (New Orleans after Hurricane Katrina in 2005 is an example they shared.)  Crop yields are down US$56 billion since 2012 due to climate-related losses (drought).

NG shares a compelling chart showing numerous “billion dollar” weather disasters that have been increasing in recent years (due to drought, heat wave, wildfire, flood, hurricane, tornado, blizzard, etc).  There’s an accompanying video featuring Bill Nye, “The Science Guy”.  NG provides links to other articles, photos of Hurricane Harvey’s destruction, and a video, “Climate 101 – Renewable Energy.”

A number of experts contributed to the NG presentation, including report co-authors Sir Robert Watson, director of the UK’s Tyndall Center for Climate Change Research, and Ryan Wiser, senior scientist at Lawrence Berkeley National Laboratory; Amir Jina, University of Chicago; John Tomanio and Riley D. Champine, NG staff members; Adam Smith, National Climatic Data Center and colleague Jeff Masters, Weather Underground, at the Center.  The article author is Stephen Leahy.

Our Top Story makes a compelling case for action now! on climate change challenges and will be an oft-quoted source (we believe) for pushing back on climate change deniers.

Top Stories This Week…

Hidden Costs of Climate Change Running Hundreds of Billions a Year
(Friday – September 29, 2017)
Source: National Geographic – A new report warns of a high price tag on the impacts of global warming, from storm damage to health costs. But solutions can provide better value, the authors say.

Sustainability Pays, Says Wal-Mart & Some Of Its Suppliers in PBS NewsHour Interviews

As part of the PBS series, “Peril and Promise: The Challenge of Climate Change,” the network’s NewsHour reported on how a few large U.S. companies are doing their part to meet climate change challenges…and prospering…even as the Trump White House continues to move toward withdrawal from the historic Paris Agreement (COP 21).

The efforts of the giant retailer Wal-Mart Stores are highlighted in the broadcast.  Wal-Mart stresses that it is striving to be recognized as a corporate leader in the “fight against climate change.”  Kathleen McLaughlin, the company’s chief sustainability officer, is interviewed in the program by PBS correspondent Stephanie Sy.

Says the Wal-Mart CSO:  “…sustainability is core to our mission.  It’s critical for business.  It’s important for customers and communities…”
The company’s sustainability journey was launched in 2005 by then-CEO Lee Scott.  He pledged to curb the company’s GhG emissions by the use of clean power sources, aiming for 100% renewables over time. As part of the effort, Wal-Mart saves energy — and money! — in store operations by demanding more efficient equipment from vendors (for HVAC, lighting, refrigeration).  There are solar installations on 364 Wal-Mart and Sam’s Club stores now — this makes the company the second largest commercial solar power generator.

Wal-Mart plans to reduce its carbon emissions by 2025 by 18% from its 2015 levels, even as it ambitiously expands its retail footprint.  With 99% of the company’s GHG impact coming from its supply chain, Wal-Mart points out that at its encouragement, dozens of its major suppliers have signed on to Project Gigaton (the effort to cut emissions).

One of the company’s key suppliers — candy maker Mars, makers of M&Ms — itself set an aggressive target of “zero carbon” in its operations by 2040, working to achieve zero GHG emissions by that date.  The company’s “vast solar farm” in rural New Jersey is featured in the PBS broadcast.  Barry Parkin, chief sustainability officer of Mars, Inc. is interviewed about the company’s efforts.

Key to the sustainability efforts:  Wal-Mart’s model, the way stores are managed, the work done with the massive supply chain partners…all of this “optimizes and lowers the footprint to deliver the same amount of product to people,” explains company CSO Kathleen McLaughlin.  And, she adds, “if you look at the scale and ambition of the efforts and what we’ve actually achieved, I’m actually quite excited about it.”

The company has partnered with the Environmental Defense Fund (“EDF”) for guidance in achieving its climate change goals.  Responding to the question about is “Wal-Mart doing enough?,” Fred Krupp, President of the Environmental Defense Fund in the interview said:  “The scale of Wal-Mart is hard to wrap your head around.  They can always do more.  What they have shown so far is a serious commitment, and the journey is an ongoing one of improvement.”

Making this story come alive for you:  There is a videotape of the program and the various interviews posted in the print version of the program script in our Top Story that you can view.  You’ll also want to read the various viewer/reader responses to see the perspectives shared by viewers…many opinions were shared, both positive and negative.

“Peril and Promise” is an ongoing PBS series on the human impact of, and solutions for, Climate Change.”  FYI, PBS is the largest non-commercial television network in the U.S.A., with more than 350 local stations broadcasting PBS and their own programming; combined, these reach more than 100 million households. Major stations are located in New York City, Chicago, Boston, Washington DC, San Francisco, Atlanta, Miami, Denver, Detroit, and many more cities in the 50 states.

Top Stories This Week…

Large companies see payoffs in sustainability
(Monday – September 18, 2017)
Source: PBS NewsHour – This summer, when President Trump withdrew the U.S. from the 2015 Paris climate accord — a voluntary pact to cut emissions of gases that cause global warming — some opposition came from what is perhaps a surprising place: big…

Sustainable Business Practices Can Impact The Bottom Line, Say This Quartet of Researchers — Lessons Here For Busy Execs

You can read our Top Story this week first and then you can forward this important commentary to your C-Suite if the execs there have been wondering how corporate sustainability may be impacting a company’s bottom linein positive ways.

A quartet of experts writing in the Harvard Business Review has responded to the short-term, bottom-line pressures that we hear so much about throughout much of Corporate America.

To develop their case, the authors (three academics and a consultant) looked at Brazil’s giant beef industry, a challenge for studying considering the size and complexity of the industry and its long-term impact on the planet.  (Brazil is the world’s largest beef exporter and second largest consumer market for beef products.)

Key finding:  “sustainable” and “deforestation-free” industry practices created significant financial benefits for all players in the industry value chain. Quantifying this, the authors found net benefits to ranchers ranging from 12% to 23% of revenues.  Sustainable agricultural practices provided the most financial benefits, while the uptake of deforestation-free commitments over time reduced risk to the industry and company components.

Their approach demonstrated (they write) that measuring the value chain of sustainable business can be done and the sustainable business itself can be cost-effective.  Brazil’s beef industry impact on the plant has been intense (with de-forestation and GHG emissions) and there have been significant steps taken to address the issues involved.

One industry participant explained that while there is no price premium for sustainability alone, there is for quality, and the company’s quality immediately increased with the adoption of sustainable practices.  Today, 70% of their beef products are sold with a quality premium, from “zero” two years ago. That resulted in increased revenues and greater customer satisfaction.

While the focus is on the Brazil beef industry (and the value chain from grower through the processor to retail) we think there’s some good material here to help executives understand “the possible” bottom line impacts through sustainable business practices.

The authors are Tensie Whelan of NYU Stern School of Business, Center for Sustainable Business; Bruno Zappa, A. Kearney strategy consultant; Rodrigo Zeidan, of NYU-Shanghai and Fundacao Dom Cabril/Brazil; and Greg  Fishbein at The Nature Conservancy / Collaboration for Forests & Agriculture.

The academic authors worked with AT Kearney to develop the methodology for their case.  The work included research, data analysis and interviews with key players.  Organizations examined included McDonald’s; Carrefour; JBS, Mafrig, Antea Group (all in Brazil); Infalora; Instituto Centro de Vida (ICV); and, The Nature Conservancy.
And, they provided a link to the Excel spreadsheets on which they calculated the numbers for the article (it’s embedded in the post).

Top Stories This Week…

How Do We Measure Sustainability?
(Friday – September 08, 2017)
Source: EWN – Globally, there has been an increase in demand for higher transparency on environmental, social and governance issues.