Terra Incognita For Climate Change Policy – “Dead Ahead” As #44 Leaves / #45 Assumes Responsibility for Public Policy

We are about to enter “uncertain terrain” or as the ancient Romans called it, terra incognita - when it comes to what [national] public policies the United States of America will / or will not pursue in the days ahead regarding the complex issues surrounding “climate change” (or dare we say…”global warming”).

Elected officials may /or may not / pay attention to, or adopt the recommendations emanating from, the Federal government’s official research and analysis bodies and those closely affiliated with the U.S. government. Politics. Worldviews. Business/vested interests. Pandering to the base. Ignorance – deliberate and otherwise. All of these can get in the way and cloud the political lens of the U.S. senator, member of the House, appointed cabinet officer (the secretary)…and higher up.

In this last week of the eight-year reign of the 44th Chief Executive, Barack Obama, the influential National Academy of Sciences (NAS) put out a report and made recommendations that contained a specific metric that we will no doubt be hearing about no matter the side of the climate change issues we are on.

The question posed is:  what is the “social cost of carbon???” The answer from NAS is $36 per ton for carbon dioxide. Remember that “monetary cost” number: $36 per ton when we do a proper cost-benefit analysis (positive, negative) on the various impacts on human societies (flood, drought; impacts on agriculture, human health, etc.). ALL have economic consequences. (The new report is an updating estimation of the social cost of carbon in 2017.)

NAS is a private, not-for-profit society established by an Act of Congress and signed into law by President Abraham Lincoln in 1863. The society provides independent, objective advice to public sector leaders in the fields of science and technology. Consider this: Over the years some 500+ members have won the Nobel Prize.

Under the NAS banner, there are two important subgroups: The National Academy of Engineering (1964) and the National Academy of Medicine (1970).  All together, there are 6,000 experts involved from the various field. NAS says in the matters of engineering, science and medicine, Congress and the White House issue legislation (laws, which become rules) or Presidential Executive Orders based on the society’s recommendations.

The hometown newspaper of the nation’s capital published the results with an appropriate headline: “Scientists have a new way to calculate what global warming costs. Trump’s team isn’t going to like it.” (The Washington Post story by Chelsea Harvey is our featured story this week.)

And you can purchase the report from NAS / The National Academies Press in paperback (“Valuing Climate Change” – $80.00) or download a FREE PDF copy as a guest at https://www.nap.edu/catalog/24651/valuing-climate-damages-updating-estimation-of-the-social-cost-of

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Scientists have a new way to calculate what global warming costs. Trump’s team isn’t going to like it.
(Friday - January 13, 2017)
Source: Washington Post - How we view the costs of future climate change, and more importantly how we quantify them, may soon be changing. A much-anticipated new report, just released by the National Academy of Sciences, recommends major updates to a…

Update 2017 – Forward Momentum! For Sustainability – Pope Francis Set the Tone in 2016

by Hank Boerner – Chairman, G&A Institute

Here we are in the year 2017 — and I see momentum coming into this new calendar year for continuing many of the positive trends for corporate sustainability / citizenship / responsibility managers, and sustainable investment professionals that I explored and commented on in 2016.

I set out more than 50 of these trends in my collection of commentaries — “Trends Converging! — The Convergence of Important CSR – ESG – SRI – Sustainability Trends in the Year 2016 and Beyond.”

In my first post of 2017 I explained some of these trends and provided background on the many experts and thought leaders that shared their perspectives with us on key topics and issues.  Going forward, I am going to update the trends material with current news and developments and shared perspectives from third parties.

I see this as continuing momentum for the positive trends — even in the face of hostile action that is anticipated in our nation’s capital.  So I am positioning my comments as “Momentum 2017 – Sustainability Forward!” for corporate sustainability and sustainable investing professionals.  And for NGOs and other stakeholders.

The 2016 trends are available for you in total on our G&A Institute web site (under Research menu).  The updates going forward will include the original materials that I saw as being forward-moving and in many instances helping to make “the business case,” “the investing case,” and so on.

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Here’s the first update for 2017 and the original perspectives shared in 2016.

January 2017 – Momentum – Forward!

Thousands of American Roman Catholics have petitioned President-elect Donald Trump to urge him to “take swift and meaningful action on climate change,” including honoring commitments and pledges made by President Barack Obama.

The Catholic Climate Covenant petition asked the incoming president to “demonstrate bold leadership” on climate on three fronts:

  • Keep the U.S. commitment to the Paris Agreement and go forward on the U.S. pledge to cut GhG emissions to 26% / 28% of the 2005 levels by year 2025.
  • Keep the U.S. pledge of $3 billion to the Green Climate Fund to help developing countries address climate change (mitigation, adjustments), including the development of sustainable energy resources.
  • Go forward with the Federal government’s Clean Energy Plan, and the U.S. EPA’s rules designed to help reduce carbon emissions from coal- and gas-fired power plants. (Note that some states are implementing their state-level plan as mandated in the Obama Administration approach. A Federal court put the plan on ice.)

The Catholic coalition cited Pope Francis’s Laudato Si (encyclical)  — On Care for Our Common Home – to remind the President-elect and his minions of the importance to the Roman Catholic Church worldwide of climate change and environmental and social issues to be addressed.

The U.S. Conference of Catholic Bishops (USCCB) strongly supports a national carbon pollution standard — as one way to move forward to implement the Paris (COP 21) Agreement of 2016.

The Catholic Climate Covenant is gathering signatures for its appeal to the new President and communicating its appeal on [his] favorite channels – social media!

The petition notes that before Pope Francis came to the USA in September 2015, a Public Religion Research Institute poll found three-out-of-four Catholics believed that the U.S. government should be more to address climate change. When white-only respondents were tallied, the percentage rose to 86%.

More recently (May 2016) a Center for Applied Research in the Apostolate at Georgetown University showed the amount held steady, with 73% of American Catholics in favor of society taking steps to combat climate change.

The Covenant petition has been endorsed by the Global Catholic Climate Movement; the Leadership Conference of Women Religious; the Conference of Major Superiors of Men; the Sisters of Mercy; and the Franciscan Action Network.

And in January, the President-elect can expect to see more than 100 prayer vigils stages across the country and during his first 100 days in office. That way, there will be clear demonstration against his climate-skeptic appointments and for an environmentally-sustainable future.

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Here is the foundational perspective offered up in my trend-watching efforts in 2016:  Chapter # 44. Pope Paul and Perspectives and Actions the Roman Catholic Church Worldwide

There are an estimated 1 billion Catholics worldwide, and a huge infrastructure of the RC Church that can implement policies and practices. Worldwide, the Bishops of the Church among other things are traditional heads of local dioceses — there are 177 in the U.S.A. alone. There are “ecclesiastical provinces” organized in metropolitan area; these are usually headed by an archbishop (New York, Washington DC, Baltimore, etc.).

The Roman Catholic Church as a collective institution is one of the largest owners and holders of assets in the world, including properties, solid gold, bonds, cash, and equity investments, pension systems of various orders, Catholic charities, and healthcare systems.

Imagine the power that such an institution can bring to bear on challenges, in the world, in the United States and other large nations — especially when it focuses on a societal issue

The Bishop of Rome, Pope Francis, in May 2015, issued “Laudato Si,” the Encyclical Letter of the Holy Father, “On Care of Our Common Home.” Among other things to explain his position, he addressed a joint session of the U.S. Congress in September 2015. (Note that in the audience, 31% of Members are Catholic, as well as six of the nine Supreme Court Justices.) The speech received 37 standing ovations.

So what are the Pope’s concerns, expressed in the House of the People? Consider these:

• Climate change;
• addressing common needs;
• addressing risk to our common home (the Earth);
• addressing income inequality (especially in less-developed nations);
• the responsibility of richer nations; advancing justice and peace;
• the dignity of human life;
• job creation;
• business is a “noble vocation”;
• environmental challenges.

“We should have a culture of care,’” Pope Francis said, and “now is the time for action” to protect our planet.

The Pope’s 74-page letter “to the world” and especially to the Catholic faithful in all lands, addressed topics that are front-of-mind for sustainability professionals:

• Pollution and climate change are a threat to the world.
• Part of the cause is the residue of industrialization.
• Part of the cause is our throwaway society.
• The climate is a common good, belonging to all.
• Warming has effects on the carbon cycle. This affects drinking water, agriculture, energy and other activities.
• Climate change is a global problem, affecting environmental, social, economic, political, and distribution of goods.
• There are critical issues in water, biodiversity, global inequality.

Pope Francis called for a vision of “integral ecology,” one that seriously considers environmental, social and economic factors.

The Holy Father set out suggestions for “approach and action,” with dozens of specific steps that could be taken to address challenges and bring about integral ecology. It is in these specificities that action will come through the organs of the worldwide RC Church, and its billion adherents to the faith.

We should not underestimate the enormous power that will be applied in many direct, indirect and subtle ways to implement “Laudato Si,” the Holy Father’s vision of how his church can help to bring about significant changes in the global society.

Consider the work of the Interfaith Center on Corporate Responsibility (ICCR), the 35-year old faith-based investment coalition, whose 300 institutional members manage up to $100 billion in assets. ICCR is a value-driven organization “who view the management of their investments as a powerful catalyst for social change.” ICCR’s membership includes many RC Church institutional investors.

We can expect to see the Pope’s vision applied by ICCR institutional members in the areas of concern — corporate governance, domestic health, the environment (including global warming), fair lending, food access and safety, human rights, and water (including corporate water impacts).

I’m keeping in mind the century-long influence that another Pope had with his encyclical letter on labor rights, human rights,

This was Pope Leo XIII and his 1891 letter, “Rerum Novarum” — on “the Rights and Duties of Capital and Labor.” This addressed the conditions of the working classes as industrialization and the emergence of the modern capital markets gained momentum.

What resonates from that work for some today: “Remedy must be found quickly for the misery of wretchedness pressing so unjustly on the majority of the working class…” Through the decades since the start of the 20th Century, RC Church interests have been guided by Rerum Novarum’s dictates to the faithful.

Expect the vision of the present pope to serve RC Church interests in similar ways — with impacts being felt in discussion of climate change, global warming, the plight of the worker, income & wealth inequality, financial & economic fairness, and many more issues that are in the realms of the capital markets and the global corporate community.

Noting MSCI Research on Inequality

About the issues surrounding wealth and income inequality: MSCI recently projected important trends for 2016. In the firm’s “2016 ESG Trends to Watch” report, there is this observation:

According to the NGO Oxfam, at the end of 2014, 80 individuals owned the same wealth as the bottom half of all of the world population. (The number was 388 individuals in 2010.) This is not just a societal issue, MSCI points out. OECD estimates that that growing inequality has cumulatively cuts six to seven percentage points off U.S. economic growth in the United States, Italy and Sweden between 1990 and 2010. (The U.K., Finland and Norway cut in growth was higher, at nine percent.)

What needs more understanding, says MSCI in its report, is how corporations feed into inequality (through job cuts, pushing down of wages, maximizing shareholder return) which over time could impact economic growth and stability.

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So – in the year 2016 we’ll be monitoring the growing intensity of the public debate about wealth and income inequality, in the presidential race for sure (thanks to U.S. Senator Bernie Sanders and his positions on the subject), in the fiduciary concerns raised (especially by activist investors), and in the restlessness of the population if the anger rises and targets are selected (that is, those perceived to be responsible for growing inequality in developed and developing countries).

The actions of the worldwide Roman Catholic Church, following the Pope’s positions on inequality, will be important to watch in the months ahead.

The statements and actions of investors will also be worth watching. The public dialogue on inequality will have many dimensions, depending on the voices raised. As responsible investment thought leader (and G&A Institute Fellow) Steve Viederman notes, “…where you sit will determine where you stand on an issue.” (“Sitting” meaning your affiliation, where you sit during the business day.)

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What are your thoughts?  Let us know!  Send me an email at: hboerner@ga-institute.com.

So Many Positives in 2016 for Sustainability – Corporate Citizenship – CR – Sustainable Investing — The Core of “Trends Converging!” Commentaries. It’s 2017 — Now What?

by Hank BoernerG&A Institute

Welcome to 2017! We are off to the start of a challenging year for sustainability / responsibility / corporate citizenship / sustainable investing professionals.

We are being forewarned: A self-described (by his constant tweeting) “new sheriff is coming to town,” along with the newly-elected members of the 115th Congress who begin their meetings this week. Given the makeup of the new Administration (at least in the identification of cabinet and agency leaders to date) and the members of the leadership of the majority party on Capitol Hill, sustainability professionals will have their work set out for them, probably coming into a more clear focus in the fabled “first 100 days” after January 20th and the presidential inauguration ceremonies.

The year 2016 began on such a hopeful note! One year ago as the year got started I began writing a series of commentaries on the many positive trends that I saw — and by summer I was assembling these into “Trends Converging! — A 2016 Look Ahead of the Curve at ESG / Sustainability / CR / SRI.” Subtitle, important trends converging that are looking very positive…

As I got beyond charting some 50 of these trends, and I stopped my thinking and writing to share the commentaries and perspectives that formed chapters in an assembled e-book that is available for your reading. I’ve been sharing my views because the stakes are high for our society, business community, public sector, social sector…all of us!

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The specifics: Throughout the early months of 2016 I was encouraged by:

The Secretary of the U.S. Department of Labor giving American fiduciaries the green light for considering corporate ESG factors in their investment decision-making. Page 7 – right up front in the commentaries!

The Sustainable Accounting Standards Board (SASB) team completing its comprehensive recommendations for 12 sectors and 80 industry components of these for “materiality mapping” and expansion of corporate reporting to include material ESG factors in the annual 10-k filing. These are important tools for investors and managements of public companies. See Page 17.

His Holiness Pope Francis mobilizing the global resources of the worldwide Roman Catholic Church with his 74-page Laudato Si [encyclical] that includes sharp and sweeping focus on climate change, global warming, water availability, biodiversity, and other social issues. Imagine, I wrote, the power that such an institution can bring to bear on challenges, in the world, in the USA, and other large nations…

This is the Pope’s great work: “On Care of Our Common Home.” I explored the breadth of depth of this in my commentaries. That’s on Page 163 – Chapter 44.

President Barack Obama ably led the dramatic advances made in the Federal government’s sustainability efforts thanks in large measure to several of the President’s Executive Orders (such as EO 13693 on March 19, 2015: Planning for Federal Sustainability in the Next Decade).

Keep in mind the Federal government is the largest purchaser of goods and services in the U.S.A. — over time this action will result in positive changes across the government’s prime supply chain networks. Page 50 / Chapter 13.

The European Union’s new rules for disclosure of non-financial information beginning in 2017; As I began my commentary, the various EU states were busily finalizing adoption of the Accounting Directive to meet the deadline for companies within each of the 28 states. The estimate is that as many as 5,000 companies will begin reporting on their CR and ESG performance. Page 27 / Chapter 7.

Here in the USA, Federal regulators were inching toward final rules for the remaining portions of the 2010 Dodd-Frank legislation. Roughly 20% of rules were yet to be completed for corporate compliance with D-F as we entered 2016, according to estimates by the Davis Polk law firm. Page 30 / Chapter 8.

In 2017, one very contentious rule will be in effect — the required disclosure by public companies of the CEO-to-median worker-pay ratio; the final rule was adopted in August 2015 and so in corporate documents we will be seeing this ratio publicized (technically, in the first FY beginning in January 1, 2017). Page 34 / Chapter 9 – What Does My CEO Make? Why It Matters to Me.

Good news on the stock exchange front: member exchanges of the World Federation of Exchanges have been collaborating to develop “sustainability policies” for companies with shares listed on the respective exchanges. At the end of 2015 the WFE’s Sustainability Working Group announced its recommendations [for adoption by exchanges]. Guidance was offered on 34 KPIs for enhanced disclosure. Page 103 / Chapter 27.

The WFE has been cooperating with a broad effort convened by stakeholders to address listing requirements related to corporate disclosure

This is the “SSE” — the Sustainable Stock Exchanges initiative, spearheaded by the Ceres-managed Investor Network on Climate Risk (INCR), and leadership of key UN initiatives as well as WFE member exchanges.

NASDAQ OMX is an important part of this overall effort in the United States and is committed to discussing global standards for corporate ESG performance disclosure.  Notd Evan Harvey, Director of CR for NASDAQ: “Investors should have a complete picture of the long-term viability, health and strategy of their intended targets. ESG data is a part of the total picture. Informed investment decisions tend to produce longer-term investments.”

The United Nations member countries agreed in Fall 2015 on adoption of sweeping Sustainable Development Goals (SDGs) for the next 15 years (17 goals/169 specific targets). This is a dramatic expansion of the 2000 Millennium Goals for companies, NGOs, governments, other stakeholders. Now the many nation-signatories are developing strategies, plans, programs, other actions in adoption of SDGs. And large companies are embracing the goals to help “transfer our world” with adoption of mission-aligned strategies and programs out to 2030.

G&A Institute’s EVP Lou Coppola has been working with Chairwoman of the Board Dr. Wanda Lopuch and leaders of the Global Sourcing Council to help companies adopt goals (the GSC developed a sweeping 17-week sourcing and supply chain campaign based on the 17 goals). Page 56 / Chapter 15.

Very important coming forth as the year 2016 moved to a close: The Report on US Sustainable, Responsible and Impact Investing Trends, 2016 – the every-other-year survey of asset managers in the USA to chart “who” considers ESG factors across their activities. Money managers and institutional investors, we subsequently learned later in 2016, use ESG factors in determining $8.72 trillion in AUM – a whopping 33% increase since 2014. Great work by the team research effort helmed by US SIF’s Meg Voorhes and Croatan Institute’s Joshua Humphreys (project leaders). Background before the report release Page 78.

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The above is a very brief overview of the many positive trends that I saw, explored further, and wrote commentaries on through many months of 2016. I worked to weave in the shared perspectives of outstanding thought leaders and experts on various topics. We are all more enlightened and informed by the work of outstanding thought leaders, many presented in the public arena to benefit us.

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Sharing Thought Leadership

In developing our commentaries we shared the wisdom of many people who are influential thought leaders and who enthusiastically share their own perspectives with us. These include:

  • Chris Skroupa, Founder of Skytop Strategies and prominent Forbes blogger. His views on Page i.
  • Pam Styles, Founder/Principal of Next Level Investor Relations and NIRI Senior Roundtable member. See Page iv.
  • Secretary Thomas Perez, U.S. Department of Labor on ERISA for fiduciaries. Page 7.
  • Dr. James Hawley of St. Mary’s College of California on the concept of the Universal Owner, based on the earlier work of corporate governance thought leader Robert Monks. Page 9.
  • the team at Sustainable Accounting Standards Board led by Chair Michael Bloomberg, Vice Chair Mary Schapiro, Founder and CEO Jean Rogers, Ph.D., P.E. . Page 17.
  • the team at TruCost.
  • the team at CDP.
  • the team at CFA Institute (the global organization for Chartered Financial Analysts) developing guidelines for inclusion of ESG factors in analysis and portfolio management — the new Guide for Investment Professionals – ESG Issues in Investing. Coordinated by Matt Orsagh, CFA, CIPM; Usman Hayat, CFA; Kurt Schacht, JD, CFA; Rebecca A. Fender, CFA. Page 20.
  • the leadership team at New York Society of Securities Analysts’ (NYSSA) Sustainable Investing Committee (where I was privileged to serve as chair until December 31st). Page 21. We have great perspective sharing among the core leadership team (Kate Starr, Peter Roselle, Ken Lassner, Andrew King, Agnes Terestchenko, Steve Loren).
  • experts respected law firms sharing important perspectives related to corporate governance, corporate citizenship / CSR / disclosure / compliance and related topics: Gibson Dunn on compliance matters. Page 25.
  • the law firm of Davis Polk on Dodd-Frank rulemaking progress and related matters.
  • experts at the respected law firm of Morrison & Foerster on executive compensation and related regulatory matters (in the excellent Cheat Sheet publication). Page 30.
  • the experts at the law firm of Goodwin Procter addressing SEC regulations. Page 146.
  • the skilled researchers, analysts and strategists at MSCI who shared “2016 ESG Trends to Watch” with their colleagues. The team of Linda Eling, Matt Moscardi, Laura Nishikawa and Ric Marshall identified 550 companies in the MSCI ACWI Index that are “ahead of the curve” in accounting for their carbon emissions targets relative to country targets. Baer Pettit, Managing Director and Global Head of Products, is leading the effort to integrate ESG factors into the various MSCI benchmarks for investor clients.Page 100.

AND……..

  • Thanks to Peter Roselle for his continuous sharing of Morgan Stanley  research results with the analyst community. 
  • the perceptive analysts at Veritas, the executive compensation experts who closely monitor and share thoughts on CEO pay issues. Page 36.
  • the outstanding corporate governance thought leader and counsel to corporations Holly Gregory of the law firm Sidley Austin LLP who every year puts issues in focus for clients and shares these with the rest of us; this includes her views on proxy voting issues. (She is co-leader of the law firm’s CG and Exec Compensation Practice in New York City.) Page 39.
  • the Hon. Scott M. Stringer, Comptroller of the City of New York, with his powerful “Board Accountability Project,” demanding increased “viable” proxy access in corporate bylaws to enable qualified shareholders to advance candidates for board service. Pages 40, 45 on.
  • the experts at Institutional Shareholder Services (ISS), a unit of MSCI, which counts numerous public employee pension funds and labor pension systems among its clients; ISS staff share their views on governance issues with the rest of us to keep us informed on their policies and related matters. Page 40.
  • SRI pioneer and thought leader Robert Zevin (chair of Zevin Asset Management) who shares his views on the company’s work to improve corporate behaviors. Page 41.
  • Mark W. Sickles, NACD thought leader, and my co-author of “Strategic Governance: Enabling Financial, Environmental and Social Sustainability” (p.2010) for helping me to better understand and refine my views on the “Swarming Effect” (investor engagement) by institutional investors that influences corporate behavior. Page 44.
  • the experts led by thought leader (and ED) Jon Lukomnik at Investor Responsibility Research Center (IRRC) that, working with Ernst & Young LLP, one year ago in January produced the Corporate Risk Factor Disclosure Landscape to help us better understand corporate risk management and related disclosure. Page 47.
  • CNN commentator and author Fareed Zakaria who shared his brilliant perspectives with us in publishing “The Post American World,” focusing on a tectonic, great power shift. Page 61.
  • The former food, agriculture and related topics commentator of The New York Times, Mark Bittman, who shared many news reports and commentaries with editors over five years before moving on to the private sector. Page 65.
  • our many colleagues at the Global Reporting Initiative (GRI) in the Netherlands, the USA, and in other countries, who shared their views on corporate sustainability reporting and related topics; the GRI framework is now becoming a global standard. (G&A Institute is the Data Partner for GRI in the USA, UK and Republic of Ireland; we are also a Gold Community member of supporters for the GRI.) Page 71.
  • our colleagues at Bloomberg LP, especially the key specialist of ESG research, Hideki Suzuki; (and) other colleagues at Bloomberg LP in various capacities including publishing the very credible Bloomberg data and commentary on line and in print. Page 76 and others.
  • Barbara Kimmel, principal of the Trust Across America organization, who collaborated with G&A Institute research efforts in 2016.
  • we have been continually inspired over many years by the efforts of the Interfaith Center on Corporate Responsibility (ICCR), and past and present leaders and colleagues there, who helped to inform our views in 2016 on shareholder activism and corporate engagement. Chair the Rev. Seamus Finn is on point with his “Holy Land Principles” in recent years. The long-time executive director, Tim Smith (now at Walden Asset Management) has been very generous in sharing news and perspectives long after his ICCR career. Details on Page 77.
  • our colleagues at the U.S. Forum for Sustainable & Responsible Investment (US SIF), and its Foundation, led by CEO Lisa Woll; and our colleagues at the SIF units SIRAN and IWG. The every-other-year summary of Assets Under Management utilizing ESG approaches showed [AUM] nearing $9 trillion before the run up in market valuations following the November elections. Page 78.
  • Goldman Sachs Asset Management acquired Imprint Capital in 2015 (the company was a leader in developing investment solutions that generate measureable ESG impact — impact investing). Hugh Lawson, head of GSAM client strategy, is leading the global ESG activities. GSAM has updated its Environmental Policy Framework to guide the $150 billion in clean energy financing out to 2025. Page 83.
  • the experts at Responsible Investor, publishing “ESG & Corporate Financial Performance: Mapping the Global Landscape,” the research conducted by Deutsche Asset & Wealth Management and Hamburg University. This is an empirical “study of studies” that looked at the “durable, overall impact of ESG integration to boost the financial performance of companies.” A powerful review of more than 2,000 studies dating back to 1970. Page 90.
  • Boston Consulting Group’s Gregory Pope and David Gee writing for CNBC saw the advantage held by the USA going into the Paris COP 21 talks: advances in technology are making the USA a global leader in low-cost/low-pollution energy production. They worked with Professor Michael Porter of Harvard Business School (the “shared value” proponent) on research. Page 95.
  • researchers, analysts and experts at Morgan Stanley Research charted “what was accomplished in Paris in 2015″ for us; their report identified five key areas of progress that cheered conference participants; I share these in the “Trends Converging!” work. MS Research in the post-Paris days shared perspectives on the carbon tax concept and the status of various nations on the issue — and the actions of the State of California in implementing “AB 32″ addressing GhGs. Page 119.
  • G&A Institute Fellow Daniel Doyle, an experienced CFO and financial executive, sharing thoughts on corporate “inversion” and the bringing back of profits earned abroad by U.S. companies. Page 122.
  • the Council of State Governments (serving the three branches of state governments) is actively working with public officials in understanding the Clean Power Plan of the Obama Administration (the shared information is part of the CSG Knowledge Center). Page 101.
  • Evan Harvey, Director of CR at NASDAQ, has continuously shared his knowledge with colleagues as the world’s stock exchanges move toward guidance or rule making regarding disclosure of corporate sustainability and related topics. Page 104.
  • our former Rowan & Blewitt [consulting practice] colleague Allen Schaeffer, now the leader of the Diesel Technology Forum, explaining the role of “clean diesel” in addressing climate change issues. Page 128.
  • Harvard Business School prof Clayton Christensen, who conceived and thoroughly explained “the Innovator Dilemma” in the book of the same name in 2007, updated recently, characterized new technology as “disruptive” and “sustaining,” now happening at an accelerated pace. We explain on Page 147.
  • the researchers and experts at the Society for Human Resource Management (SHRM) has shared important perspectives and research results dealing with the massive shift taking place in the corporate and business sectors as Baby Boomers retire(!) and the Millennials rise to positions of influence and power. And Millennials are bringing very positive views regarding corporate sustainability and sustainable investing to their workplace! The folks at Sustainable Brands also weighed in on this in recent research and conference proceedings. Page 154.
  • Author Thom Hartman in 2002 explored for us the subject of “corporate citizenship” in his book, “Unequal Protection, the Rise of Corporate Dominance and the Theft of Human Rights.” This work continues to help inform views regarding “corporate rights” in the context of corporate citizenship and beyond. The issue of corporate contributions to political parties and candidates continues to be a hot proxy season debate. Page 160.
  • Author and consultant Freya Williams in her monumental, decade-long research into “Green Giants” shared results with us in the book of that name and her various lectures. Seven green giant [companies] are making billions with focus on sustainability, she tells us, and they outperform the S&P 500 benchmark. Page 170.
  • Speaking of the S&P 500, I shared the results of the ongoing research conducted by our G&A Institute colleagues on the reporting activities of the 500 large companies — now at 81% of the benchmark components. Page 195.
  • And of course top-of-mind as I moved on through in writing the commentaries, I had the Securities & Exchange Commission’s important work in conducting the “Disclosure Effectiveness Initiative,” and a look at Regulation S-K in the “Concept Release” that was circulated widely in the earlier months of 2016. Consideration of corporate sustainability / ESG material information was an important inclusion in the 200-page document. Page 174.

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All of the above and more were important contributors in my collected “Trends Converging!” (in 2016) work. I am grateful to many colleagues in the corporate community and in the capital markets community who shared knowledge, wisdom, expertise and more with Lou Coppola and I over the recent years. They have helped to inform our work.

We thank the knowledge and valuable information willingly shared with us by our valued colleagues at RepRisk, especially Alexandra Milhailescu; Measurabl (Matt Ellis); The Conference Board’s Matteo Tonello; Nancy Mancilla and Alex Georgescu at our partnering organization for training, ISOS Group; Bill Baue at Convetit; Herb Blank at S-Networks Global Indexes; Robert Dornau at RobecoSAM Group, managers of the Dow Jones Sustainability Index family; Barbara Kimmel at Trust Across America.

Also, Professor Nitish Singh of St. Louis University, with his colleague VP Brendan Keating of IntegTree, our on-line professor and tech guru for the new G&A on-line, sustainability and CSR e-learning platform.

And, Executive Director Judith Young and Institute Founder James Abruzzo, our colleagues at the Institute for Ethical Leadership at Rutgers University Business School; Matt LePere and the leaders at Baruch College / City University of New York; and, Peter Fusaro, our colleague in teaching and coaching, at Global Change Associates.

And thank you, Washington DC Power Players!

Very important: We must keep uppermost in mind the landmark work of our President Barack H. Obama (consider his Action Plan on Climate Change, issued in December 2015) with the Clean Power Plan for the USA included. His Executive Orders have shaped the Federal government’s response to climate change challenges.

And there is U.S. Senator Bernie Sanders, again and again hitting the hot button sensitive areas for the middle class — like income and wealth inequalities and Wall Street reform — that raised the consciousness of the American public about these issues.
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Former Secretary of State Hillary Rodham Clinton and her views (published in The New York Times) in her “How to Rein in Wall Street” op-ed.

And I thank my G&A Institute colleagues for their support and continued input all through the writing process: EVP Louis Coppola; Ken Cynar, our able editor and news director; Amy Gallagher, client services VP; Peter Hamilton, PR leader; Mary Ann Boerner, head of administration.

So many valuable perspectives shared by so many experts and thought leaders! All available to you…

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And Now to 2017!

And so what will happen in these many, many areas of forward-momentum in addressing society’s most challenging issues (like global warming) with “deniers and destroyers” lining up for key Federal government positions in the new administration and in the 115th Congress?

I and my colleagues at G&A Institute will be bringing you news, commentary and opinion, and our shared perspectives on developments.

If you would like to explore the many (more than 50) positive trends that I saw as 2016 began and proceeded on into the election season, you will find a complimentary copy of “Converging Trends!” (2016) at:http://www.ga-institute.com/research-reports/trends-converging-a-2016-look-ahead-of-the-curve.html

* * * * * * * *

Please do share with us your own thoughts where you think we might be headed in 2017, and your thoughts on the 2016 trends and their future directions — for 2017 and beyond. Do tune in to the many experts that I included in the various commentaries as they adjust to the New Normal of Washington DC.

I plan to share the individual commentaries with updates in 2017. Do Stay Tuned to G&A Institute’s Sustainability Update blog (you can register here to receive notice of new postings). You can sign on to receive the latest post at: http://www.ga-institute.com/sustainability-update-blog.html (Sharing insights and perspectives for your sustainability journey.)

Best wishes from the G&A Institute team for the New Year 2017!

 

 

Good News: Solar & Wind Emerge in Global Search for Renewable Energy Sources

Guest Commentary  - Alison Crady      Marketing Specialist, CDF Distributors and Fast Partitions, United Kingdom

On Planet Earth there are numerous resources we have learned to utilize to enhance our work and private lives. Through the work of brilliant inventors and engineers, our cities come alive day and night powered by reliable electricity.

From the cars we drive to the light bulbs that illuminate our desktop, we steadily use the planets’ natural resources without giving much thought to the power source.
But in recent years, in addition to our increasing usage of these resources and supplied power, there comes our greater awareness of their limitations.

Today, with the societal emphasis on greater sustainability in all areas of our lives, environmentalists and technicians eagerly search for renewable energy sources.

Options like hydropower, solar power, wind energy and geothermal plants are being tested around the world… the good news is, with increasing success, worth noticing.

Here are some good news stories to share about renewable energy successes around the world:

In Costa Rica
Perhaps one of the “brightest” examples, the nation of Costa Rica in Central America has managed to use 100 percent renewable energy for 76 days straight. This was the second test-run of the length of sustainable power this year, which adds up to over 150 renewable energy days. Being a smaller country, Costa Rica is the perfect testing grounds for replacement energy sources. The length of the country’s use of renewable power is astounding.

Throughout the project, the Costa Rican government depended on these primary replacements:
• Hydro/geothermal/wind/solar energy— 80. 27%
• Geothermal plants— 12.62%
• Wind turbines— 7.1%

In the Nation of Portugal
The Portuguese quest for clean energy has achieved some important milestones. Recently, this small European country on the Atlantic shoreline managed to provide power for four days straight using only renewable energy sources. For the entire 107 hours, the nation of Portugal was sustained only by wind and solar power. This 4-day streak was the recent peak of their increasingly-promising clean power journey. Last year renewable sources provided 48% of Portugal’s total energy needs. Zero harmful emissions release is the goal.

In the United Kingdom
In the UK, governmental leaders and renewable energy industry leaders are hard at work to identify sustainable clean energy solutions. Researchers have seen some dramatic changes in solar power and wind energy usage. Unfortunately, the UK government has decided to halt the spread of onshore windfarms, primarily because of how expensive these installations were becoming.

Experts predict at least a one gigawatt — enough to light up 660,000 homes — loss in renewable energy generation within the next five years. After the ground-breaking investment in wind energy last year, several proposed construction projects will come to a halt.

That is the disappointing news. Investment in solar power, on the other hand, has slowly but steadily been increasing. Perhaps with the coming drop in government wind energy subsidies, the renewable energy finances will be redirected to encourage greater solar energy funding.

In Spain
If you visit the colorful lands of Spain, Portugal’s neighbor on the Iberian Peninsula, you’ll soon learn that electrical power is expensive. The country’s lack of natural resource blessings — such as deposits of oil, natural gas or coal — has spurred policymakers and industry leaders forward in the development of renewable energy. With this motivation to find less expensive, reliable energy sources, Spain is becoming known as a “Cradle of Renewable Energy.”

During the night time, wind energy fulfills 70% of Spain’s electricity needs, with a daytime record achievement of 54%. Over 29 million homes in Spain are currently powered by wind energy. However, wind energy is unpredictable, which makes forecasting key to sustainable clean energy. The Spanish firm Acciona consistently monitors the operations of 9,500 wind turbines at the Pamplona control center.

In Germany
The German nation’s quest for renewable energy has recently gained momentum. According to the Agora Energiewende think tank, Germany was able to supply nearly 100% of its energy needs with renewable sources for an entire day. Conventional power plants were able to supply 7.7 gigawatts at their energy output peak. As the country moves forward to phase out nuclear and fossil fuels, Germany’s cleaner power drive / quest narrows in on solar and wind power.

In China
Never a country to miss out on significant global trends, China has taken stock in its renewable energy resources. Aware of the need to combat climate change, China sets up new wind turbines at the astonishing rate of two every hour. According to the International Energy Agency (IEA), onshore wind and solar panels have increasingly been reduced in costs.

The IEA reported this decline as impressive, and they expect the trend to continue. With cheaper renewable energy options, the clean power usage trend will continue to take off, most industry expert agree.

The Rewards of Renewable Energy
The damaging effects of current levels of carbon dioxide emissions and the awareness of ever-limited natural resources are being felt around the world. The need for a better way to generate energy is clear. Given the recent trends of success, in a growing number of countries, solar and wind energy power sources are not going away any time soon. These renewable resources are the forecasted “superheroes” for continued (and significant) reduction in dangerous carbon emissions and energy source and supply security on a global scale.

That’s the good news to share today.

# # #

Allison Crady provides these links to the companies she serves as marketing specialist:
• http://www.cdfdistributors.com/
• https://www.fastpartitions.com/

Alison Crady

Guest Commentator Alison Crady

At the CR Commit! Forum: Next Generation Sustainability Reporting Issue Table

Juliet RussellBy Juliet Russell, G&A Institute GRI Data Reports Analyst

At the final session on the first day of the recent Commit! Forum’s conference in New York City, attendees broke out into “Issue Tables,” each focusing on different topics — ranging from Human Trafficking to 3rd Party [report] Assurance to STEM Education.

I joined the Next Generation Sustainability Reporting Issue table, where I sat among twelve experts, including the Vice President of Corporate Sustainability at MGM Resorts, the CEO of AdaptReady and the Global Head of Strategy at Thomson Reuters.  We shared knowledge and discussed ideas about the future of Sustainability reporting.

Highlights of our discussion:  First, the growing importance of sustainability reports was discussed, including (but not limited to) their importance as an information base for investors, helping to shape investment decisions.  Many investors are beginning to make decisions based on information disclosed publicly in corporate sustainability reports and are increasingly looking out for ESG (Environmental / Social / Governance) data.

We were encouraged to discuss recent advancements in Sustainability Reporting and the direction in which we expect it to head in.

Regarding frameworks, we expected more companies to be aligning with the GRI G4 report framework and also discussed the possible influence of the new modular GRI reporting standards, beginning this November, 2016.

SASB (Sustainability Accounting Standards Board) was a popular discussion within the group, as many felt this would become increasingly important in Sustainability reporting.

The UN Sustainable Development Goals (SDGs) also received a great deal of attention – being new goals (devised in 2014) for companies to align with and being more challenging than the UN Global Compact.  Many of us felt that Sustainability Reporting will be increasingly referring to, and based around, the UN SDGs.

Considering the content of the report, the group expected to see more companies committing to Science Based Targets.  These include ambitious greenhouse gas emissions (GhGs) reduction targets tailored individually for each company committed to help keep global warming below the COP21-agreed 2 degrees Celsius.  This includes communication about ‘best practices’ and scoring each of their main suppliers.

Many of us believed that stating that the materiality of the report content is foundational for these reports and so expected to see more of these types of references.  We also discussed that streamlining Sustainability information provided by a company, e.g. integrating Sustainability Reports into the Annual Reports; that should help to decrease audit fatigue and increases investment in the company and employees’ investment into their work.

Our table participants concluded that the future of sustainability reporting is likely to reflect the combination of influence of GRI, SASB and the SDGs. The final task was to come up with a “tweet” to convey the outcome of our discussion, we decided: “Future of sustainability reporting is a GRI+SASB+SDG sandwich. Yummy. #ReportingSandwich.”

Overall, I found this CR Commit! conference session to be very interesting and insightful. It was a really fun and interactive session, encouraging people from across industries with different experiences to share their opinions and ideas. I think every person around the table gained some knowledge and possibly also ideas for their own company with how to tackle their next, or first published, Sustainability Report.

Quo Vadis on Sustainability Issues in 2017 — As a New Administration & New Congress Come to Town?

Are you holding your breath after the November elections?  Wondering where corporate sustainability or sustainable investing goes from here?  What our public sector positioning may be on issues of importance to the corporate or capital markets communities?

The author of the best seller, “Green to Gold” takes on the Quo Vadis questions regarding sustainability issues as President-elect Donald J. Trump builds and announces his management team, albeit with an unusual method that reminds one of the popular TV show, “The Apprentice.”

In the Harvard Business Review, author Andrew Winston posts that “sustainable business” will move ahead with or without the future Trump Administration’s support or involvement or interference.  Companies will continue on their sustainability journeys because macro forces are driving the movement, he believes.  And we can move forward even without the Federal government’s push (although that support and encouragement is always nice to have as the wind-at-our-backs).

There are five “mega-trends” at work here, author Winston offers up for us.  For example, if you want to install solar or wind power for your business, as a manager you should be encouraged that the cost to build is down by half or much more from prior levels.  (The wind-at-our-back here of course includes the very important public sector support for development of non-fossil-fuel generated power.)

Second, climate change is now well beyond theory, author Winston argues.  The CEO of Kellogg speaking at the Paris COP-21 meetings said for his company, “climate change is mission critical.”  Many other CEOs are publicly or privately thinking/expressing the same thoughts.  Climate-related weather shocks can seriously damage crops — and ripple through food, apparel, fuel and other industrial production.

Third, consider the huge Millennial generation — soon to be half of the global workforce — these men and women are not retreating from the sustainability advances made to date.  Almost 9-out-of-10 of this demographic cohort believes (Winston explains to us) that “…the success of a business should be measured in terms of more than financial performance…”  These Millennial generation men and women are rising fast to positions of power in industry (and in government, finance, NGO management, etc.). They are taking us in a different direction on key societal issues.

Number Four on his list: Social media today can quickly create fame and fortune — or disaster — for the company on the right side or the wrong side of important societal issues — like responsible management of supply chains, and acting responsibly on key social and environmental issues that our society now deems to be important (especially for popular brand marketers).

And then there is the breadth and depth of many governmental commitments for — and action taken on — climate change issues. There was great momentum coming out of the Paris meetings in Fall 2016 and on to the Morocco meetings concluded just days ago.  We are moving inexorably toward a low-carbon economy and many global public sector leaders — unlike the American President-elect’s campaign comments — do not believe “all of this” is a hoax (that is, generated by China). Indeed, as explained in our Top Story, even China has clearly delivered the message:  Climate Change, it’s not a hoax.

We invite your reading of the HBR commentary by Andrew Winston, and suggest that you share it with your colleagues (and especially the “anxious” folks in your circle). Andrew Winston is on target with his projections that the business community will continue to act even if the new Trump Administration does not take positive positions on critical societal sustainability issues.

In this, our weekly newsletter for you, we have added a section with an eye on sustainability issues, with focus on the November-December-January transition to the new executive branch leadership and the coming of the 115th U.S. Congress.  A great deal is at stake on decisions to be taken on many of our societal issues.  We are presenting for you a brief selection of the many news stories and commentaries being published that can help us to understand what may/or may not be in store — regarding the decisions and actions to be taken after January 20, 2017 with regard to sustainability issues.

Sustainable Business Will Move Ahead With or Without Trump’s Support
(Monday - November 21, 2016)
Source: Harvard Business Review - Will the seismic shift in U.S. political leadership have a chilling effect on corporate action around environmental and social issues? The short answer is no.

The Results Are In: Sustainable, Responsible, Impact Investing by U.S. Asset Managers At All-time High — $8 Trillion!

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

We have an important update for you today: The US SIF Report on “US Sustainable, Responsible and Impact Investing Trends, 2016,” was released this week.

The top line for you today: In the U.S.A., sustainable, responsible and impact (SRI) investing continues to expand — at a rapid and encouraging pace.

As we read the results of 2016 survey report, we kept thinking about the past 30 or so years of what we first knew as “socially responsible,” “faith-based,” “ethical” (and so on) approaches to investing, and that more recently we declared to be sustainable & responsible investing (SRI). And even more recently, adding “Impact Investing”).

At various times over the years we tried to visualize “how” the future would be in practical terms when many more mainstream investors embraced SRI / ESG approaches in their stock analysis and portfolio decision-making.

We’re happy to report that great progress continues to be made. It may at times have seemed to be slow progress for some of our SRI colleagues, especially the hardy pioneers at Domini, Trillium, Calvert, Zevin, Walden, Christian Brothers/CBIS, As You Sow, Neuberger Berman, and other institutions.  But looking over the past three decades, always, in both “up and down” markets, and especially after the 2008 market crash — sustainable, responsible and impact investment gained ground!

And so, we in the U.S. SRI community anxiously look forward to the every-other-year survey of U.S.A. asset owners and managers to measure the breadth and depth of the pool of assets that are managed following ESG methods, SRI approaches, etc.

Here are the key takeaways for you in the just-released survey by the U.S. Forum for Sustainable & Responsible Investment (US SIF), the trade association of the SRI community that has tracked SRI in its survey efforts since 1995-1996, and the US SIF Foundation.

2016 Survey Highlights:

• At the start of 2016, ESG (“environmental/social/governance”) factors were being considered for US$8.72 trillion of professionally-managed assets in the United States of America.

• SRI Market size: that is 20 percent / or $1-in-$5 of all Assets Under Management (AUM) / for all US-domiciled assets under professional management (that is almost $9 Trillion of the total AUM of $40.3 trillion).

• This is a gain of 33% over the total number ($6.572 trillion in AUM) in the previous US SIF survey results at the start of 2014.

• Surveyed for the 2016 report: a total of 447 institutional investors, 300 money (asset) managers, and 1,043 community investment institutions. This can be described as a diverse group of investors seeking to achieve positive impacts through corporate engagement -or- investing with an emphasis on community, sustainability or advancement of women.

Drivers: Client demand is a major driver – the U.S. asset owners hiring asset (money) management firms are increasingly focused on ESG factors for their investments — as responsible fiduciaries.

ESG Criteria: Survey respondents in the investment community had 32 criteria to select from in the survey, including E-S-G and product related activities (ESG funds); they could add ESG criteria used as well.

What is important to the investors surveyed?  The report authors cited responses such as:

• Environmental investment factors — now apply to $7.79 trillion in AUM.
• Climate Change criteria – now shape $1.42 trillion in AUM – 5 times the prior survey number.
• Clean Technology is a consideration for managers of $354 billion in AUM.
• Social Criteria are applied to $7.78 trillion in AUM.
• Governance issues apply to $7.70 trillion in AUM, 2X the prior survey.
• Product specific criteria apply to $1.97 trillion in AUM.

The Social criteria (the “S” in ESG) include conflict risk; equal employment opportunity and diversity; labor and human rights issues.

Product issues include tobacco and alcohol; these were the typically “screened out” stocks in the earlier days of SRI and remain issues for some investors today.

Mutual Funds:
Among the investment vehicles incorporating ESG factors into investment management, the survey found 519 registered investment companies (mutual funds, variable annuity funds, ETFs, closed-end funds). Total: $1.74 trillion in AUM.

Alternative Investment Vehicles:
There were 413 alternate investment vehicles identified as using ESG strategies (including private equity, hedge funds, VCs). Total: $206 billion in AUM.

Institutional Investors:
The biggie in SRI, with $4.72 trillion in AUM, a 17% increase since the start of 2014 (the last survey). These owners include public employee funds; corporations; educational institutions; faith-based investors; healthcare funds; labor union pension funds; not-for-profits; and family offices.

Community Investing:
The survey included results from 1,043 community investing institutions, including credit unions; community development banks; loan funds; VC funds. Total: $122 billion in AUM. (These institutions typically serve low-to-moderate income individuals and communities and include CDFI’s.)

Proxy Activism:
SRI players are active on the corporate proxy front: From 2014 to 2016, 176 institutional investors and 49 money managers file / co-file shareholder resolutions at U.S. public companies focused on environmental (E) or social (S) issues. (The number remains stable over the past four years, the report tells us.) The major development was that where such resolutions received 17% approval from 2007 to 2009, since 2013, 30% of resolutions received 30% or more approval.

Methodologies/Approaches:
There are five primary ESG incorporation strategies cited by US SIF: (1) Analyzing, selecting best-in-class companies, positive choices for the portfolio; (2) negative approaches / exclusionary approaches for certain sectors or industries or products by/for the fiduciary; (3) methods of ESG integration — considering various ESG risks and opportunities; (4) impact or “outcome” investing, intended to generate social (“S) or environmental (“E”) impact along with financial return; (5) selecting sustainability-themed funds of various types.

Commenting on the survey results, US SIF CEO Lisa Woll observed that as the field grows, some growing pains are to be expected. . .with the continuing concern that too often, limited information is disclosed by survey respondents regarding their ESG assets. While the number of owners and managers say that they are using ESG factors, they do not disclose the specific criteria used. (This could be, say, criteria for clean energy consideration, or labor issues of various kinds.)

The US SIF biannual survey effort began in 1996, looking at year-end 1995 SRI assets under management. In that first year, $639 billion in AUM were identified. By the 2010 report, the $3 billion AUM mark was reached. That sum was doubled by the 2014 report.

Year-upon-year, for us the message was clear in the periodic survey results: The center (the pioneering asset owner and management firms) held fast and key players built on their strong foundations; the pioneers were joined by SRI peers and mainstream capital market players on a steady basis (and so the SRI AUM number steadily grew); and investors — individuals, and institutions — saw the value in adopting SRI approaches.

Today, $1-in-$5 in Assets Under [Professional] Management sends a very strong signal of where the capital markets are headed — with or without public sector “enthusiasm” for the journey ahead in 2017 and beyond!

There is a treasury of information for you in the report, which is available at: www.ussif.org.

Congratulations to the US SIF team for their year-long effort in charting the course of SRI in 2015-2016:  CEO Lisa Woll; Project Directors Meg Voorhes of the US SIF Foundation and Joshua Humphreys of Croatan Institute; Research Team members Farzana Hoque of the Foundation and Croatan Institute staff Ophir Bruck, Christi Electris, Kristin Lang, and Andreea Rodinciuc.

2016 survey sponsors included: Wallace Global Fund; Bloomberg LP; JP Morgan Chase & Co.; Calvert Investments; TIAA Global Asset Management; Candriam Investors Group; KKR; MacArthur Foundation; Neuberger Berman; Saturna Capital (and Amana Mutual Funds Trust); Bank of America; BlackRock; CBIS (Catholic Responsible Investing); Community Capital Management Inc.; ImpactUs; Legg Mason Global Asset Management / ClearBridge Investments; Morgan Stanley Institute for Sustainable Investing; Sentinel Investments; Trillium Asset Management; Cerulli Associates; and, Walden Asset Management.

A footnote on terminology: Throughout the survey exercise and reporting, terms used include sustainable, responsible and impact investing; sustainable investing; responsible investing; impact investing; and SRI. These are used interchangeably to describe investment practices.

About US SIF:  This is a three-decade old, Washington-DC-based membership association that advances SRI to ensure that capital markets can drive ESG practices. The mission is to work to rapidly shift investment practices toward sustainability, focusing on long-term investment and the generation of positive social and environmental impacts.  SIF Members are investment management and advisory firms; mutual fund companies; research firms; financial planners and advisors; broker-dealers; non-profit associations; pension funds; foundations; community investment institutions; and other asset owners.

Governance & Accountability Institute is a long-time member organization of the U.S. Forum for Sustainable and Responsible Investment (US SIF).

As part of the G&A Institute mission, we are committed to assisting more investing and financial professionals learn more about SRI and ESG — especially younger professionals interested in adopting SRI approaches in their work.  G&A is collaborating with Global Change Advisors to present a one-day certification program hosted at Baruch College/CUNY on December 14, 2016.  Details and registration information is at: https://www.eventbrite.com/e/intro-to-corporate-esg-for-investment-finance-professionals-certification-tickets-29052781652

President Elect Donald Trump – What Does it Mean for ESG?

The voters have spoken; their decision is known.  It may not have been the news that was expected, or hoped for, but the Office of the President of the United States of America is now in transition.  What does that mean for advocates of greater corporate and societal sustainability…corporate responsibility…corporate citizenship…a cleaner, lower-carbon economy?  What will happen to the US support of COP 21 goals and objectives?  What about the US low-carbon economy?  What about the SEC views on expanding corporate disclosure to include more ESG information?  What about Dodd-Frank rules now in place – or the rules not yet implemented?

So many questions!  We are now monitoring so many commentaries on these questions and more — and the views offered (very strong, indeed) by experts with deep background in the subject matter.  This week’s Top Stories for you are two views offered by such experts.

Chris Bryant of Bloomberg writes from Frankfurt, Germany in his “Trump Can’t Stop the Energy Revolution.” While President-elect Donald J. Trump can slow down the United States participation in the efforts to constructively address global climate change, he “can tell producers which power generation technologies to buy,” writes Bryant. “That decision will come down to cost in the end.  Right now, coal is losing that battle, while renewables are gaining…”

Coal plants may stay open for longer, thinks Bryant, under a Trump Administration (IF campaign promises are kept); but coal will struggle to compete with cheap natural gas and a large volume of coal-generating [electrical] capacity will be retired by 2030.  This is a terrific piece to share with your colleagues who despair that “coal clouds” will be filling the atmosphere after the new administration comes to office.

Andrew Winston, author of Green to Gold, writing in Huffington Post online, says “Trump Can’t Stop the Clean Economy” in his commentary.  We share his views courtesy of our colleagues at Sustainable Brands in the other Top Story.  “If there is any force greater than whatever propelled Donald Trump to the Presidency,” says Winston, “it is economic.  Nobody, not even a President Trump, can stop all the movement toward the clean economy.  The reason is simple:  It’s now cheaper to cut carbon and use renewable energy than to keep the status quo.”

This commentary also has encouraging content to share with colleagues.  If Donald Trump follows through on what he said he would do on energy and climate, thinks Andrew Bryant, yes, it could have a devastating impact on global political progress on climate change.  He goes on to share his views on clean energy and the competitive pricing for renewables in the USA.  “Renewables have already won,” says Bryant.

We are receiving commentaries from various colleagues in NGOs, investment houses, the public sector, trade and professional associations, and individuals.  We’ll share these over the coming weeks as we move toward the January 20th 2017 transition of power in our federal government.   What are your thoughts?  Share them with us!

 

Top Story

Trump Can’t Stop the Clean Economy
(Wednesday - November 09, 2016)
Source: Andrew Winston Commentary / Huff Post via Sustainable Brands-  If there’s any force greater than whatever propelled Donald Trump into the Presidency, it’s economics. Nobody, not even a President Trump, can stop all movement toward the clean economy. The reason is simple: It’s now cheaper to cut carbon and use renewable energy than to keep the status quo.

Trump Can’t Stop the Energy Revolution
(Wednesday - November 09, 2016)
Source:  Chris Bryant / Bloomberg Commentary from Frankfurt - The planet is warming, dangerously so, and burning more coal will make it worse. President-elect Donald Trump thinks man-made climate change is a hoax and he’s promised to revive the US coal industry by cutting regulation. So renewables are dead in the water, right? Maybe not.

Will We See Mandated Corporate Reporting on ESG / Sustainability Issues in the USA?

by Hank Boerner – Chairman – G&A Institute

Maybe…U.S. Companies Will Be Required…or Strongly Advised… to Disclose ESG Data & Related Business Information

Big changes in mandated US corporate disclosure and reporting on ESG factors may be just over the horizon — perhaps later this year? Or perhaps not…

Sustainable & responsible investing advocates have long called for greater disclosure on environmental and social issues that affect corporate financial performance (near and long-term). Their sustained campaigning may soon result in dramatic changes in the information investors and stakeholders will have available from mandated corporate filings.

We are in countdown mode — in mid-April the Securities & Exchange Commission (SEC), the agency that regulates many parts of the capital market operations and especially corporate disclosure and reporting for investors issued a Concept Release with a call for public comments.

Among the issues In focus are potential adjustments, expansions and updating of mandated corporate financial reporting. One of these involves corporate ESG disclosure. The issue of “materiality” is weaved throughout the release.

Among the many considerations put forth by SEC: expanding corporate disclosure requirements for corporate financial and business information to include ESG factors, and to further define “materiality.” Especially the materiality of ESG factors.

The comment period is open for you to weigh in with your opinion on corporate ESG disclosure and reporting rules — or at least strong SEC guidance on the matter.

SEC has been conducting a “Disclosure Effectiveness Initiative,” which includes looking at corporate disclosure and reporting requirements, as well as the forms of presentation and methods of delivery of corporate information made available to investors. (Such as corporate web site content, which most feel needs to be updated as to SEC guidance.)

The umbrella regulatory framework — “Regulation S-K” — has been the dominant approach for corporate reporting since 1977 has been the principal repository (in SEC lingo) for filing corporate financial and business information (such as the familiar 10-K, 10-Q, 8-K, etc.).

Investors Want More Corporate ESG Information

For a number of years now, investment community players have urged SEC to look at mandating or offering strong guidance to public company managements to expand disclosure and reporting to substantially address what some opponents conveniently call “non-financial,” or “intangible” information. An expanding base of investors feel just the opposite — ESG information is quite tangible and has definite financial implications and results for the investor. The key question is but how to do this?

Reforming and Updating Reg S-K

In December 2013 when the JOBS Act (“Jumpstart Our Business Startups”) was passed by Congress, SEC was charged with issuing a report [to Congress] on the state of corporate disclosure rules. The goal of the initiative is to improve corporate disclosure and shareholders’ access to that information.

The Spring 2016 Concept Release is part of that effort. The SEC wants to “comprehensively review” and “facilitate” timely, material disclosure by registrants and improve distribution of that information to investors. Initially, the focus is on Reg S-K requirements. Future efforts will focus on disclosure related to disclosure of compensation and governance information in proxy statements.

Asset managers utilizing ESG analytics and portfolio management tools cheered the SEC move. In the very long Concept Release – Business and Financial Disclosure Required by Regulation S-K, at 341 pages — there is an important section devoted to “public policy and sustainability” topics. (Pages 204-215).

ESG / Sustainability in Focus For Review and Action

In the Concept Release  SEC states: In seeking public input on sustainability and public policy disclosures (such as related to climate change) we recognize that some registrants (public companies) have not considered this information material.

Some observers continue to share this view.

The Concept Release poses these questions as part of the consideration of balancing those views with those of proponents of greater disclosure including ESG information:

• Are there specific public policy issues important to informed voting and investment decisions?

• If the SEC adopted rules for sustainability and public policy disclosure, how could the rules result in meaningful disclosures (for investors)?

• Would line items about sustainability or public policy issues cause registrations to disclose information that is not material to investors?

• There is already sustainability and ESG information available outside of Commission (S-K) filings — why do some companies publish sustainability, citizenship, CSR reports…and is the information sufficient to address investor needs? What are the advantages and disadvantages of these types of reports (such as being available on corporate web sites)?

• What challenges would corporate reporters face if ESG / sustaianbility / public policy reporting were mandated — what would the additional costs be? (Federal rule making agencies must balance cost-benefit.)

• Third party organizations — such as GRI and SASB for U.S. company reporting — offer frameworks for this type of reporting. If ESG reporting is mandated, should existing standards or frameworks be considered? Which standards?

The Commission has received numerous comments about the inadequacy of current disclosure regarding climate change matters. And so the Concept Release asks: Are existing disclosure requirements adequate to elicit the information that would permit investors to evaluate material climate change risk? Why — or why not? What additional disclosure requirements– or SEC guidance — would be appropriate?

Influential Voices Added to the Debate

The subject of expanded disclosure of corporate ESG, sustainability, responsibility, citizenship, and related information has a number of voices weighing in. Among those organizations contributing information and commentary to the SEC are these: GRI; SASB; Ceres; IEHN; ICCR; PRI; CFA Institute; PWC; E&Y; ISS; IIRC; BlackRock Institute; Bloomberg; World Federation of Exchanges; US SIF.

The overwhelming view on record now with SEC is that investor consideration of ESG matters is important and that change is needed in the existing corporate reporting and disclosure requirements. You can add your voice to the debate.

For Your Action:

I urge your reading of the Concept Release, particularly the pages 204 through 215, to get a better understanding of what is being considered, especially as proposed by proponents; and, I encourage you to weigh in during the open public comment period with your views.

You can help to ensure the SEC commissioners, staff and related stakeholders understand the issues involved in expanding corporate disclosure on ESG matters and how to change the rules — or offer strong SEC guidance. Let the SEC know that ESG information is needed to help investors better understand the risks and opportunities inherent in the ESG profiles of companies they do or might invest in.

SEC rules or strong guidance on ESG disclosure would be a huge step forward in advancing sustainability and ESG consideration by mainstream capital market players.

Information sources:

The SEC release was on 13 April 2016; this means the comment period is open for 90 days, to mid-July.

Helpful Background For You

Back in 1975 as the public focus on environmental matters continued to increase (all kinds of federal “E” laws were being passed, such as the Clean Air Act and Clean Water Act), stakeholders asked SEC to address the disclosure aspects of corporate environmental matters.

The initial proposal was deemed to have exceeded the commission’s statutory authority.

In 1974 the ERISA legislation had been passed by Congress, and pension funds, foundations and other fiduciaries were dramatically changing the makeup of the investor community, dwarfing the influence of one once-dominant individual investor. After ERISA and the easing of “prudent man” guidelines for fiduciaries, institutional investors rapidly expanded their asset holdings to include many more corporate equities.

And the institutions were increasingly focused on the “E,” “S” and :”G” aspects of corporate operations — and the real or potential influence of ESG performance on the financials. Over time, asset owners began to view the company’s ESG factors as a proxy for (effective or not) management.

While the 1975 draft requirements for companies to expand “E” and “S” information was eventually shelved by SEC, over the years there was a steady series of advances in accounting rules that did address especially “E” and some “S” matters.

FAS 5 issued by FASB in March 1975 addressed the “Accounting for Contingency” costs of corporate environmental liability FASB Interpretation FIN 14 regarding FAS 5 a year later (September 1976) addressed interpretations of “reasonable estimations of losses.” SEC Staff Bulletins helped to move the needle in the direction of what sustainable & responsible investors were demanding. Passage of Sarbanes-Oxley statutes in July 2002 with emphasis on greater transparency moved the needle some more.

But there was always a lag in the regulatory structure that enables SEC to keep up with the changes in investment expectations that public companies would be more forthcoming with ESG data and other information. And there was of course organized corporate opposition.

(SEC must derive its authority from landmark 1933 and 1934 legislation, expansions and updates in 1940, 2002, 2010 legislation, and so on. Rules must reflect what is intended in the statutes passed by Congress and signed into law by the President. And opponents of proposals can leverage what is/is not in the laws to push back on SEC proposals.)

There is an informative CFO magazine article on the subject of corporate environmental disclosure, published September 9, 2004, after the Enron collapse, two years after Sarbanes-Oxley became the law of the land, and 15+ years after the SEC focused on environmental disclosure enhancements. Author Marie Leone set out to answer the question, “are companies being forthright about their environmental liabilities?” Check out “The Greening of GAAP” at: http://ww2.cfo.com/accounting-tax/2004/09/the-greening-of-gaap/

And we add this important aspect to corporate ESG disclosure: Beginning in 1990 and in the years that followed, the G1 through G4 frameworks provided to corporate reporters by the Global Reporting Initiative (GRI) helped to address the investor-side demand for more ESG information and the corporate side challenge of providing material information related to their ESG strategies, programs, actions and achievements.

The G&A Institute team sees the significant progress made by public companies in the volume of data and narratives related to corporate ESG performance and achievements in the 1,500 and more reports that we analyze each year as the exclusive data partner for The GRI in the United States, United Kingdom, and The Republic of Ireland.

We have come a very long way since the 1970s and the SEC Concept Release provides a very comprehensive foundation for dialogue and action — soon!

Please remember to take action and leave your comments here:

http://www.sec.gov/rules/concept.shtml

Reporting 2025 – Perspectives: Hot Topics and the Role of Companies

The GRI global organization is conducting a series of interviews with thought leaders to gain their perspectives on what they expect the main issues to be on corporate agendas and their public reports in 2025.  These are produced monthly and G&A Institute will share these through our websites, newsletters, blog, social media, and various other channels to raise awareness of this important initiative.

Hot Topics and the Role of Companies 
This video presents the highlights on the hot topics and the role of companies from the interviews conducted as part of the Sustainability and Reporting 2025 project.

22 March 2016