Game Changing News on Climate Crisis Actions – President Biden Announces “Whole of Government” Plans

By Hank Boerner – Chair and Chief Strategist – G&A Institute

What a time to be a sustainability advocate – January 2021 is it!  There was significant news in the USA on matters related to meeting climate change challenges. Start with the Biden-Harris Administration bold moves on addressing the climate crisis…

President Joseph R Biden, in his first days in office signed Executive Orders to commit the “whole of government” to addressing the climate crisis in the USA — and around the world.

The President of the United States of America has broad, sweeping powers as the elected head of the Executive Branch of government.  Presidential EO”s must be anchored in the existing laws of the land (such as the Clean Air Act), be within the powers of the presidency as set out by the Constitution of the United States, and serve as the “directives” and instructions (as well as memoranda and “findings” and more) from the head of the Executive Branch to the organs of the Federal government of the United States of America.

The American Historical Institute explains the EO serves to deliver direct orders, intrepretation of law, provide guidance for future regulatory actions, structure government institutions or processes, and make political statements (foundations of policy). This is an often-used approach creating policy.

American heads of state have used the EO process at least 20,000 times dating back to the days of President George Washington – these orders can be challenged by the other two branches of the U.S. government (Judicial and Legislative).

The Biden Executive Orders are assembled in “Tackling the Climate Crisis at Home and Abroad” – the EOs issued “take bold steps” to combat the climate crisis at home in the USA and throughout the world with many elements included (starting with rejoining the Paris Agreement). Consider:

  • The climate crisis will be “centered” now in U.S. foreign policy and in national security considerations.
  • There will be a climate leaders’ summit in the USA on Earth Day (in April 2021).
  • The Major Economies Forum will be re-convened.
  • A new Special Presidential Envoy is appointed (former Secretary of State John Kerry).
  • The USA’s process to address the “Nationally Determined Contribution” (NDC) called for in the Paris Accord is now underway.
  • The National Intelligence Estimate on security implications of climate change is to be prepared by the Director of National Intelligence for the White House.
  • The White House Office of Domestic Climate Policy is established (headed by former US EPA Administrator Gina McCarthy).
  • Important: the National Climate Task Force is created; this brings the top leaders of the Federal government across 21 agencies (all Cabinet officers) to implement the president’s climate agenda.
  • Clean energy job creation is an important objective – this to be part of the “Build Back Better” initiatives.
  • “Made in America” for manufacturing is a pillar; the Order directs all agencies to buy “carbon-pollution-free” electricity for all government facilities and clean, zero-emission vehicles to help create good paying, union jobs and stimulate clean energy industries.

There’s more – rebuilding infrastructure (focus on “green” here); advancing conservation; reforestation; revitalizing communities left behind as the transition to clean energy displaced workers in fossil fuel extraction and processing; developing approaches to secure “environmental justice” for communities; spurring economic growth; bringing science back into climate change discussions; creating a Presidential Council of Advisors on Science and Technology.

The White House is now reviewing more than 100 of the Executive Orders of the prior administration to reinstate protections for air, water, land and communities.

This is sweeping and presents abundant opportunities and risks for both the corporate community and the capital markets. (As the EOs were being announced, General Motors unveiled its plan to “go all electric” in vehicle manufacture by 2035!)

We have prepared a Resource Paper to explain and explore the many implications for the Biden-Harris Administration moves to address the climate crisis. You can download the paper here: https://www.ga-institute.com/research-reports/resource-papers/biden-harris-white-house-actions-a-ga-resource-paper.html

In the days ahead we will be preparing numerous commentaries for this blog on the many (!) developments aligned with, and supporting, the presidential moves of this week. Stay Tuned!

Looking Back to Look Ahead – The Promise of Biden-Harris Administration to Return to the Hopes of Action on Climate Change Issues

November 9, 2020

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

For almost four l-o-n-g, long years we have been watching – and decrying! – the antics of the Trump Administration in the attempt to roll back vital federal environmental protections that have been put in place (and protected) by elected representatives of both parties over five decades.

It was President Richard M. Nixon – a Republican and conservative leader – who signed the National Environmental Policy Act of 1969 (NEPA) into the law of the land. NEPA was established by the 91st Congress and became law on January 1, 1970.

This also established the President’s Council on Environmental Quality. What flowed thereafter was important…

…the Environmental Protection Agency (US EPA) was created;
The Clean Air Act was enacted into law;
The Clean Water Act soon followed; and then
Toxic Substances Control Act (TSCA);  and 
…”Superfund” for clean up of contamination (actually, CERCLA-Comprehensive Environmental Response, Compensation and Liability Act);  and
Emergency Planning and Community Right-to-Know Act;  and 
Endangered Species Act;  and
Federal Insectiside, Fungicide, and Rodenticide Act; and 
Energy Policy Act; and
Chemical Safety Information, Site Security and Fuels Regulatory Relief Act;
…and much more!

Beginning almost immediately as the Trump Administration took charge of the EPA and other cabinet agencies, these historic legislative achievements were being undermined and protections whittled away.

There will be new environmental overseers coming to town in 2021 and the great hopes pinned on the Biden-Harris Administration include rebuilding the important rules, oversight mechanisms and enforcement of the laws/rules by EPA, Interior, Energy and other agencies.

The New York Times today outlined the first steps that could be taken – issuance of presidential Executive Orders (EOs) and President Memoranda that would undo the same mechanisms employed by President Trump and EPA political leaders to undermine environmental protection measures.

We read in — “Biden Will Roll Back Parts of the Trump Agenda With Strokes of a Pen” – that on Day One, we can expect action on climate change, writes Michael D. Shear and Lisa Friedman.

That starts with notice to the United Nations that the U.S.A. will rejoin the Paris Agreement.

The move to revoke Trump era EOs and re-issue Obama-Biden Administration orders can be immediate; or, President Joe Biden in 2021 can issue new orders along the same lines of prior EOs addressing climate change issues.

Important: The new Executive Orders would create important policies for the heads and rank and file members of the departments – Defense, EPA, Labor, Commerce, Interior, SEC, and many others that in some way directly or indirectly are affected by climate change.

Attitudes do matter – and Presidential Executive Orders to heads of agencies really matter!

2021 is looking like climate change matters will move to front-and-center on the public policy agenda. The Financial Times today pointed out that candidate Joe Biden set a policy of having a target to reach zero carbon

While Donald Trump led the effort to isolate the United States from world affairs, China moved to pledge net zero by 2060 and Japan and South Korea set net zero targets.

With the USA back on board, real progress can be made toward meeting Paris Agreement goals. Exciting to consider: The United States of America as once again a leader in the drive to make the world a safer, healthier place for billions of us!

For a reminder of the Trump moves in 2017 to reverse a half-century and more of environmental protection, here’s my March 2017 look at what was underway just two months into the new administration, with a new leader (Administrator Scott Pruitt) at the helm of the EPA.

Let’s go back to March 2017 – Just two months into the Trump Administration – with bad news on climate change all around!

http://ga-institute.com/Sustainability-Update/climate-change-nah-the-deniers-destroyers-are-work-white-house-attempts-to-roll-back-obama-legacy/


Cradle-to-Cradle: Method Case Study

Guest Column by Lama Alaraj – Analyst-Intern, G&A Institute

We live in a world where our society is run through consumerism and capitalist gains. As a result, this system has had adverse effects on the health of our environment.

One of the major industries in our economies is cleaning products, where demand is unlikely to decrease. Consumer behavior influences the supply of cleaning products in our economy, and as a result there is a rise in demand for the ‘green products’.

As consumers it is important for us to know what hazardous chemicals we are bringing into our homes. In this industry transparency is not enough, as the average human cannot understand chemical labels (citation, Grotewohl, 2018 – see bibliography at end).

I believe that we need more companies to shift their business model to be more of a commitment towards achieving holistic sustainability.

There are many different strategies and business models that companies can apply to experience financial growth, with sustainability and the environment in mind.  The focus of this essay will be on the cradle-to-cradle approach — a more sustainable business model that has proven to work in the cleaning products industry.

The cradle-to-cradle approach is a system that moves away from the conventional linear manufacturing process, which focuses on taking raw materials to produce products that will end up disposed, towards a circular approach by closing the loop in production and eliminating waste.

• This process requires businesses to change their business model towards one that incorporates conscious sustainable thinking at the core (Brennan et al, 2015).

• The approach talks about two types of metabolism: biological and technical (Severis et Rech, 2019).

• Each has corresponding nutrients — ‘biological nutrients’ — are materials that can be safely returned to the biosphere, and ‘technical nutrients’ are manmade materials that can be reused (Severis et Rech, 2019).

Goal: Reuse or Return to the Environment

The goal of this approach is to create products that can either be reused or return to the environment (such as though composting) and therefore eliminating the concept of waste at the end of the life cycle of a material which is related to the common cradle-to-grave operation (Severis et Rech, 2019).

An important term that was a prelude to the birth of the cradle-to-cradle approach is the strategy of being eco-effective. This strategy is defined as using resources that maximize the benefits of a product or a service in order for the material to have a continuous life cycle (Brennan et al., 2015).

For the cradle-to-cradle approach to be successful and sustainable in its application by a business, it needs to adhere to three guidelines: waste equals food, use renewable energy, and celebrate diversity (Brennan et al, 2015). For example:

(1) Waste equals food is essentially where the concept of upcycling comes from. By not creating more waste, companies can look at resources that have already been used and recycled, and utilize these materials to their maximum potential.

This guideline pushes businesses to be creative and innovative, enabling them to design a product that has multiple life cycles, and does not lose its value or superiority when it is recycled into something different (Brennan et al, 2015).

(2) The second guideline, use of renewable energy, pushes firms to switch from fossil fuels and to generate clean energy through the use of solar, wind, hydro or biomass technologies. This fits the framework of using what is naturally present and contributes to a holistic approach (Severis et Rech, 2019).

The final approach is about incorporating diversity within the business, through innovation. As part of this guideline firms are required to design products that “support biodiversity, socio-cultural diversity and conceptual diversity” (Ankrah et al.,2015).

This encourages business leaders and their firms to look outside the box and design products that avoid environmental pollution and strive for maximum material reutilization.

Cradle-to-Cradle Certification

To encourage and enable business to apply the cradle-to-cradle approach, the Cradle-to-Cradle certification was established in 2005. Since then, 200-plus companies have produced products that are certified (Source: Cradle to Cradle Products Innovation Institute, 2020).

The rise in Cradle-to-Cradle certified products is influenced by increased environmental awareness, growing consumer demands for green products and business financial savings.

According to research through the Ellen MacArthur Foundation, businesses in the European Union could save up to US$630 billion a year by switching to a cradle-to-cradle model and operating through a circular production system (Cradle-to-Cradle Products Innovation Institute, “CCPII” – 2020).

For instance, Shaw industries, a global carpet manufacturer, switched to a cradle-to-cradle business model in 2007 and as part of this switch, Shaw achieved a 48% increase in water efficiency, and improved energy efficiency, both of which have major environmental benefits (CCPII, 2020).

Financial benefits of this approach allowed Shaw to save US$2.5 million in 2012 alone (CCPII-2020). The benefits of this approach can be vast and are realized through economic, social and environmental gains.

One economic benefit is cost reduction — savings achieved through the reuse of materials, and resource efficiency by saving on water and energy spending (CCPII-2020).

Moreover, these benefits are eliminating toxic waste and pollution, and giving more than one life cycle to a product, through upcycling the material and creating something different in order to operate through environmental awareness and positive sustainable practices (Brennan et al, 2015)

Looking at Cleaning Products

Cleaning products typically contain many hazardous chemicals that can contaminate our groundwater, lakes and oceans, and lead to the formation of algal blooms which threaten marine life. Not only do these chemicals harm our ecosystems, they can also have adverse effects on humans, if exposed to high levels of these chemicals (Grotewohl, 2018).

This is where Method — a United States-based company — decided to take matters into their own hands. They are the “People against dirty”, their infamous slogan is an homage to their commitment against traditional cleaning products that are harmful to our environment, and us.

Method is one of the first green cleaning companies to have a full line of cradle-to-cradle certified products. The company uses non toxic, and full biodegradable formulas, ensuring their products adhere to the unique process of cradle-to-cradle for maximum reutilization (Ryan et al, 2011).

This sophisticated and innovative company values renewable energy at the core of their production process, ensuring to me the renewable energy guideline of cradle-to-cradle fundamentals.

The firm has even opened the first LEED-platinum -certified plant in their industry (Chow, 2015). Everything at this factory is made on site, a one-stop shop approach. The plant runs on wind and solar energy; they have utilized the space in an environmentally-conscious way by allowing Gotham Greens to use the plant’s entire rooftop as a greenhouse in order to harvest organic produce for the local markets and communities (Chow, 2015).

In this way Method demonstrates that the management thinks beyond profitability of the end product, and also looks to maximize every space in their factory and seek inclusivity and to benefit society through their community centered approach, meeting both the renewable energy and diversity guideline of the cradle-to-cradle approach.

The process of recycling actually produces toxins and pollution, so companies encouraging their consumers to recycle is not enough because they are not breaking the system of waste, just contributing to it (Ryan et al., 2011).

Competitors in the cleaning industry typically use white PET to package their goods, as a way to brand their green commitment. However, this type of plastic does not filter through recycling plants and so ends up in landfills (Ryan et al., 2011).

Method’s leaders did their homework, and rather than sticking to traditional industry trends, they designed packaging that is 100% recyclable and made from Post Consumer Recycled PET (Ryan et al., 2011).

In addition to Method’s cleaning materials being sustainably sourced, their packaging is made of 100% recycled bottles, reducing waste in their production process. By upcycling its waste, Method uses up to 70% less energy to manufacture its products (Ryan et al., 2011). Moreover, the plastics used are carefully chosen to ensure they can be recycled and reused, operating a closed loop production system.

For Method, waste is truly fuel, upholding the first guideline in the approach.

Looking at Laundry Detergents

Laundry detergent on the commercial scale is typically water intensive (“80% of detergent is water”), and causes a lot of waste (Ryan et al., 2011). Conventionally, it is packaged to make consumers believe that more is better, so consumers use more detergent than needed (like an optical illusion of sorts).

The first breakthrough in innovation a better detergent was in 2004, when Method launched their ‘three times concentrated’ formula, which uses a lot less water and a lot less energy to clean, making it more environmentally friendly than conventional detergents (Ryan et al., 2011).

This sparked a competitive race in the industry, and major names in the game launched their own versions of concentrated detergents (Ryan et al., 2011). Method creators did not patent their formula, rather they wanted to encourage their competitors to produce more environmentally-friendly and cleaner detergents (Ryan et al., 2011).

In 2010 Method made waves again, and launched their eight times concentrated detergent, and this time it became the first detergent to receive an official cradle-to-cradle certification for its innovative design, non toxic, biodegradable and reduced water formula (Gittell et al., 2012).

Moreover, because it does not require the same amount of energy to clean clothes, it does not require the same amount of detergent either — proving to be resource efficient.

The product is dispensed through a pump, is a lot smaller, and weighs less. This demonstrates the diversity aspect of cradle-to-cradle, because the product used design as a way to reduce excessive and wasteful amounts of detergent that we as consumers have mindlessly done, and by reducing we are benefiting the environment (Gittell et al., 2012,).

Looking Beyond Traditional Business Models

The cradle-to-cradle approach aims to push beyond traditional business models that lean on eco- efficiency policies and towards eco-effective strategies. Typically eco-efficiency relies on the three Rs: reduce, reuse, recycle, and operate on zero waste strategies (Brennan et al., 2015).

With this mindset there are some problems that can arise, as this is still adhering to a linear business model. For instance, with recycling, the product loses its value, and hence its life cycle is significantly shortened. We need to do better than that as businesses and go from downcycling, to upcycling, from eco-efficient, to eco-effective.

Method in my view is a cradle-to-cradle success story and I think it is a role model for companies to take that plunge. Since its conception, as a small two person company, Method has grown to be a US$100 million dollar company (Gittell et al., 2012).

Management has never broken the commitment to true sustainability, and has proved that having a cradle-to-cradle business strategy can result in positive environmental impacts & commercial growth. From breaking conventional trends in the industry, to pushing their giant competitors to adopt the three times cycled detergent, i see Method as a force to be reckoned with.


# # #

Lama Alaraj is a graduate of Dalhousie University (Nova Scotia, Canada) with double major in economics and international development studies. She is a marketing consultant for Web.com. She was an analyst-intern with G&A Institute and was a key member of the team producing the S&P 500 Index annual research on sustainability reporting, and was very much involved in the G&A Institute’s GRI Data Partner duties.



Link: https://www.ga-institute.com/about-the-institute/the-honor-roll/lama-alaraj.html

Bibliography

Ankrah, N. A., Manu, E., & Booth, C. (2015, December). Cradle to Cradle Implementation in Business Sites and the Perspectives of Tenant Stakeholders. Elsevier, 83(Energy Procedia), 31-40. https://www.sciencedirect.com/science/article/pii/S1876610215028581#abs0005

Brennan, G., Tennant, M. and Blomsma, F. (2015). Chapter 10. Business and
production solutions: Closing Loops & the Circular Economy, in Kopnina, H. and Shoreman-Ouimet, E. (Eds). Sustainability: Key Issues. Routledge: EarthScan, pp.219-239

Chow, L. (2015, July 29). Gotham Greens + Method = World’s Largest Rooftop Greenhouse Coming to Chicago. EcoWatch. Cradle to cradle products innovation institute. (2020). Impact Study Executive Summary. www.c2ccertified.org. https://www.c2ccertified.org/impact-study

Gittell, R., Magnusson, M., & Merenda, M. (2012). The Sustainable Business Case Book (Vol. Chapter 6). Saylor Foundation. https://2012books.lardbucket.org/books/sustainable-business-cases/index.html

Grotewohl, E. (2018). Chapter 830: Cleaning Products Are Coming Clean. University of Pacific Law Review, 49(2). Scholarly Commons. https://scholarlycommons.pacific.edu/cgi/viewcontent.cgi?article=1161&context=uoplawreview

Ryan, E., Lowry, A., & Conley, L. (2011). The Method Method: Seven Obsessions That Helped Our Scrappy Start-up Turn an Industry Upside Down. Penguin.

Severis, R., & Rech, J. (2019). Cradle to Cradle: An Eco-effective Model. In Earth and Environmental Science Reference Module Physical and Materials Science. Springer, Cham. https://link.springer.com/referenceworkentry/10.1007/978-3-319-71062-4_62-1

Food! Will We Have Enough to Feed an Ever-Hungrier Planet? – Are Food & Ag Industries “Sustainable” – Let’s Explore…

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

October 30 2020

The United Nations projection is for today’s global population of an estimated 7.6 billion people to expand to a global population of 8.6B by 2030 and 9.8B by 2050…and then to 11.2 billion in 2100 (so says the UN Department of Economic and Social Affairs report, June 2017).

Each year, says the UN, 83 million more people are added to the world’s population.

If we go back 1,000 years, the world population was an estimated 300 million people.

And then, only 4% (about 4 million square kilometers) was used for farming, according to the University of Oxford (source: ourworldindata).

Today, half of the world’s habitable land is used for agriculture (excluding deserts, beaches, rocks, etc.) – that is 51 million KMs. T

There is also land (an additional 40 million KMs) used for livestock, meat, and dairy. Protein supply is largely from plant-based food for much of the world population. (Data – UN Food and Agricultural Organization).

So as the population grows and grows, will we be able to feed millions and then billions of additional people? Where will the capital be needed for food & ag expansion?

Will investors and other stakeholders have enough information – especially reliable, comparable data sets – to understand where the food & ag industry players are…to meet the daily food needs of many more people…to use available arable land wisely and sustainably…to understand what food manufacturers and marketers are doing to be more sustainable and responsible?

We’ve selected a few items in our Top Stories to explore these questions, especially as investors look for agriculture and food trends that fit into the ESG bucket.

TOP STORIES

  1. Forbes contributor Hank Cardello looks at the food industry and the magazine’s list of “100 most sustainably managed public companies” – finding food processing companies “a no show among the top companies”:Food Industry is a No-Show in New Sustainability Study (Source: Forbes)
  2. This ESG / Financial Times article explores why the food sector is difficult to assess from an ESG perspective – to quote, “ESG investors are finding it hard to incorporate food in their portfolios…food businesses’ far-reaching impacts are difficult to measure, making it unclear whether they meet ESG criteria”:Food Proves Hard for ESG Investors to Digest (Source: Financial Times)
  3. This article talks about ESG not being covered in farm media and opines that primary producers don’t have to rely on ESG reporting to get access to capital. So – it seems like these factors could cause difficulty for downstream customers to report on the ESG metrics of their supply chains. Contributing analyst Elaine Kub advises the ag industry that convincing investors a company is operating sustainably and making long-term decisions…and deserves to be in the “ESG category”, but is nary a mention of this in farm media…yet: ESG: Another Acronym for Ag to Know (Source: Progressive Farmer)
  4. 4-A new study from the U.S. Department of Agriculture (USDA) charts organic ag sales have increased 31% from 2016 to 2019:2019 Organic Survey Results Show Sales Up 31% from 2016 (Source: USDA)

Sources:

Advancing Toward a Circular New York

By Kirstie Dabbs – Analyst-Intern, G&A Institute

New York City’s latest OneNYC 2050 strategy outlines an ambitious sustainability agenda that includes goals to achieve zero waste to landfill by 2030, and carbon neutrality by 2050.

New Yorkers who track city- and state-wide environmental goals and regulations are likely aware of the importance of renewable energy and energy efficiency in achieving this climate strategy, but those actions alone won’t fulfill New York’s ambitions.

A circular economy must also be adopted in order to further reduce greenhouse gas emissions and waste, while also conserving resources. Although the OneNYC strategy does make note of this shift, many New Yorkers remain unfamiliar with even the concept of the circular economy, let alone its principles, practices and potential impact.

What is the Circular Economy?

Also known as circularity, the circular economy calls for a reshaping of our systems of production and consumption, and an inherently different relationship with our resources.

Rather than following our current “linear” economic model that extracts resources to make products that are used and disposed of before the end of their useful life, a circular economy follows three core principles to extend the value of existing resources and reduce the need to extract new resources:

  • Design out waste.
  • Keep products and materials in use.
  • Regenerate natural systems.

These three principles — as put forth by the Ellen MacArthur Foundation — create opportunities to reduce and potentially eliminate waste,  from the design phase all the way to a product’s end of life.

Materials Matter

In the design phase, the choice of materials plays a critical role in either facilitating or preventing recirculation of materials down the line. By choosing to manufacture products with recycled materials, companies will drive demand for more post-consumer feedstock, further reducing waste to landfill which is aligned with the City’s waste-reduction goal.

Companies can also choose to manufacture products using responsibly sourced bio-based materials, which enable circularity because they biodegrade at the end of life with the appropriate infrastructure in place.

WinCup and Eco-Products are examples of companies leading the way toward biodegradable paper and plastic cup alternatives. The regenerative process of biodegradation is in line with the third principle of circularity and supports New York City’s waste goals in bypassing the landfill altogether and heading directly to the compost pile.

Durable Design Increases Product Lifespan and Reduces Consumer Demand

In addition to applying material design principles to divert material from landfill, companies can deploy design and marketing strategies to keep their products in use longer.

Designing durable products and those that can be easily repaired not only leads to longer product lives, but also reduces waste and demand for new products. Creating products that will be loved or liked longer – such as “slow” fashion that won’t go out of style – is another tactic to extend the emotional use of a product.

Finally, companies such as Loop that combine durability with reuse offer a solution to the packaging waste dilemma by keeping long-lasting packaging in circulation.

According to a 2019 report from the European Climate Foundation, by recirculating existing products and materials, the demand for new materials will decrease, reducing environmental degradation and product-related carbon emissions.

How Will the Circular Economy Help Reduce Greenhouse Gas Emissions?

The same report also notes that in order to meet the carbon reduction targets outlined by the Intergovernmental Panel on Climate Change, we “cannot focus only on…renewables and energy efficiency” but must also ”address how we manufacture and use products, which comprises the remaining half of GHG emissions.”

A recent press release from the World Economic Forum (WEF) summarized it succinctly: If we don’t link the circular economy to climate change, “we’re not just neglecting half of the problem, we’re also neglecting half of the solution.”

New York’s Steps to Advance the Circular Economy

Although the principles of circularity can be applied to an individual’s or organization’s behavior, to fully achieve a circular economy the economic system as a whole must fully adopt these principles.

According to a recent report by Closed Loop Partners — an investment company dedicated to financing innovations required for a circular economy — the four key drivers currently advancing circularity in North America are investment, innovation, policy and partnership. All are important and increasing; we are seeing the private and public sectors collaborating to take advantage of the economic opportunity offered by circularity while executing this environmental imperative.

The New New York Circular City Initiative

Closed Loop Partners, along with several other private and public organizations, have come together to found the New York Circular City Initiative, officially launching this month.

One of several partners participating in the initiative is the NYC Economic Development Corporation (NYCEDC), and Chief Strategy Officer Ana Arino spoke last year of how the NYCEDC is well-positioned to inspire and implement city-wide changes leading to a circular economy through levers such as real estate assets; programs to support circular innovation; its intersectional position between the private and public sectors; and public-facing awareness campaigns.

The vision of the New York Circular City Initiative is “to help create a city where no waste is sent to landfill, environmental pollution is minimized, and thousands of good jobs are created through the intelligent use of products and raw materials.” Through engagement in this collaborative effort, the City is taking an important step toward circularity, that, if scaled, has the potential to make significant and lasting changes in the local economy—and beyond.

# # #

Kirstie Dabbs is pursuing her M.B.A. in Sustainability with focus on Circular Value Chain Management at Bard College.  She is currently an analyst-intern at G&A Institute working on GRI Data Partner assignments and G&A research projects. In her role as an Associate Consultant for Red Queen Group in NYC she provides organization analyses and support for not-for-profits undergoing strategic or management transitions.

 

Profile:  https://www.ga-institute.com/about-the-institute/the-honor-roll/kirstie-dabbs.html

 

This article was originally published on the GreenHomeNYC blog on September 28, 2020.

 

The United Nations at 75 Years This Week – Corporate CEOs Around the Globe Pledge Support of the Missions

October 20, 2020

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

Three-quarters of a century of serving humanity — the family of nations celebrates the 75th Anniversary of the founding of the United Nations on October 24th.

After the global conflict of World War Two, with great losses of life, liberty and property, 51 nations of world gathered in San Francisco to put the Charter into force — to collectively explore a better way forward with collaboration not confrontation.  (The Charter was signed as the war was ending in the Pacific and had ended in May in Europe).  We can say that on October 24, 1945, the United Nations “officially” came into existence with the ratification of the Charter by nations and the gathering of delegates.

The United Nations members states — the global family of sovereign nations collaborating peacefully for seven-plus decades to address common challenges — got good news in its 75th anniversary year.

More than one thousand business leaders from 100+ nations endorsed a Statement of Renewed Global Cooperation, pledging to further unite in helping to help to make this a better world…for the many, not the few. Some of the world’s best known brand marketers placed their signatories on the document.

UN Secretary General Antonio Guterres received the CEOs’ messages of support at a Private Sector Forum during the recent General Assembly in New York (September).

The Statement from Business Leaders for Renewed Global Cooperation was created as the nations of the world are coping with the impacts of the Coronavirus, domestic and global economic slowdown, rising political and civic unrest, wars in different regions, critical climate change challenges, the rising demand for equality of opportunity, and more.

The corporate CEOs’ public commitments included demonstration of ethical leadership and good governance (the “G” in ESG!) through values-based strategies, policies, operations and relationships when engaging with all stakeholders.

Now is the opportunity, the statement reads, to realign behind the mission of the UN to steer the world onto a more equitable, inclusive and sustainable path. We are in this together – and we are united in the business of a better world.

“Who” is the “We”? Leaders of prominent brands signing on include Accenture, AstraZeneca, BASF, CEMEX, The Clorox Company, Johnson & Johnson, Moody’s, Nestle, Thomson Reuters, S&P Global, Salesforce, Tesla, and many other consumer and B-to-B marketers. (The complete list of large-cap and medium and small companies accompanies the Statement at the link.)

There are many parts of the global community’s “meeting place” (the UN) that touch on the issues and topics that are relevant to us, the folks focused on sustainability. Think of the work of:

UN Global Compact (UNGC)
This is a non-binding pact (a framework) to encourage enterprises to voluntarily adopt sustainable and socially responsible policies and report on same; 12,000+ entities in 160 countries have signed on to date (the Compact was created in July 2000).

UN Principles for Responsible Investing (PRI)
Founded 2006, this is a global network of financial institutions and others in the capital markets pledging to invest sustainably, using 6 principles and reporting annually; today, there are 7,000+ signatories to date in 135 countries; this is in partnership with UNGC and the UNEP Finance Initiative.

UN Sustainable Development Goals (SDGs)
The SDGs (17 goals with 169 targets) build on the earlier Millennium Development Goals MDGs- (2000-2015).

The Paris Agreement builds on the UN Framework Convention on Climate Change.

The UN Environment Programme (UNEP) plays important roles in protecting the world’s environment.

In all, there are almost three dozen affiliated organizations working to advance humanity through the United Nations System.

 

SHARED PERSPECTIVES: FAYE LEONE
With all of this activity, the UN needs support, and shared ideas, to build even stronger foundations. Our colleague, G&A Institute Senior Sustainability Content Writer Faye Leone, has a decade of experience reporting on the UN.

Her perspectives: “It is exactly right for business leaders to express support for global cooperation– not competition- at this time. This is in the spirit of the UN’s 75th anniversary and critical for the next big challenge for multilateralism and solidarity: to fairly provide a safe vaccine for COVID-19.”

She explains that leading up to its 75th anniversary in September 2020, the UN conducted a year-long ‘listening campaign”. The results, after over one million people around the world participated!

They said they do not want “more of the same” from the UN.  They overwhelmingly called for a more inclusive, diverse, and transparent UN that does a better job of incorporating businesses, cities, vulnerable peoples, women, and young people. They also said the UN should be more innovative.

(View Source)

The Sustainable Development Goals, says Faye, can help with that.  The 17 goals “provide a common language for everyone to combine their strengths. According to the head of B Lab, business’ role is to participate in delivering on the SDGs, use the power of business to solve the world’s most urgent problems, and inspire others to do the same”.

(View Source)

Read more about the UN’s 75th anniversary through Faye’s work with IISD here.

Read more about the UN’s 75th anniversary here.

Mark October 24 on your calendar. That’s the day we commemorate the UN’s official founding after WW II (on 24 October 1945). We invite you to think about how you can support the UN moving toward the century-of-service mark in 25 years (2025) – and what ideas you can share to help this organization of the family of nations to address 21st Century challenges!

TOP STORY

Celebrating Highlights Issue #500 – And Unveiling a New Design

October 16, 2020

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

Celebrating Highlights issue #500 – this is a landmark achievement, we will say, for this is also the tenth anniversary year of publishing the G&A Institute’s weekly newsletter (G&A Institute’s Sustainability Highlights).  As you will see in reading #500, we are also introducing an enhanced format intended to make the newsletter easier to read or scan as well.

Our G&A Institute’s Sustainability Highlights newsletter is designed to share timely, informative content in topic/issue “buckets” that we think will be of value to you, our reader. So much is happening in the sustainable investing and corporate sustainability spaces these days – and we are working hard to help you keep up to date with the important stuff!

Publishing the Sustainability Highlights newsletter is a team effort here at G&A.

Our company was formed in late 2006 and among our first efforts, Ken Cynar, then and now our Editor-in-Chief, began the daily editing of the then-new “Accountability Central” web site with shared news and opinion. The focus was (and is) on corporate governance, environmental matters, a widening range of societal and corporate-society issues, SRI investing, and more.

Two years later we created the “SustainabilityHQ” web platform – Ken manages content for both platforms today.

Back in those early days there was not the volume of ESG news or opinion pieces that we see today. Whenever we “caught” something of note the rest of the G&A team would quickly share the item with Ken.

Our team had worked together (some for a number of years) at the former Rowan & Blewitt consultancy, specialists in issue management, crisis management and strategic communications for the fortunate Fortune 500s.

That firm was acquired by Interpublic Group of Companies and after 7 years the New York City team created G&A Institute to focus on corporate sustainability, responsibility, citizenship and sustainable & responsible investing.  All of us came equipped with a strong foundation of issue management, risk management, critical issues managements, and corporate communications experience and know-how.

“ESG” had just emerged as a key topic area about the time we began our publishing efforts and soon we saw a steady flow of news, features, research reports, opinions & perspectives that we started sharing.

We had worked on many corporate engagements involving corporate governance, environmental management, a range of societal issues, public policy, and investor activism.  Here it was all coming together and so the G&A enterprise launch to serve corporate clients!

By 2010, as we emerged from the 2007-2008 financial markets debacle, then-still-small-but-solid (and rapidly expanding) areas of focus were becoming more structured for our own information needs and for our intelligence sharing, part of the basic mission of G&A from the start. And so, we created the weekly Highlights newsletter for ease of sharing news, research results, opinion & perspectives, and more.

It is interesting to recall that in the early issues there were scant numbers of corporate CSR or sustainability etc. reports that had been recently published (and so we were able to share the corporate names, brief descriptions of report contents, links of those few reports).  That trickle soon became a flood of reports.

But looking back, it was interesting to see that at the start of the newsletter and our web sites, there were so few corporate sustainability / responsibility reports being published we could actually post them as news for readers. Soon that trickle of corporate reports became a flood.

A few years in, The Global Reporting Initiative (GRI) invited G&A to be the data partner for the United States and so our growing team of ESG analysts began to help identify and analyze the rapidly-increasing flow of corporate reports to be processed into the GRI’s global reporting database.

Hank Boerner and Lou Coppola in the early days worked closely with Ken on the capturing and editing of content.  Lou designed the back end infrastructure for formatting and distribution.

Amy Gallagher managed the weekly flow of the newsletter, from drafts, to layout and then final distribution along with the coordination of a growing body of conference promotions with select partner organizations.

And now with a solid stream of content being captured today, all of this is a considerable effort here at G&A Institute.

Ken is at the helm of the editorial ship, managing the “AC” and “SHQ” web platforms where literally thousands of news and opinion are still hosted for easy access. He frames the weekly newsletter.

Today Ken’s effort is supported by our ESG analysts Reilly Sakai and Julia Nehring and senior ESG analyst Elizabeth Peterson — who help to capture original research and other content for the newsletter.

Hank and Lou are overall editors and authors and Amy still manages the weekly flow of activities from draft to distribution.  Our head of design, Lucas Alvarez, working with Amy created this new format. As you see, it is a team effort!

There is a welcome “flood” — no, a tidal wave! — of available news, research and opinion being published around the world that focuses on key topic areas: corporate sustainability, CSR, corporate citizenship, ESG disclosure & reporting, sustainable investing, and more.  We capture the most important to share in the newsletter and on our web sites.

We really are only capturing a very tiny amount of this now-considerable flow of content, of course, and present but a few select items in the categories below for your benefit.  (The target is the three most important stories or items in each category.)

Much more of the ongoing “capture effort” is always available to you immediately on the SustainabilityHQ web platform (see the “more stories” links next to each category of headlines).

We hope that you find Sustainability Highlights newsletter of value. It’s a labor of love for us at G&A, and we would like to get your thoughts and feedback …including how we can continue to improve it. Thanks for tuning in all of these years to our long-term readers!

TOP STORIES

As example of the timely news of interest for this week we offer these (two) commentaries on the Sustainability Development Goals (SDGs).  We are five years in/with 10 years in which to make real progress…where do you think we are headed?

As students and faculty head back to campus – there’s discussion about “sustainability” and “campus”:

 

As Summer 2020 Nears End in Northern Hemisphere – Quo Vadis, Corporate Sustainability and ESG/Sustainable Investing?

September 14 2020

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

This has been a strange summer in the northern climes, as the corporate sector and capital markets players meet the challenges of the Big Three crises — Corona virus pandemic, economic downturn, and widespread civil protests.

In times of crises (and as we have at least three major crisis situations occurring all at once to deal with this summer) certain actions may take a back seat.  Not so with forward movement of corporate sustainability and ESG/sustainable investing in summer 2020.

We bring you brief updates on some of these trends that continue to shape the interactions of companies and their providers of capital.

First –– worldwide, ESG/sustainable investing index funds reach a record of US$250 billion, with the crises appearing to accelerate investors’ moves into these passive and actively managed investment instruments.

Consider:

  • Before COVID-19, sustainability funds were already experiencing major growth, with assets doubling over the past three years.
  • Actively-managed ESG mutual funds continue to attract the lion’s share of dollars and represent a much larger portion of the sustainable investing landscape. Combined inflows into both active and passive ESG-focused funds reached $71.1 billion during the second quarter — pushing global AUM above the $1 trillion mark for the first time.
  • In the USA, sustainable index funds still make up less than 1% of the market – lots of room for growth here!
  • According to a recent survey conducted by Morgan Stanley’s Institute for Sustainable Investing, nearly 95% of Millennials are interested in sustainable investing, while 75% believe that their investment decisions could impact climate change policy.

On the corporate sustainability side, Goldman Sachs shares the view that oil & gas enterprises could lead the way into a lower-carbon economy. Perhaps.  Will take leadership and action – very soon.

The sector’s leading equities players limped in value this summer and there are many challenges still ahead – but, says a Goldman Sachs report, a new European Union rule in 2021 could accelerate the oil & gas companies’ shift into more sustainable activities.  The industry leaders can leverage their brands and trading capabilities to acquire power customers, thinks GS analysts.  And exert leadership.

And the “octopus” that many retailers see encircling their businesses, Amazon, is pushing ahead with The Climate Pledge (founded by Amazon and Global Optimism in September 2019) with an important commitment:  meeting the Paris Agreement goals a decade early!

Info: https://sustainability.aboutamazon.com/about/the-climate-pledge

Mercedes-Benz is the latest signatory to the pledge.  And look at what these moves can mean in practical business terms:  Amazon will add 1,800 electric Mercedes-Benz vans to its delivery fleet in Europe in 2020!  Other big-name corporate signatories include Verizon, Infosys, and Reckitt Benckiser.

Not quite a quiet summer in the corporate sector and capital markets, we would say!

On to Fall now in the Northern climes and a most welcome Spring season in the Southern Hemisphere, 2020 into 2021.

These are the Top Stories picks for you this week – and there are important items in the categories as well.  Happy Welcome to Autumn and Spring, wherever you are from the G&A Institute team.

Top Stories

Research We Can Use As We Consider the Changes To Come in a Lower-Carbon Economy

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

There certainly is a large body of research findings and resulting projections of what to expect as society moves toward a lower-carbon global economy.  The research comes from the public sector, academia, NGOs, capital market organizations, and scientific bodies.  One of the most comprehensive of analysis and projections is the National Climate Assessment produced periodically by the U.S. federal government. 

One reliable source of research that we regularly have followed for many years is the The National Bureau of Research (NBER), a not-for-profit “quant” research organization founded 100 years ago in Boston, Massachusetts.  The organization boasts of a long roster of economic experts who issue many Working Papers during the year (1,000 or more) with permission granted to reproduce results.

Such is the stature of NBER over many years that this is the organization that issues the official “start and end” of recessionary periods in the U.S. (you probably have seen that mentioned in news stories).

Lately NBER researchers have been focused on ESG-related topics.  We are sharing just a few top line research results here for you.

Research Results: California’s Carbon Market Cuts Inequality in Air Pollution Exposure

In NBER Working Paper 27205, we learn that California’s GhG cap-and-trade program has narrowed the disparity in local air pollution exposure between the disadvantaged populations and others.  The state’s is second largest carbon market in the world after the European Union’s cap-and-trade (based on total value of permits).

Early on there were concerns that market forces could worsen existing patterns in which disadvantaged neighborhoods would be exposed to even more pollution that better-off counterparts.  Not so, say researchers Danae Hernandez-Cortes and Kyle C. Meng, who examined 300 facilities in the 2008-2017 period.

Findings:  The gap in pollution exposure between disadvantaged and other communities in California narrowed by 21% for nitrogen dioxide; 24% for sulfur dioxide; and 30% for particulates following the introduction of cap and trade. (This between 2012, the start of the state’s program, and 2017).  The researchers labeled this the “environmental justice gap”.

California’s law caps total annual emissions of GhGs, regulating major stationary GhG-emittting sources, such as utilities.  Putting a price on carbon encourages firms to buy emissions permits or carbon offsets.  The researchers say that shifting emission cuts from high-to-low abatement cost polluters, cap-and-trade can be more cost-effective than imposing uniform  regulations on diverse industries.  But – “where” pollution is generated could be altered by market forces and either exacerbate or lessen existing inequities in pollution exposure.

Research Findings:  Building in Wildland-Urban Interface Areas Boosts Wildlife Fire Costs

Speaking of California, over the past few years (and even today as we write this commentary) wildfires have affected large areas of the state.  Who pays the cost of firefighting as more people build homes in high fire-risk areas near federal and state-owned public land?

Researchers Patrick Baylis and Judson Boomhower in NBER Working Paper 26550 show that a large share of the cost of fire fighting is devoted to trying to prevent damage to private homes and borne by the public sector…where there is “interface” between wild areas and urban areas. The guarantee of federal protection generates moral hazard because homeowners do not internalize the expected costs of future protection when they decide where to live or how to design and maintain their homes.

The net present value of fire protection subsidies can exceed 20% of a home’s value.  For 11,000 homeowners in the highest risk areas of the American West, the researchers calculated a subsidy rate of 35% of a home’s value…compared to only 0.8% in the lowest risk area.  And, about 84,000 more homes have been built in high risk areas (than would have been the case) had federal wildlife protection not lowered the cost of homeownership in those areas.

Fire protection provided by the public sector effectively subsidizes large lot sizes and low-density development and may reduce the private incentive to choose fireproof building materials and clear brush around the home.  Fire protection costs level off about 6 acres per home (suggesting cluster development is more preferable).

As we consider the impacts of climate change (drought, high winds, other factors becoming more prevalent), the role of local and state governments in zoning, land use and building code decision-making is key to addressing fire prevention.  Nice to live near to preserved state and federal land…but not sometimes.

Research to Consider:  Environmental Preferences, Competition, and Firm’s R&D Choices

In NBER Working Paper 26921, we learn that consumers’ environmental preferences do affect companies’ decisions to invest in environmentally-friendly innovations.  Buyers care about the environmental footprint of the products they buy.  And so companies do consider these preferences when they make R&D decisions.  (That is, choosing “dirty” or “clean” innovations to invest in.)

Companies use data on patents, consumers’ environmental preferences, and product-competition levels in the automobile manufacturing  industry.  Researchers Philippe Aghion, Roland Benabou, Ralf Martin and Alexandra Roulet looked at 8,500 firms in 42 countries, studying the period 1998-2012 to try to determine how companies in the industry respond to detected changes in consumer preferences.

Findings include:  Firms in auto-related businesses whose customers are environmentally-focused are more inclined to develop sustainable technologies, particularly in markets defined by higher levels of competition.

One effect reported is that for firms with more sustainability-minded consumers, the growth rate of “clean” patents is 14% higher than for “dirty” patents…and is 17% higher in more competitive markets.

Individual consumer preference for “buying green” may not have a direct impact on pollution short-term — but over time such preferences can alters an auto company’s willingness to invest in R&D focused on environmentally-friendly products.

Research Investors Think About:  Could Undeveloped Oil Reserves Become “Stranded” Assets?

If the vehicle shopper wants to “buy green” and is seeking “environmentally-friendly” products, what is the long-term effect on vehicle manufacturing if that segment of the market grows — especially in highly-competitive markets?  Do these preferences mean buyers will move away from fossil fuel-powered vehicles…and over time the in-the-ground assets of energy companies will become “stranded”?

Researchers Christina Atanasova and Eduardo S. Schwartz examined the relationship between an oil firm’s growth in “proved” assets and its value.  The question they posed for their research NBER Working Paper 26497 was: “In an era of growing demands for action to curb climate change, do capital markets reflect the possibility that some reserves may become “stranded assets” in the transition to a low-carbon economy?”

They looked at 679 North American producers for the period 1999-2018; the firms operating (as they described) in an environment of very low political risk and foreign exchange exposure…and with markets that are liquid, with stringent regulation and monitoring (unlike companies in countries with markets that are more easily manipulated, among other factors).

Findings: Capital markets only valued those reserves that were already developed, while growth of undeveloped reserves had a negative effect on an oil firm’s value.  The negative effect was stronger for producers with higher extraction costs and those with undeveloped reserves in countries with strict climate policies.  This reflects, they said, consistency with markets penalizing future investment in undeveloped reserves growth due to climate policy risk.

These are a small sampling of NBER research result highlights.  The full reports can be purchased at NBER individually or by annual subscription.  Contact for information about Working Papers and other research by the organization is:  NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138-5398.

 

 

Publicly-traded Companies Have Many More Eyes Focused on Their ESG Performance – And Tracking, Measuring, Evaluating, ESG-Linked-Advice to Investors Is Becoming Ever-More Complex

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

Some recent developments for consideration by the boards and C-Suite of publicly-traded companies as established ESG ratings agencies up their game and new disclosure / reporting and frameworks come into play.

The “Global Carbon Accounting Standard” will debut in Fall 2020. Is your company ready? Some details for you…

Financial Institutions – Accounting for Corporate Carbon

The Partnership for Carbon Accounting Financials (PCAF) was organized to help financial institutions assess and then disclose the Greenhouse Gas emissions (GhGs) of their loans and investments to help the institutions identify and manage the risks and opportunities related to GhGs in their business activities.

Think: Now, the companies in lending or investment portfolios should expect to have their carbon emissions tracked and measured by those institutions that lend the company money or put debt or equity issues in their investment portfolios.

The financial sector kimono will be further opened. This could over time lead to a company lagging in ESG performance being treated differently by its institutional partners, whether the company in focus discloses their GhG emissions or not.

For companies (borrowers, capital recipients), this is another wake-up call – to get focused on GhG performance and be more transparent about it.

This effort is described as the to be the “first global standard driving financial institutions to measure and track the climate impact of their lending and investment portfolios.”

As of August 3, 2020, there are 70 financial institutions with AUM of US$10 trillion collaborating, with 16 banks and investors developing the standard…to be a common set of carbon accounting methods to assess and track the corporate emissions that are financed by the institutions’ loans and investments.

Significant news: Morgan Stanley, Bank of America (owners of Merrill Lynch) and Citi Group are all now members of the partnership and Morgan Stanley and Bank of America are part of the PCAF Core Team developing the Standard.

The institutional members of the Core Team leading the work of developing the PCAF Standard are: ABN AMRO, Access Bank, Amalgamated Bank, Banco Pichincha, Bank of America, Boston Common Asset Management, Credit Cooperatif, FirstRand Ltd, FMO, KCB, LandsBankinn, Morgan Stanley, Producanco, ROBECO, Tridos Bank, and Vision Banco.

The work of the PCAF will feed into the work of such climate initiatives as the CDP, TCFD, and SBTi (Science-based Target Initiative).

The work in developing the “Standard” includes an open comment period ending September 30, 2020. The final version of the Standard will be published in November.

Morgan Stanley, in its announcement of participation, explained: MS is taking a critical step by committing to measure and disclose its financial emissions…and those in its lending and investment portfolio. As other institutions will be taking similar steps.

(Morgan Stanley became a bank during the 2008 financial crisis and therefore received federal financial aid designed for regulated banking institutions.)

Tjeerd Krumpelman of ABN AMRO (member of the Steering Committee) explains: “The Standard provides the means to close a critical gap in the measurement of emissions financed by the financial industry. The disclosure of absolute financed emissions equips stakeholders with a metric for understanding the climate impact of loans and investment…”

Bloomberg Announces Launch of ESG Scores

Bloomberg LP has launched proprietary ESG scores – 252 companies are initially scored in the Oil & Gas Sector and Board Composition scores have been applied for 4,300 companies in multiple industries.

This approach is designed to help investors “decode” raw data for comparisons across companies; Bloomberg now presents both (raw data and scores) for investors.

This offers “a valuable and normalized benchmark that will easily highlight [corporate] ESG performance, explains Patricia Torres, Global Head of Bloomberg Sustainable Finance Solutions.

There is usually stronger data disclosure for the Oil & Gas Sector companies, says Bloomberg (the sector companies account for more than half of carbon dioxide emissions, generating 15% of global energy-related Greenhouse Gas emissions).

Governance scoring starts with Board Composition scores, to enable investors to assess board make up and rank relative performance across four key areas – diversity, tenure, overboarding and independence.

Bloomberg describes the “E, S” scores as a data-driven measure of corporate E and S (environmental and social) performance across financially-material, business-relevant and industry-specific key issues.

Think of climate change, and health and safety, and Bloomberg and investor clients assessing company activities in these against industry peers.

This is a quant modelling and investors can examine the scoring methodology and company-disclosed (or reported) data that underly each of the scores.

Also, Bloomberg provides “data-driven insights” to help investors integrate ESG in the investment process. This includes third party data, access to news and research content, and analytics and research workflows built around ESG.

Sustainalytics (a Morningstar company) Explains Corporate ESG Scoring Approach

The company explains its ESG Risk Rating in a new document (FAQs for companies). The company’s Risk Ratings (introduced in September 2018) are presented at the security and portfolio levels for equity and fixed-income investments.

These are based on a two-dimension materiality framework measuring a company’s exposure to industry-specific material ESG risks…and how well the company is managing its ESG risks.

Companies can be placed in five risk categories (from Neglible to Severe) that are comparable across sectors. Scores are then assigned (ranging from 9-to-9.99 for negligible risk up to 40 points or higher for severe risk of material financial impacts driven by ESG factors).

The company explains: A “material ESG issue” (the MEI) is the core building block of Sustainalytics’ ESG Risk Rating – the issue that is determined by the Sustainalytics Risk Rating research team to be material can have significant effect on the enterprise value of a company within an sub-industry.

Sustainalytics’ view is that the presence or absence of an MEI in a company’s financial reporting is likely to influence the decisions made by a reasonable investor.

And so Sustainalytics defines “Exposure to ESG Risk” and “Management of ESG Risk” and applies scores and opinions. “Unmanaged Risk” has three scoring components for each MEI – Exposure, Management, Unmanaged Risk.

There is much more explained by Sustainalytics here: https://connect.sustainalytics.com/hubfs/SFS/Sustainalytics%20ESG%20Risk%20Rating%20-%20FAQs%20for%20Corporations.pdf?utm_campaign=SFS%20-%20Public%20ESG%20Risk%20Ratings%20&utm_medium=email&_hsmi=93204652&_hsenc=p2ANqtz–uiIU8kSu6y0FMeuauFTVhiQZVbDZbLz18ldti4X-2I0xC95n8byedKMQDd0pZs7nCFFEvL172Iqvpx7P5X7s5NanOAF02tFYHF4w94fAFNyOmOgc&utm_content=93203943&utm_source=hs_email

G&A Institute Perspectives: Long established ESG raters and information providers (think, MSCI, Sustainalytics, and Bloomberg, Refinitiv, formerly Thomson Reuters) are enhancing their proprietary methods of tracking, evaluating, and disclosing ESG performance, and/or assigning ratings and opinions to an ever-wider universe of publicly-traded companies.

Meaning that companies already on the sustainability journey and fully disclosing on same must keep upping their game to stay at least in the middle of the pack (of industry and investing peers) and strive harder to stay in leadership positions.

Many more eyes are on the corporate ESG performance and outcomes. And for those companies not yet on the sustainability journey, or not fully disclosing and reporting on their ESG strategies, actions, programs, outcomes…the mountain just got taller and more steep.

Factors:  The universe of ESG information providers, ratings agencies, creators of ESG indexes, credit risk evaluators, is getting larger and more complex every day. Do Stay Tuned!