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”:

 

Lively Discussions: The Move Toward Harmonized Corporate ESG / Sustainability Reporting

September 22 2020

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

There are lively discussions going on, centered on improving publicly-traded company disclosure and reporting – and especially ESG reporting…that is, storytelling about the company’s “non-financials” (in accounting-speak).  And the story of the corporate sustainability story for those-in-the-know!

The proliferation of ESG / sustainability reporting frameworks, standards, information platforms, industry guidance, stock exchange guidance and much more has been astounding in recent years.

We think of all this as about the organizing of the storytelling about a company’s sustainability journey and what the enterprise has accomplished. 

And why the story matters to society…to investors, employees, customers, suppliers, communities…and other stakeholders.

And it has a been a long journey to the state of today’s expanding corporate ESG disclosure.

The start of mandating of periodic financial and business mandated disclosure goes back to the 1930s with passage of landmark federal legislation & adopted implementation (compliance) rules for publicly-traded companies in the United States.

Corporate financial disclosure in concept is all about providing shareholders (and potential investors) with the information they need to make buy-sell-hold decisions.

The sturdy foundations of mandated corporate disclosure in the U.S. are the laws passed after the 1929 stock market crash – the 1933 Securities Act and 1934 Exchange Act.  These laws and the bodies of rules deriving from them have been constantly updated over the years, including with Sarbanes Oxley legislation in 2002 and Dodd Frank in 2010. These mandate or guide and otherwise provide the rules-of-the-road for financial disclosure for company managements.

Disclosure has steadily moved well beyond the numbers – Sarbanes-Oxley updated the 1930’s laws and addressed many aspects of corporate governance, for example.

Voluntary Disclosure & Reporting – ESG Issues & Topics
Over the past 40 years, beyond the financials, corporate voluntary non-financial disclosure has been steadily increasing, as investors first embraced “socially responsible investing” and moved on to sustainable & responsible & impact investing in the 21st Century.

Asset owner and asset manager (internal and external) requests for ESG information from publicly-traded companies in portfolio has steadily expanded in the depth and breadth of topic and issue areas that institutional investors are focused on – and that companies now address in significantly-expanded ESG disclosures.

Today, investor interest in ESG / sustainability and related topics areas is widespread throughout asset classes – for equities, equity-focused products such as imutual funds and ETFs, fixed-income instruments, and now credit risk, options and futures, fixed assets (such as real estate), and more.

With today’s dramatic increase in corporate sustainability & ESG reporting, the maturation of reporting frameworks and standards to help address the internal need for better organizing non-financial data and information and accompanying ESG financial disclosure.

And all of this in the context of trying to meet investor demands.  Today with expanded ESG disclosure, corporate executives find that while there are more resources available to the company, there is also more confusion in the disclosure process.   Investors agree.

Common Complaints:  Lack of Comparability, Confusion, Demand for Change
The result of increasing demand by a widening range of investors for accurate, detailed corporate ESG information and the related proliferation of reporting frameworks and standards can and has resulted in confusion among investors, stakeholders and companies as to what is important and material and what is frill.

This especially as corporate managements embrace various elements of the available frameworks and standards and industry guidance and ESG ratings for their still-voluntary ESG reporting.

So where do we go from here?  In our selection of Top Stories for you, we bring you news from important players in the ESG reporting process as they attempt to move in the direction of more uniform, comprehensive, meaningful and decision-ready corporate ESG reporting. That investors can rely on.

The news for you is coming from GRI, SASB, GSSB, IIRC, CDSB, and CDP (among others) – all working to get on the same page.

The aim: to benefit corporate reporters – and the users of the reports, especially capital market players.

Because in the end, ESG excellence is all about winning in the competition for access to capital. Accurate, timely, comprehensive comparable ESG information is key!

Top Stories

Busy Summer 2020 for the World of ESG Players – Rating Agencies, Information Providers, UNGC & the SDGs…and More

August 27 2020

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

It’s been a very busy summer for organizations managing corporate reporting frameworks and standards, for ESG rating agencies, and for multilateral agencies focused on corporate sustainability and responsibility.

If you are a corporate manager — or a sustainable investment professional — do tune in to some of the changes that will affect your work in some ways. Here’s a quick summary:

ISS/Institutional Shareholder Services
For four decades, ISS has been the go-to source on governance issues for proxy voting and corporate engagement guidance for major fiduciaries (pension funds are an example).

Two years ago, “E” and “S” ratings were added for investor-clients.

Now, ISS ESG (ISS’s responsible investing unit) is providing “best-in-class fund ratings” that assess the ESG performance of 20,000 firms. Funds will be rated 1-to-5 (bottom is 1) – this to be a broad utility resource for investment professionals. And for corporate managers – ISS ESG scores along with those of other ESG ratings agencies are a factor in whether your company is included in indexes, benchmarks, maybe ETFs and mutual funds that are being rated.

Bloomberg LP
It’s launching E, S & G scores for thousands of firms (highlighting environmental and societal risks that are material to a sector).

First sector up is Oil & Gas, with 252 firms rated. Also, there are new Board Composition scores, with Bloomberg assessing how well a board is positioned to respond to certain G issues. (Note that 4,300 companies are being rated – probably including yours if you are a publicly-traded entity.)

And in other news:

UN Global Compact and the SDGs
The UNGC observes its 20th anniversary and in its latest survey of companies, the organization asked about the SDGs and corporate perspectives of the 17 goals and 169 targets. The findings are in the blog post for you.

MSCI
This major ESG ratings agency expanded its model for evaluating company-level alignment to the Sustainable Development Goals. New tools will help capital markets players to enhance or develop ESG-themed investment services and products.

Global Reporting Initiative
The GRI continues to align its Universal Standards with other reporting frameworks or standards so that a GRI report becomes a more meaningful and holistic presentation of a company’s ESG profile.

GRI Standards were updated and planned revisions include moving Human Rights reporting closer to the UN Guiding Principles on Business and Human Rights and other inter-governmental instruments.

Climate Disclosure Standards Board
The CDSB Framework for climate-related disclosure is now available for corporate reporters to build “material, climate-related information” in mainstream documents (like the 10-k). This is similar to what the TCFD is recommending for corporate disclosure.

This is a small part of what has been going on this summer. We have the two top stories about ISS and Bloomberg and a whole lot more for you in the G&A Sustainability Update blog.

For your end-of-summer/get-ready-for-a-busy-fall schedule!

Top Stories

The G&A Blog with many more organizations and their actions here.

Corporate Sustainability Reporting – Frameworks, Standards, Guidance – Summer 2020 Update

Have You Heard? Despite the Global Crises, Corporate ESG/Sustainability Reporting Momentum Continues to Build – Here, Some Updates For You on Focused on Corporate ESG Reporting Frameworks and Standards

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

This has been a challenging year. In January when I do my usual “crystal-balling” for the new year, the coronavirus was fast-spreading in Wuhan, China, and the world outside had not yet awakened to the serious threat the early infections posed to we humans.

The U.S. equities market looked very promising – but the markets would tank in March and then slowly recover. (As we write this the Nasdaq numbers and S&P 500 Index® levels have investors cheering – look at Nasdaq and the S&P 500!)

Despite the upheavals in 2020, Reporting Standards and Frameworks are continuing to evolve and especially to become more investor-focused

Investors, public companies’ executives, and sustainability reporting Standards and Frameworks organizations are not slowing the pace on advancing ESG / Sustainability / Corporate Purpose / Sustainable Investing et al, and advancing the cause by various means in this Summer 2020.

In the event that you have been busy this spring and summer (haven’t we all!) and perhaps missing something here and there, here are news items & developments for you to illustrate the forward momentum and increasing importance of ESG “etc” matters.

This update is focused on ESG reporting frameworks, standards and ESG disclosure guidance – this is the daily work of the team at G&A Institute.

UN Global Compact Celebrates 20 Years – And Builds on the Progress

It is 20 years now since the founding of the United Nations Global Compact (UNGC) and the organization released its look back/look ahead report, “Uniting Business in the Decade of Action”. Each year the Compact surveys its participants to gauge the progress being made (or not).

This year the survey included a review of progress in complying with the Ten Principles of the Global Compact – and – corporate contributions to the achievement of the Sustainable Development Goals (SDGs).

2020 Survey Findings:

  • 30% of companies responding believe they have targets sufficiently ambitious to meet the 2030 goals of the SDGs.
  • Fewer than a third of respondents consider their industry moving fast enough to deliver on prioritized goals.
  • Good news: 84% of UNGC corporate participants are taking some kind of action on SDGs.
  • Not-so-good: only 46% are embedding the goals into their core business.
  • Only 37% are designing business models to “contribute” to the 17 goals.
  • 61% say that their company provides some kind of product/service that contribute(s) to the progress of the SDGs (that level was 48% in 2019).
  • 57% measure their own operations’ impact on the SDGs.
  • 13% extend this to their supply base; and only 10% extend this to raw materials and product use.
  • 29% of companies advocate publicly to encourage action on the SDGs (this is a slide down from over half of companies in 2019).

Many companies focus on Goal 8: Decent Work and Economic Growth; and Goal 9: Industry, Innovation, and Infrastructure; less traction was noted for “socially-focused” goals (reducing inequality, gender equality, peace & justice).

The General Secretary of the United Nations has called on corporations to align their operations and strategies with the Ten Universal Principles of the Global Compact.

We are half-a-decade in now since goals adoption – with only one decade to go (years 2020 to 2030) to achieve the objectives.

More than 10,000 companies and 3,000 non-business entities (“signatories”) are participating in achieving the goals in some way, operating in 160 countries — and so, the UNGC has become the world’s largest corporate sustainability initiative.

Has your company signed on to the UNGC? Selected SDGs to build into your core business strategy and models? There is guidance for you in the UNGC report. https://unglobalcompact.org/take-action/20th-anniversary-campaign

About the SDGs – MSCI’s New “SDG Net Alignment Factors”

MCSI, one of the major ESG rating firms providing significant research and analysis results to its global investor clients, expanded the model for evaluating company-level alignment to the UN SDGs.

The new tools will help capital market players to enhance or develop ESG-themed investment services and products. 

Subscribers to the firm’s Sustainable Impact Metrics now have access to the SDG Net Alignment Factors, which measures revenue exposure to “sustainable impact solutions and support actionable thematic allocations in line with impact frameworks like the UN SDGs.”

This approach will help investors to better understand what a company is doing with respect to the SDGs, what progress the company is making (or not), and related metrics that are being disclosed.

Institutional investor clients can use the information provided in developing sustainable investing products and services.

Corporate managers should be aware that the SDGs are getting more attention now as the last decade is upon us for achieving progress on the 17 goals/169 underlying targets.

MSCI’s Approach

The MSCI approach was developed in collaboration with the OECD and takes a “net impact” perspective to evaluate alignments of companies based on product and operations for each of the 17 Sustainable Development Goals (and there are 169 underlying targets for these).

The approach to “help institutional investors:

  • Measure and report on the degree of SDG alignment.
  • Develop SDG-themed investment products.
  • Meet rising demand to channel capital toward addressing the objectives of the Goals.
  • Identify companies better aligned with the SDGs based on a well-rounded framework that looks beyond [corporate] disclosure and considers positive and negative alignment.

Corporate board members and C-suite leaders note: In evaluating your company, MSCI’s approach will include qualitative categories indicating the degree of alignment and scores that assess:

  • Each public company’s overall Net Alignment for each of the 17 SDGs.
  • Product alignment – focusing on products and services with positive and negative impacts.
  • Operational alignment – internal policies of the company, operating practices to address SDGs targets, involvement in controversial activities.

The new SDG Net Alignment Framework is built on the MSCI Sustainable Impact Metrics; these include:

  • New Sustainable Agriculture and Connectivity categories to provide additional areas where products and services align with the SDGs.
  • Expanded Fixed-Income coverage to align the MSCI ESG Ratings corporate coverage universe, bringing impact coverage to 10,000+ equity and fixed-income issuers.
  • Introduction of more granular “E” impact revenue sub-categories to enable a flexible application of MSCI Sustainable Impact Metrics to a broad range of impact and sustainability frameworks.

The new service for MSCI clients began in August.

Note the OECD is the Organization for Economic Co-Operation and Development, and part of its mission is to establish evidence-based international standards and finding solutions to social, economic, and environmental challenges.

GRI – The Choice of Many Corporate Reporters for Guidance

The Global Reporting Initiative has its roots in the United States, with foundational elements put in place by (in that day) socially responsible investors, a few companies, and some NGOs.

In 1989 in Prince William Sound, Alaska, the tanker Exxon Valdez spilled crude oil in the waters over several days. In response, in Boston, Trillium Asset Management under the direction of Joan Bavaria worked to create a new organization — the “Coalition for Environmentally Responsible EconomieS” (now, known simply as Ceres) and created the Valdez Principles for companies to sign (to pledge to be more environmentally-responsible).

These became the Ceres Principles and over time contributed to the creation of the GRI and its first framework (“G1”).

The framework was continually evolving, becoming G3 and G4 and what would be G5 (Generation 5) are now the GRI Standards, a powerful guide for public companies to use to examine and decide on “what” to disclose against the Standards.

Companies can choose to report against “Core” or “Comprehensive” levels.

GRI has also aligned the Standards with other reporting frameworks or standards so that publishing a “GRI Report” becomes a more meaningful and holistic presentation of a company’s ESG profile.

Note: G&A Institute is the designated Data Partner for the GRI in the United States of America, the United Kingdom and the Republic of Ireland. In this role, we gather and analyze every report published in these countries and provide the analysis to GRI for inclusion in its comprehensive, global report database.

This is the largest collection of corporate sustainability reports going back to the first issued using “G1” in 1999-2000.

What’s happening now:

In June GRI announced an update to the “Universal Standards”. These are planned revisions such as address concerns in Human Rights reporting to move GRI Standards “closer” to inter-governmental instruments such as the UN Guiding Principles on Business and Human Rights.

“Materiality” will be “re-focused” so that companies will report the importance of issues to stakeholders – rather than the customary approach of disclosing the results of a materiality assessment with focus on the company’s view of issues (regarding the economy, environmental matters, and people or human assets).

This will mean much more engagement with stakeholders to determine their perspectives to guide disclosures using the Universal Standards.

In the past, part of the guidance from the GRI was focused on “sectors”. Now, the organization is reviving Sector Guidance, which will support the Universal Standards. The sector guidance will link where possible with other frameworks and initiatives.

These steps are in the “disclosure draft” stage, with GRI gathering input to move to final adoption in 2021. GRI is inviting organizations – including companies – to be part of a “Global Standards Fund” to “safeguard and increase GRI’s to deliver the leading sustainability standards that encourage organizations to embrace responsible business practices.” It hopes to raise 8 million euros by 2022.

Climate Disclosure Standards Board – Guidance Issued

The CDSB Framework for climate-related disclosure is available for corporate reporters to build “material, climate-related information” in their “mainstream” reports. (That is, “the annual reporting packages required to audited financial results under the corporate compliance or securities laws of the country in which they operate.”)

Think of the 10-k in the United States or annual report in the United Kingdom, and similarly required filings.

The guidance is similar to that of the TCFD  recommendations – the Task Force on Climate-related Financial Disclosure (organized by the Financial Stability Board, an arm of the G-20 nations, with the Task Force headed by Michael Bloomberg).

Important note: CDP advises that connecting CDP data with the CDSB Framework will help companies to successfully fulfill the TCFD recommendations.

The CDSB has been working on the Standards since 2007, and over time reflected on such developments as the 2015 Paris Agreement (or Accord) on climate risk.

In discussions with company managers and in our monitoring of corporate disclosure as the GRI data partner in the U.S.A., we see a wide range of opinions on just what “integrated reporting” should look like.

For some companies (not to be cute here) it boils down to have a 10-k and ESG report at the same time, often combined. Side-by-side, stapled in effect for a printed report.

Other firms may put financial/economic information up top and then build out a sustainability report with volumes of ESG data. We don’t see a lot of tieing the implications of that data to financial results, with top and bottom line impacts clearly spelled out.

Bloomberg – Launching E, S & G Scores – Oil & Gas Sector First Up, Along With Board Composition Scores for Thousands of Firms

This month Bloomberg announced it was launching new, proprietary ESG scores for 252 companies in the Oil & Gas Sector – and Board Composition scores for more than 4,300 companies. The scores are available in the professional services terminals service.

For the “E” and “S” scores of the companies in the Oil & Gas Sector, Bloomberg is highlighting environmental and societal risks that are material to the sector.

For the Board Composition scoring, Bloomberg says it is assisting investors with information to assess how well a board is positioned to provide diverse perspectives, supervision of management, and assess potential risks in the current board structure.

ISS/Institutional Shareholder Services – New Data Points For Investors

The long-time governance ratings and proxy guidance organizations were originally focused on “G” – governance practices – and expanded its work into “E” and “S” scoring and evaluations two years ago. (The “G” work goes back four decades.)

Now, “ISS ESG” (the responsible investment arm) is providing “best in class” fund ratings that assess the ESG performance of 20,000-plus firms around the world.

The new ratings will draw on ISS’s ESG ratings, governance data, norm-based research, energy and extractives’ screens, SDG impact ratings, carbon emissions analysis, shareholder voting outcomes, and more…resulting in a composite, holistic picture of a fund’s ESG performance.

Funds will be rated on a relative scale of “1” (bottom” to “5”, based on the fund’s standing within the Lipper Global Benchmark class.

The service is intended to have broad utility for investment professionals, such as fund managers and investment advisors.

This is still one more layer to add to the complexity of the capital markets competition for public companies.

G&A Institute Perspectives:
Inside the publicly-traded company, there may be a lively discussion going on among participants as the sustainability disclosures are prepared – for example, legal teams may frown certain ESG data revelations at times.

“Who is asking for this” may be a determinant in “what” gets disclosed. Lots of negotiations go on, we can tell you. 

But every year, more and more ESG data sets and narratives are published and corporate leaders in sustainability reporting set the pace for industry and sector.

The various reporting frameworks, guidance, standards that are available to corporate managers are a positive – here, including the framework (guidance) presented by the Standards of the Carbon Disclosure Standards Board. Information: https://www.cdsb.net/

G&A Institute closely monitors the corporate sustainability reporting arena and will share with you more updates as we see the need.  

Lots going on in Summer 2020 — be in touch with us if you have questions about any of this!  We’d like to be your sherpas and guides and navigators on the corporate sustainability journey!

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!


The S&P 500® Universe — Setting the Pace for Corporate Sustainability Reporting: 90% Mark Reached!

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

The popular corporate equity “baskets” including the Dow Jones Industrial Index, Nasdaq 100, S&P 500, the Russell 1,000 – 2,000 – and 3,000– in essence consist of the underlying value of the corporate shares in each basket (or benchmark for investors).

Today, there is an ocean of stock indexes for asset managers to license from the creators and then apply process and approaches for keeping track of the companies in the fiduciary portfolio, or to analyze and pick from the underlying issues for their portfolio.

Alternative benchmarks and indexes may be dependent on market cap size and have variations in the index family to fine tune the analysis (think of the varieties of Wilshire, Russell, S&P Dow Jones, etc.).

There has been a steady move by many asset managers from “active management” to passive investment instruments, with this transition key benchmarks become an important tool for the analyst and portfolio manager.

One large-cap index really dominates the capital markets:  The S&P 500.

G&A Institute’s Annual S&P 500® Research
Almost a decade ago, the team at G&A Institute began gathering corporate reports to build our models and methodology for guiding client’s corporate disclosure and reporting — and focusing especially on the structured reports of U.S. publicly-traded companies, we selected the universe of companies that the index creators include in the S&P 500 Index®.

Here’s why:  The S&P 500 Index is the most-widely-quoted index measuring the stock performance of the 500 largest investable companies listed on American stock exchanges.  Asset managers licensees like State Street, MCSI, Invesco Capital and London Stock Exchange Group use this index for their constructing ETFs and other investable products.

This universe of public companies provided for our team a solid foundation for tracking and analyzing the activities of these 500 companies as they began or expanded their sustainability reporting. In 2011, that first year. we found just about 20% of the 500 were publishing sustainability reports.

And here’s the dramatic news:
G&A’s just-completed report shows 90% of the S&P 500 companies produced a sustainability report in year 2019!

Tracking the Trends
Over the decade of close tracking and analysis of the 500 companies in the index, the good news is we saw the number of reports steadily grow.

We charted the broad impact of these market-leading enterprises on such reporting frameworks and standards as the GRI and SASB as those standards evolved and matured and were adopted by the companies in the 500.  We saw…

CDP disclosure steadily expanded in structured reports and (stand alone) corporate responses to CDP on carbon emissions, water, supply chain, forestry products.

The adoption of UN Sustainable Development Goals (SDGs) by companies as they were in some way conceptually a part of a company’s sustainability strategy (and subsequent reporting).

And more recently, there was the adoption of TCFD recommendations by corporate issuers in the U.S. – that began to show up in reports recently.

Starting with 2010 reporting, the first G&A analysis, we’ve shared the highlights of the research efforts.

Teams of talented, passionate and bright analyst-interns developed each year’s report (you can see who they are/were in G&A’s Honor Roll on our web site).  Most of the team members have moved on to career positions in the corporate, investment, public sector and NGO communities.

Download this year’s report, examining 2019 corporate sustainability reporting by the S&P 500 companies.

We’ve organized the deliverable for both quick scanning and concentrated reviewing.  Let us know if you have questions about the research results.

Stay tuned to G&A’s upcoming Russell 1000 Index® analysis of 2019 reporting.

This second important index/benchmark was created several decades ago by the Frank Russell Company and is now maintained by FTSE Russell (subsidiary of the London Stock Exchange Group)

The largest companies by market cap companies are available as benchmarks for investors in the S&P 500 (largest cap) and for the next 500 in the Russell 1000.

The ripple effects of the S&P 500 companies and more recently some of the Russell 1000 companies on corporate sustainability disclosure and reporting is fascinating for us to track.

Many mid-cap and small-cap companies are now adopting similar reporting policies and practices.  Privately-owned companies are publishing similar reports.  All of this means volumes of ESG data and narrative flowing out to investors – and fueling the growth of sustainable investing.  We find this all very encouraging in our tracking of corporate reporting.

Here are the details for you:

Top Stories

90% of S&P 500 Index Companies
Publish Sustainability Reports in 2019,
G&A Announces in its Latest Annual
2020 Flash Report

Source: Governance & Accountability Institute, Inc. – G&A Institute announces the results of its annual S&P 500 sustainability reporting analysis. 90% of the S&P 500 published corporate sustainability reports, an all-time high!


Adding Important Perspectives to G&A’s S&P 500 Research Results

What is Greenwashing? The Importance of Maintaining Perspective in ESG Communications
Source: AlphaSense, Pamela Styles principal of Next Level Investor Relations LLC – “Greenwashing” can generally be described as ‘the practice of only paying lip service to environmental, social and governance (ESG) factors with token gestures.’ In practice, greenwashing occurs when an organization presents…

New report measures boardroom diversity at top S&P 500 companies
Source: CNBC – There’s a renewed focus on diversity in the boardroom, but a new report shows not much is changing. CNBC’s Seema Mody reports.

GRI & SASB 2020 Collaborate To Better Understand The Use Of The Two Standards Together In Corporate ESG Reporting

Two heavyweights in the corporate reporting frameworks/standards arena have announced intentions to move closer to help promote “clarity and comparability in the sustainability landscape” – GRI and SASB.

The two organizations just announced a collaborative work plan to demonstrate how some companies have used both sets of corporate ESG reporting standards…together — and lessons to share for reporters.

The common understanding expressed is that “GRI and SASB share a guiding principle” – that greater transparency (in corporate reporting) is the best currency for creating trust among organizations and their stakeholders (Tim Mohin – CEO of GRI).

Notes SASB CEO Janine Guillot:  “In a post-COVID world, companies will increasingly be expected to disclose their performance on a range of ESG Topics.”  The COVID-19 crisis demonstrates that non-financial information disclosure can highlight material financial implications, she advises.

In the short-term of the collaboration, the two organizations will develop examples based on reports that demonstrate how corporate reporters can use GRI Standards and SASB Standards together.  Further progress in the collaboration will be decided later this year/into 2021.

The Global Reporting Initiative is the most widely-used corporate reporting framework around the world for companies reporting on their ESG sustainability, responsibility, citizenship (companies select their titles) and related activities.

The GRI Standards for reporting features a set of “universal” and “topic-specific” standards (continuing to evolve) each with one or more disclosures to guide corporate managers in preparing their disclosures — focused on the environmental, economic and social impacts of a company.  The reporting is fashioned for delivery of important ESG information to a range of stakeholders – including investors.

The GRI Standards are the fifth generation of the framework; the first corporate reports were published following “G1” back in 1999-2000. Since then more than 40,000 reports have been published following the constantly-evolving GRI framework (which became standards in 2017).

The Sustainable Accounting Standards Board (SASB) standards are more recently developed, with investor needs in mind. After an intensive collaborative effort by investors and corporate issuers and other parties, standards were announced for 77 industries in 11 sectors. Using the SASB Sustainable Industry Classification System – SICS®.

SASB standards recommend material ESG disclosure topics and related accounting metrics for the primary SICS industry assigned to a company (often companies operate across more than one industry and should consider guidance from SASB on these as well).  For example, a Primary SICS Sector may be “Extractives & Minerals Processing” and the industry, “Oil & Gas – Exploration and Production”.

SASB recommendations for corporate reporting are reflecting a critical input from institutional investors on what providers of capital are considering to be material for the industry categories.  The intention is to identify a subset of sustainability-related risks and opportunities likely to affect a publicly-traded company’s financials and risk profile.

At G&A institute, our team uses both sets of standards as a “hybridized” approach in working with our corporate clients in preparing their ESG disclosure and structured reporting.

“Best practice” in preparing the corporate sustainability report with ample ESG data disclosures for both investors and a range of stakeholders requires a fulsome content indexes to guide the user (especially the investor and ESG rating agencies’ analysts) to the exact information they are seeking (for example GhG emissions, water used or energy consumption) in an efficient and effective manner.

The GRI Standards content index is one of the most important aspects in assisting these analysts and other users in navigating the content and disclosures.  We help companies cross-reference the SASB standards – as well as (more recently) the TCFD recommendations for disclosures; CDP data; GRESB data where applicable…and more working to create a Rosetta Stone for different users of the report to interpret the disclosures through their lens.

In our work as Data Partner for the U.S.A., U.K. and Republic of Ireland for GRI, we are capturing significant information now on the use of GRI and SASB and other reporting frameworks in one report – a most welcome advance in corporate ESG disclosure.

The trend of using both sets of standards is clearly on the rise for U.S. public companies.

Watch for our announcement (very soon!) with results of the annual S&P 500 Index® analysis.  There is information in the report about the use of GRI and SASB among the S&P 500 – and the use of other reporting frameworks as well.

The S&P 500 universe of corporate issuers continue to set the pace for all publicly-traded – and privately-owned companies – in the disclosure of ESG data and information now expected by key stakeholders.

While our hybridized approach to corporate ESG reporting adds value to the reporting company’s effort to achieve greater disclosure, we advise clients (as do SASB and GRI in their announcement of collaboration) that the two standards organizations prize the independence of their standards-setting processes.  As do the other reporting / standards-setting frameworks (like TCFD, CDP, et al).  There is not yet a “one-size fits all” for corporate ESG reporting, but announcements like the one in our featured story move the needle.

Bottom line:  as stated by SASB and GRI, both provide compatible standards for sustainability reporting that can be used in the same report.  While they are designed to fulfill different purposes, based on different approaches to materiality, there are many ways to use them to create a hybrid report that creates value.

Top Stories

Promoting Clarity and Compatibility In The Sustainability Landscape
Source:  Global Reporting Initiative (July 13, 2020)
Amid rising global demand for clarity in the sustainability reporting ecosystem, the Sustainability Accounting Standards Board (SASB) and the Global Reporting Initiative (GRI) are pleased to announce a collaborative workplan.