Big News: US SIF Report on US Sustainable and Impact Investing Trends 2020 Released

Big News:   As 2020 Began, $1-in-$3 of Professionally Managed AUM in the United States Had ESG Analysis and/or Portfolio Management Strategies Applied…US$17.1 Trillion Total

November 2020 — Every two years, since 1996, the influential trade organization for sustainable, responsible and impact investment (US SIF) conducts a year-long survey of professional asset managers to determine the total of USA-based assets under management (“AUM”) that have ESG analysis and/or portfolio management applied.

The Trends report just released charts the AUM with ESG analysis and strategies in the United States at $16.6 trillion at the start of 2020 – that’s 25X the total since the first Trends report in1996, with compounded growth rate of 14 percent. (The most rapid growth rate has been since 2012, says US SIF.)

Consider: This means that today, $1-in-$3 of professionally managed assets in the United States follows analysis and/or strategies considering ESG criteria. (The total of US assets under professional management at the start of 2020 was $51.4 trillion.)

This is a dramatic 43% increase over the survey results of the 2018 Trends report – that effort charted a total of $11.6 trillion in ESG-managed AUM in the USA at the start of 2018.

The survey respondents for the current Trends report identified the ESG-focused AUM practices of 530 institutional investors; 384 money managers; 1,204 community investment institutions – all applying environmental, social, and corporate governance criteria in their portfolio management.

What are top ESG issues identified by money management professionals in the survey effort?

  • Climate Change-Carbon: $4.18 trillion – #1 issue
  • Anti-Corruption: $2.44T
  • Board Room Issues: $2.39T
  • Sustainable Natural Resources/Agriculture: $2.38T
  • Executive Compensation: $2.22T
  • Conflict Risk (such as repressive regimes or terrorism, this cited by institutional investors): $1.8T

Note that many strategies and ESG analysis and portfolio management approaches can be overlapping.

Lisa Woll, US SIF Foundation CEO explains: “Money managers and institutional investors are using ESG criteria and shareholder engagement to address a plethora of issues including climate change, sustainable natural resources and agriculture, labor, diversity, and political spending. Retail and high net worth individuals are increasingly using this investment approach, with $4.6 trillion in sustainable investment assets, a 50% increase since 2018.”

The 2020 Trends report counts two main strategies as “sustainable investing” – (1) the incorporation of ESG factors in analysis and management of assets and (2) filing shareholder resolutions focused on ESG issues.

What are the top issues for the professional asset owners, their managers, and other investment professionals participating in the survey? Gauging the leading ESG issues for 2018-to-2020, examining the number of shareholder proposals filed, the Trends report charts the following in order of importance:

  • Corporate Political Activity
  • Labor & Equal Employment Opportunity
  • Climate Change
  • Executive Pay
  • Independent Board Chair
  • Special Meetings
  • Written Consent
  • Human Rights
  • Board Diversity

Looking at the 2020 Trends report, we have to say — we’ve certainly come a long, long way over the years. When first Trends survey was conducted at the end of 1995, the total AUM was just US$639 billion. The shift to sustainable, responsible, impact investment was underway! (The report released on November 16th is the 13th in the series.)

For information about the US SIF Report on US Sustainable and Impact Investing Trends 2020, and to purchase a copy of the report: https://www.ussif.org/trends

Governance & Accountability Institute is a long-time member of the Forum for Sustainable and Responsible Investment (US SIF) and a sponsor of the 2020 Trends report. US SIF is the leading voice advancing sustainable and impact investing across all asset classes.

Members include investment management and advisory firms, mutual fund companies, asset owners, research firms, financial planners and advisors, community investment organizations, and not-for-profits. The work is supported by the US SIF Foundation that undertakes educational and research efforts to advance SIF’s work.

Louis Coppola, G&A EVP and Co-founder, is chair of the SIF Company Calls Committee that arranges meetings of SIF member organizations with publicly-traded companies to discuss their ESG/Sustainability efforts.

US SIF Trends 2020 Report Published November16, 2020:

Corporate Sustainability Reporting: Changes in the Global Landscape – What Might 2021 Bring?

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

Change is a-coming – quite quickly now – for corporate sustainability reporting frameworks and standards organizations.  And the universe of report users.

Before the disastrous October 1929 stock market crash, there was little in the way of disclosure and reporting requirements for companies with public stockholders. The State of New York had The Martin Act, passed in 1921, a “blue sky law” that regulates the sales and trades of public companies to address fraud issues.  That was about it for protecting those buying shares of public companies of the day.

Under the 100 year old Act, the elected New York State Attorney General is the “Sheriff of Wall Street — and this statute is still in effect. (See: AG Eliot Spitzer and his prosecution of the 10 large asset managers for analyst shenanigans.)

President Franklin Delano Roosevelt, elected two-term governor of NY before his election to the highest office in November 1932, brought along a “brains trust” to Washington and these colleagues shaped the historic 1933 Securities Act and 1934 Securities Exchange Act to regulate corporate disclosure and Wall Street activities.

Story goes there was so much to put in these sweeping regulations for stock exchanges, brokerage houses, investor protection measures and corporate reporting requirements that it took two different years of congressional action for passage into law in the days when Congress met only briefly and then hastened home to avoid the Washington DC summer humidity and heat.

The Martin Act was a powerful influence on the development of foundational federal statutes that are regularly updated to keep pace with new developments (Sarbanes-Oxley, 2002, updated many portions of the 1934 Act).

What was to be disclosed and how? Guidance was needed by the corporate boards and executives they hired to run the company in terms of information for the company’s investors. And so, in a relatively short time “Generally Applied Accounting Principles” began to evolve. These became “commonly accepted” rules of the road for corporate accounting and financial reporting.

There were a number of organizations contributing to GAAP including the AICPA. The guiding principles were and are all about materiality, consistency, prudence (or moderation) and objectivity like auditor independence verifying results.

Now – apply all of this (the existing requirements to the Wild West of the 1920s leading up to the 1929 financial crash that harmed many investors — and it reminds one of the situations today with corporate ESG, sustainability, CR, citizenship reporting.  No generally applied principles that all can agree to, a wide range of standards and frameworks and guidance and “demands” to choose from, and for U.S. companies much of what is disclosed is on a voluntary basis anyway.

A growing chorus of institutional investors and company leaders are calling for clear regulatory guidance and understanding of the rules of the road from the appointed Sheriffs for sustainability disclosures – especially in the USA, from the Securities & Exchange Commission…and the Financial Accounting Standards Board (FASB), now the two official keepers of GAAP.

FASB was created in the early 1970s – by action of the Congress — to be the official keeper of GAAP and the developer of accounting and reporting rules.  SOX legislation made it official; there would be two keepers of GAAP — SEC and FASB.  GAAP addressed material financial issues to be disclosed.

But today for sustainability disclosure – what is material?  How to disclose the material items?  What standards to follow?  What do investors want to know?

Today corporates and investors debate the questions:  What should be disclosed in a consistent and comparable way? The answers are important to information users. At the center of discussion: materiality everyone using corporate reports in their analysis clamors for this in corporate sustainability disclosure.

Materiality is at the heart of the SASB Standards now developed for 77 industry categories in 11 sectors. Disclosure of the material is an important part of the purpose that GAAP has served for 8-plus decades.

Yes, there is some really excellence guidance out there, the trend beginning two decades ago with the GRI Framework in 1999-2000. Publicly-traded companies have the GRI Standards available to guide their reporting on ESG/sustainability issues to investors and stakeholders.

There is the SAM Corporate Sustainability Assessment (CSA), now managed entirely by S&P Global, and available to invited companies since 1999-2000. (SAM was RobecoSAM and with Dow Jones Indexes managed the DJ Sustainability Indexes – now S&P Global does that with SAM as a unit of the firm based in Switzerland.)

Since 2000, companies have had the UN Global Compact principles to include in their reporting. Since 2015 corporate managers have had the UN Sustainable Development Goals (SDGs) to report on (and before that, the predecessor UN Millennium Development Goals, 2000-2015). And the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations were put in place in 2017.

The Securities & Exchange Commission (SEC) in February 2010 issied “guidance” to publicly-traded companies reminded corporate boards of their responsibility to oversee risk and identified climate change matters as an important risk in that context.

But all of these standards and frameworks and suggested things to voluntarily report on — this is today’s thicket to navigate, picking frameworks to be used for telling the story of the company’s sustainability journey.

Using the various frameworks to explain strategy, programs, actions taken, achievements, engagements, and more – the material items. Profiling the corporate carbon footprint in the process. But there is no GAAP to guide the company for this ESG reporting, as in the example of financial accounting and reporting.

Institutional investors have been requesting more guidance from the SEC on sustainability et al reporting.  But the commission has been reluctant to move much beyond the 2010 risk reminder guidance even as literally hundreds of publicly-traded companies expand their voluntary disclosure.  And so we rely on this voluntary disclosure on climate change, diversity & inclusion efforts, political spending, supply chain management, community support, and a host of other ESG issues. (Human Capital Management was addressed in the recent Reg S-K updating.)

We think 2021 will be an interesting year in this ongoing discussion – “what” and “how” should companies be disclosing on sustainability topics & issues.

The various providers of existing reporting frameworks and standards and those influencing the disclosures in other ways are moving ahead, with workarounds where in the USA government mandates for sustainability reporting do not yet exist.

We’ve selected a few items for you to keep up with the rapidly-changing world of corporate ESG disclosures in our Top Stories and other topic silos.

There are really important discussions!  We watch these developments intently as helping corporate clients manage their ESG / sustainability disclosures is at the heart of our team’s work and we will continue to keep sharing information with you in the Highlights newsletter.

More about this in The Wall Street Journal with comments from G&A’s Lou Coppola: Companies Could Face Pressure to Disclose More ESG Data (Source: The Wall Street Journal)
TOP STORIES

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:

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”:

 

Rising Heat & Humidity, Rising Sea Levels, Up & Down Shifts in Crop Yields, More Large Fires, Huge Human Migration Within the United States -– What We Are Learning Today

September 24 2020

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

There is so much going on in the global sustainability space that we could draw an apt analogy – it’s “like drinking water not out of a straw but a fire hose!”

Every week our team seeks out the news, feature and research items that will help you stay informed on developments in corporate sustainability and CSR, sustainable investing, the actions of governments and civil society leadership, activists, academics & researchers…and more.

For the past two or three years the pace of these developments has accelerated and so created a long list of many “possibilities” to share with you.  Sometimes, certain news jumps up and shouts at us from the print or digital page.

Example:  This week we see a powerful accounting of the impacts of climate change as assembled by ProPublica, an independent, nonprofit journalism organization focused on the major issues of the day.   The collaborating journalists – at ProPublica and The New York Times with support from the non-profit Pulitzer Center — focused on “the compounding calamities of climate risk” and the projected impact on the continental U.S.A. over the coming decades.

The issues “stack on top of one another”, they write.  Such as rising heat, excessive humidity, oceans rising, very large fires, crop failures, economic damages, and more…scary projections for the 2040-2060 timeframe.   (That is starting only 20 years, or 240 months, just 1,000+ weeks away!)

ProPublica worked with data from the Rhodium Group, which when presented in the context of the report, tell a story of warming temperatures, and changing rainfall that will drive agriculture and temperate climates from south to north, as the sea levels rise and vast amounts of coastlines “are consumed” and dangerous levels of humidity “swamp the Mississippi River Valley”.

All of this will profoundly interrupt the way that we in this, the world’s largest economy, will live and farm and work later in this century.  This could be an era to be marked by mass migration within the U.S.A., far outpacing the dramatic “Great Black Migration” with large populations moving from southern states to the north, profoundly reshaping this Land.

The data is presented in maps and county-by-county review; you can in the visuals presented see how the temperate zone marches north and more…for corn and soy production, harvests will decrease and increase, depending on location in the country.

Economic impact? (Serious projections to consider today while we experience dislocation now due to the Coronavirus pandemic include rising energy costs, lower labor productivity, poor crop yields, increase in crime and more.

Which counties will rise and which, fall?  The maps tell the story.

This reportage was so important and timely that the NY Times published a comprehensive wrap up this weekend in the Sunday magazine (reaching well beyond two million print and digital subscribers).   We present this important reportage for you in the Top Stories.

Timeliness:  This is also Climate Week, with important digital and some physical meetings around the world to focus on climate change challenges. We’re sharing some of the coverage of that as well.

 

Top Stories

Americans Tuning in to Sustainability During Crises, Expecting “More” from Government and Corporate Sector

August 27 2020

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

According to responses to a June on-line survey of 2,000 adults in the U.S.A. for “clean manufacturing” leader Genomatica, sustainability is now a top-of-mind issue, with an overwhelming majority (85% of respondents) of Americans indicating they’ve been thinking about sustainability the same amount or more…and 56% want brands and government to prioritize sustainability even in the midst of the crises (Coronavirus, economic downturn – plus civil unrest).

According to Genomatica CEO Christophe Schilling: “The collective consciousness on sustainability is rising, and certainly faster than most would have expected during these unprecedented times.

While this shift has been underway for decades, and is particularly strong in Europe, many of us in the U.S. have been inspired by the rapid improvement in air quality and traffic that shine a bright light on how our behaviors and decisions impact our environment and quality of life.”

Other interesting survey findings:

  • 59% of Americans say working from home is more sustainable than working in an office.
  • 37% of Americans are willing to pay a little more for sustainable products, even during an economic downturn. Gen-Z is the most willing age group, at 43%.
  • Half of Americans won’t be comfortable using sharing economy services like Uber or Airbnb (53%), riding public transportation (54%) or carpooling (50%) until there is a vaccine, if ever.

There’s more findings in the Top Story link below:

Part of the “sustainability thinking” is about personal investments…and how to do well financially while doing good with one’s financial activities.

A new report published by the foundation of The Forum for Sustainable and Responsible Investment (US SIF) explores the growth of passive ESG investing and the outpace of investor flows into passive vs. active ESG funds.

The report shows that “net flows into passively-managed ESG funds have in recent years outpaced net flows into their actively managed counterparts” — despite the fact that “the vast majority of sustainably-invested assets are in actively-managed ESG funds.”

Meg Voorhes, Director of Research at the US SIF Foundation explains:  “The advent of passive ESG funds provides more options to investors seeking sustainable impact, and we encourage these fund managers to make commitments to comprehensive ESG approaches.”

Follow Up to Last Week
In last week’s Highlights we told you about Morgan Stanley’s pioneering move to join the Partnership for Carbon Accounting Financials (“PCAF”).  The update:  Citi and Bank of America are on board, too.  Great news moving toward the low-carbon economy. 

Citi, Bank of America join Morgan Stanley in carbon-disclosure group

Individual news releases from the banks with the details:

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

August 2020 –   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!