SASB Positions — Critical Points Made In Commentary Published by Dr. Jean Rogers in the “IBD”

The “IBD” — Investors Business Daily — is an influential publisher followed by millions of investors, both in the print and on-line versions.  The former “daily” is now published weekly and the digital content with numerous tools and resources for the serious investor is a primary focus of the publisher, always available 24/7 for subscribers.  Founded in 1984 by former stockbroker William O’Neil, the publisher today offers investors a number of popular tools for market timing, fundamental and technical market analysis, and other approaches.  (Such as “CAN SLIM,” the founder’s approach to investing.)

What is important for us today is the publication in the IBD of powerful commentary by Jean Rogers, PhD, Founder / CEO  of the Sustainable Accounting Standards Board (SASB).  (Our selection for your Top Story.)  Dr. Rogers responds to earlier published commentary in IBD that warned investors “against the dangers of infusing corporate accounting with environmental advocacy.”

In response, Jean Rogers writes — Could not agree more!  That is, she explains, SASB’s mission is to provide investors (many of whom are IDB readers) with material, decision-useful information capturing the financial impacts of corporate sustainability performance, and doing so in a way that is cost-effective for companies.  That may come as a surprise to the writers of the prior commentary, she says. (They seemed to position SASB’s work as adding to the “burden of regulation” facing public companies.)

It is large and influential investors who are the driving force behind the evolvement of the SASB standards — they are the parties who are increasingly demanding financially-relevant ESG data, explains Dr. Rogers.

Helpful note for dear IBD readers:  Jean Rogers points out for you that the PRI signatories represent about half of the Assets Under Management of global institutional assets (some US$60 trillion).  That’s the smart money to follow, we would say.  And the 2016 US SIF survey of asset managers adopting ESG approaches reached to almost $9 trillion in AUM — up 33% from two years prior.  More smart money to follow.

You’ll want to read Dr. Rogers’ commentary and share it with colleagues.  And do review the SASB standards for your company’s industry or sector if you work in the corporate sector.  As Dr. Rogers writes: “SASB work is to standardize sustainability disclosure. Its one agenda item is to help companies and their investors communicate more effectively about risk and opportunities they face in a constantly-evolving business landscape.” That certainly describes the year 2017, doesn’t it!

At G&A we’re big supporters of SASB, and we’re helping our clients review and consider SASB in their sustainability programs, materiality and reporting.  If you’d like to talk more about how we can assist your company in strategy setting for the SASB standards for your industry please contact us at info@ga-institute.com to set up a complimentary call with our team.

Sustainability Accounting Standards Represent Market — Not Regulatory — Forces at Work
(Wednesday – April 26, 2017)
Source: Investor Business Daily – Today, approximately half of global institutional assets — about $60 trillion — are managed by signatories to the Principles for Responsible Investment (PRI), which promotes the incorporation of sustainability factors into..

The SDGS – Are You Tuned In, Aligning Your Company’s Strategies, Operations, Performance, Actions? 2030 Is Just Around the Corner!

Gaining momentum in the global corporate sector, among sovereign governments and institutional investors — the 17 UN Sustainable Development Goals (“SDGs”).  After reaching agreement in September 2015, the countries of the world adopted goals to end poverty, protect our planet and ensure prosperity for a greater number of the world’s population through a universal agenda for action (with 169 specific targets under the wonderfully-aspirational broad goals).

The nation-states of the United Nations are now busily adopting the SDGs to address their issues, some broad and experienced by many nations, others more specific in impact on the country.  The goals include climate change-related issues; the growing scarcity of natural resources; adoption of absence of, new technologies;  continuing growth of cities at the expense of rural areas; water, water, water; reducing poverty; empowering women…and more.  The SDGs are in force out to year 2030 with many milestones between then and now.

There are 17 major categories of goals and 169 specific targets within these, for attention by all sectors of society out to year 2030.  Are you on board?  Your company or organization?

Matthew Yeomans (founder of Sustainly, and author of the annual Social Media Sustainability Index), writes for Sustainable Brands on the opportunity for organization leaders to align their efforts with the SDGs to work with governments, NGOs, and other companies to address the challenges through a commonly-understood framework for engagement and action on the issues (inherent in the 17 goals).

Aligning the company with the SDGs could help companies in key areas:  for marketers, or corporate communicators, the actions taken could be embedded in a campaign for customers (consumer, business, public sector).  The corporate storytelling could bring data and metrics to life and help guide customers to the company’s core sustainability reporting that might otherwise be overlooked or disregarded (perhaps thinking, is this reporting just PR?).  The SDG focus could help to underscore a company’s serious commitment, authenticity and transparency regarding actions on the SDGs.

Author Yeomans provides brief examples with Wal-Mart Stores (addressing poverty, women empowerment), Pearson’s (quality education for all) and Stella Artois (clean water).  Highlights are in the Sustainable Brands post and there’s a link to more information at Sustainly.

The G&A Institute team has been focused on the SDGs and helping our corporate clients to better understand and “adopt” material goals and the targets and key performance indicators under the broad goal, those that can be more “naturally” aligned with the adopted corporate mission and overall strategy and implementation of the corporate sustainability journey.

For example, Goal 6 is to “ensure availability and sustainable management of water and sanitation for all.”  How to do that?  We help corporate managers understand the “natural” alignments available to them within the goals/targets, and explore ways to “adopt” the goal and make it an integral part of the company’s sustainability journey.  What are the KPI’s that will matter? What are the “water issues” of importance to the company and its stakeholders?  What can the company do to address water availability, water use in products, waste water, protection of public water supplies, making water supply more secure in the communities in which it operates?  And more….

What are the data sets and metrics that will help the company to adopt operations to the goal(s) and later make the storytelling about all of its progress a more compelling tale? What are the important stakeholder relations to begin, or to enhance if a relationship exists?  What are the natural alignments within the industry or sector that can form a collective approach (perhaps through trade association) to address critical issues?  What is the ROI for the company?  How to determine these and then measure progress (or lack of)?  And finally, how to build the progress into the various reporting schemes, including the company’s GRI report?

If you need more information on these aspects of the SDGs for adoption by your company, please let the G&A team know.  We’d love to set up a call to discuss SDGs with you!

Click here to read more about G&A service related to SDG Alignment.

An important resource for you:  The Post-2015 Development Agenda:  Goals, Targets and Indicators

Top Story

Why You Should Align Your Brand’s Sustainability Efforts with the SDGs
(Thursday – March 30, 2017)
Source: Sustainable Brands – The United Nations’ Sustainable Development Goals (aka Global Goals) are viewed by most in the sustainability community as the biggest opportunity yet for the world to shape a new and better way of doing business while shaping a…

In 2017 the G&A Institute Team Celebrates the Company’s 10th Anniversary — and Editor-in-Chief Ken Cynar’s Continuing Efforts to Keep You Well Informed

In 2017, the G&A Institute team is celebrating the 10th anniversary of the founding of our corporate sustainability consulting, counseling, advice and research firm.  Many of us at G&A worked together in a prominent issues and crisis management consulting practice serving the Fortune 100 companies and many prominent multi-national businesses.  Our former firm was acquired and the business was being wound down.  And so, literally, in a garage with office space, G&A was launched.

Our mission includes sharing information and working to inform and educate managers in the corporate sector, and in the investment community, about the rising importance of corporate sustainability, corporate social responsibility, corporate citizenship, and the increasing focus by investors on all of this.

Over time the preferred approach of combining corporate environmental management factors, the addressing of social or societal concerns, and adopting more effective and investor-responsive corporate governance by public companies — the critical “ESG” factors — included many issues and trend that were familiar to us.  As a team, we had worked on these issue sets for many years as we counseled large company managements.

Our first activity as we got underway was the launch of our Accountability Central web platform.  Our colleague Ken Cynar organized the task, setting up his systems for scouring traditional and other media for “sustainability,” “responsibility,” “ESG” and related news, commentary and research results.  Very early in the morning, Ken would scour to find (literally back then) a handful of content to share with our growing audience.

Ten years on, Ken (our Editor-in-Chief) is at the top of his game. This is our 341st weekly issue of the newsletter.  This week he shared with our readers more than 100 articles, all selected by hand, scanning some 1,000 (!) items every week.  A typical week, says Ken, modestly.

Ken joined our team after a distinguished career in government service almost 20 years ago.  He brings you news and more from “everywhere,” in that he has done his scanning, selection and “posting” from such locales as the Czech Republic (his most recent trip), Germany, Italy, France, and various places around North America.

Ken’s selections continue to populate our Accountability Central website; our SustainabilityHQ news selections, and of course, this newsletter.  To Ken, our team member 10 years in — thank you, and well done!

Ken’s selection for you as Top Story this week is a very interesting read.  The panel convened in Singapore was supposed to talk about “Will Businesses Drive the SDGs?” — but quickly veered into a discussion about the financial markets, not rewarding companies for improving their ESG performance…and so the SDG goals cannot be met.  This turned out to be a very controversial dialogue — one you’ll want to tune in to. Many companies are mentioned as the conversation continued and points were made pro and con about sustainability issues and topics.

Speaking of SDGs, G&A has developed an “SDG Alignment Analysis and Strategic Advice” service offering to help companies leverage and align with the SDGs to maximize the impact and value of their corporate sustainability journey and sustainability reporting.  Find out more here.

Top Story

Do financial markets care about sustainability?
(Tuesday – March 07, 2017)
Source: Eco-Business – Razzouk threw this grenade at an audience of sustainability professionals last month, suggesting that as the market does not reward companies for improving their environmental and social performance, the UN’s Sustainable…

World’s Largest Asset Manager on Climate Risk Disclosure — the BlackRock Expectations of Public Company Boards and C-Suite

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

Monday, March 13, 2017 — The world’s largest asset management firm has clear expectations that corporate managements will disclose more on climate risk to their shareholder base…BlackRock speaks out.  Corporate boards and C-Suite – Important News for You….

You all know BlackRock — this the New York City-based “world’s largest asset manager guiding individuals, financial professionals, and institutions in building better financial futures…”

“That includes offerings such as mutual fund, closed-end funds, managed accounts, alternative investments, iShares ETFs, defined contribution plans…”

And — “advocating for public policies that we believe are in our investors’ long-term interests…” “…ensuring long-term sustainability for the firm, client investments and the communities where we work…”

For BlackRock, Corporate Sustainability includes: (1) human capital, (2) corporate governance (3) environmental sustainability, (4) ethics and integrity, (5) inclusion and diversity, (6) advocating for public policy, and (7) health and safety.

In terms of Responsible Investing, the BlackRock approach includes (1) investment stewardship and (2) having a sustainable investing platform (targeting social and environmental objectives AND the all-important financial return).

So it should not come as a big surprise to the boards and managements of literally thousands of public issuers that BlackRock has great expectations regarding the individual company’s (in a portfolio or hope to be) climate change disclosure practices.

What We Are Doing/How We Do it – Shared by BlackRock

Right now the BlackRock managers are sharing with other asset owners & managers their approach to sustainable investing. There are important lessons for corporate managements in these explanations:

As part of the investment process, BlackRock continues to assess a range of factors (that could impact the long-term financial sustainability of the public companies or companies).

Over the past two years, a number of projects have helped BlackRock to more fully understand climate change. BlackRock believes that climate risk (climate risk/change issues) have the potential to present definitive risks and opportunities that could or will impact long-term shareholder value.

The BlackRock team members also contributed to external initiatives such as the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosure (TCFD) and the continued development of the voluntary reporting guidelines of the Sustainable Accounting Standards Board (SASB).

Larry Fink – the influential CEO of BlackRock — sent letters directly to the CEO’s of public companies in 2016 and then again recently (2017) that called attention to the need for the companies to help their investors better understand the ESG factors most relevant to the firm to generate value over time.

That especially includes more robust disclosure and reporting on the issues related to climate risk. (We need to keep in mind that “risk” has a companion — “opportunity,” as represented in the Chinese pictograph for a crisis.)

BlackRock’s Investment Stewardship Team meets with portfolio company managements and votes BlackRock shares at proxy voting time; if an issue is in focus and the C-suite will not make progress on the issue, the team will elevate the concern to the company’s board room. And they “may” in time vote against director nominees and for shareholders proposals that are on the right side of BlackRock’s own concerns.

Company Boards and Executives – for 2017

BlackRock engages with 1,500 companies (on average) every year. As (according to BlackRock) climate risk awareness and its engagement with companies on the issues is being advanced, and as the asset management firm’s own thinking on climate risk continues to evolve, that issue is on the table for the Investment Stewardship Team discussions with company managements in 2017.

Companies “most exposed” to climate risk will be encouraged as part of the discussions to consider reporting recommendations coming from the FSB Task Force.

And, the board will be expected to have “demonstrable fluency in how climate risk affects the business and management’s approach to adapting to and mitigating the risk. Corporate disclosure on all of this will be key to the ongoing relationship with the investor – BlackRock (with US$5 trillion and more AUM).

Other Investment Management Peers

Tim Smith, Director of ESG Shareholder Engagement at Walden Asset Management (Boston)

Tim Smith, Director of ESG Shareholder Engagement at Walden Asset Management (Boston) and long a robust and powerful voice in the sustainable investing movement, applauded BlackRock’s shared information.

“The announcement that climate risk will be a priority in their engagements with public companies is an exceedingly important message being sent by one of your largest shareholders. That they believe climate risk is a priority reinforces the importance of the issues for senior managements of public companies. We’re hopeful that BlackRock’s announcement and engagement on climate risk will result in active support for shareholder resolutions on climate change.”

Walden and others filed their own shareholder resolution with BlackRock asking for a review of the asset manager’s corporate proxy voting process and record on climate change.

BlackRock has been accused by investment peers for its proxy voting practices. For example, Climate Wire reported in 2016 that IF BlackRock and its large institutional investment peers had supported a climate resolution filed with Exxon Mobil (this was part of the not-for-profit Asset Owners Disclosure Project) the resolution would have passed in the final vote by shareholders.

We’ll see what the 2017 BlackRock moves mean in the corporate proxy season getting underway now with continued investor focus on climate change / climate risk / global warming disclosure and reporting demands.

As corporate sustainability consultants and advisors, we at G&A Institute (and as part of our pro bono research work as the exclusive Data Partners for the Global Reporting Initiative (GRI) in the United States) analyzed more than 1,500 report sustainability reports in 2016 — and we are seeing an increase now in 2017 early survey results that corporate disclosure on climate risk issues is definitely on the increase.

We will soon release the results of our team’s analysis of S&P 500(r) on sustainability reporting and related issues. Recall that our analysis last year found that 81 percent of the 500 companies were doing structured sustainability reporting.

There’s more information for you here:

https://www.blackrock.com/corporate/en-us/about-us/investment-stewardship/engagement-priorities

https://www.blackrock.com/corporate/en-us/literature/market-commentary/how-blackrock-investment-stewardship-engages-on-climate-risk-march2017.pdf

Asset Owners Disclosure Project:  http://aodproject.net/

Tim Smith / Walden Asset Management:

http://www.waldenassetmgmt.com/team/smith-timothy

 

 

“The Authoritative Voice for Wall Streeters,” Says It … Barron’s Tells Mainstream Investors It’s a “New Era of Sustainable Investing” … And that is, in the Trumpian Era, No Less…

The Barron’s weekly newspaper is the “hot read” for Wall Streeters – both institutional and retail investors alike eagerly absorb the news and opinions of the editors, writers, and columnists.  “Did you see Barron’s….?” is a familiar question in the investment community.

And so we ask — did you see Barron’s story this week (Feb 11th issue)?  “A New Era of Sustainability Emerges,” tells readers that the flurry of policy directives at the Trump White House has “fueled activism across the country;” it may also light a fire under some investors focused on sustainable business practices.

Columnist Reshma Kapadia says President Trump’s and allies proposals to roll back environmental and financial regulations…and reject climate-change science…the priorities of a growing number of investors who put a premium on environmental stewardship, corporate governance, transparency, and diversity are at odds with the Trumpian-era directions.

“But here’s the thing,” Reshma Kapadia writes, “the political backdrop could actually be good for ‘so-called’ ESG funds…”  And then she cites the authority of US SIF and the most recent survey of asset managers using ESG criteria — $US9 trillion, or $1-in-$5 in the US capital markets.

Important:  EPFR Global reports that since the November elections, investors have put almost $400 million into ESG stock funds.  And quoting Morningstar’s Jon Hale (head of sustainability research), “the political back drop could have a galvanizing effect, as investors look for ways to more explicitly support sustainable ideas.”

This is a report that you’ll want to read and share.  ESG investing is just common-sense investing, observes the columnist.  It’s one of the most important perspectives in sustainable, responsible and impact investing to appear in the new political era.

Reshma has been with The Wall Street Journal, Smart Money magazine, Reuters, and appears regularly in Barron’s pages.

(Note that you’ll have to register to read or be a subscriber to Barron’s. There are more than 300,000 weekly readers, subscription and newsstand.)

Top Story

A New Era of Sustainable Investing Emerges
(Monday – February 13, 2017)
Source: Barron’s – The political backdrop could actually be good for so-called ESG funds, which include environmental, social, and governance criteria in their stock-picking.

Doing the Right Things in Business — Making the Business Case – Making the Financial Case — Also Incorporating the Moral Case?

It’s an age-old topic of discussion:  Where in American business do the issues of morality, ethical behaviors, and “fair and equitable” fit in?  Andrew Winston, author of the best-selling “Green to Gold,” explores the topic (“morality”) in an essay on Sustainable Brands’ “New Metrics” web platform.

Morality:  moralizing; degree of conforming to moral principles.  So — in exploring the subject of morality in business, Andrew Winston thinks managers should crank the “moral” arguments into making-the-business case-for-corporate-sustainability discussions.  Making-the-financial-case (“investors want to know…”) is occurring more frequently now with many more mainstream investors focused on the firm’s ESG performance and the sustainability journey of especially large-cap enterprises.

“This is the right thing to do…” may be the persuasive argument in making the business case to decision-makers.  The moral positions of companies and their leaders are facing greater scrutiny now, says Winston.  Will companies defend LGBT rights — or protect immigrant employees?  Will they publicly argue for greater attention and action on climate change issues?  (It’s the right thing to do, many of you, dear readers, will agree.)

In our Top Story, author Andrew Winston sets out four “buckets” of arguments as to how the initiatives companies pursue create value — and three “mainstream” arguments (have some element of making-the-business-case, such as “short-term financial wins”).  The fourth argument — improve the shared commons —  and is it time to broaden how we talk about sustainability and bring in a moral dimension.

The traditional business case is still critical – but broadening the arguments in making the sustainability business case has Winston wondering if a combined logic or “good for business” and “good for the soul” will work.  He welcomes your thoughts after reading the essay.

Governance & Accountability Institute, Inc. is now in the 10th year of operations.  When we founded G&A back in 2007, we adopted the tagline:  Helping our clients do the right things for the right reasons.  That’s guided us to 2017 and benefited many of our corporate clients and our partners-in-progress.

Is it Time to Add Morality to the Business Case for Sustainability?
(Monday – February 06, 2017)
Source: Sustainable Brands – Every manager (or consultant) who has pitched an initiative under the banner of “sustainability” has faced the same question nearly every time: What’s the business case?

State Street CEO to Boards of Companies in Portfolio: Disclose More About the Impact of Climate Change on Your Business — Be More Transparent…and More

State Street Corp is one of the world’s leading asset managers, with US$2.47 trillion in AUM.  State Street Global Advisors CEO Ron O’Hanley in late-January sent a message to the boards of directors of public companies whose stock is in State Street portfolios:  SSGA is increasing focus on climate change, safety, workplace diversity and various other ESG issues.  Especially climate change.  Tell us more about what you are doing.

How?  The State Street Global Advisors CEO is asking, how is the board [of the company] preparing the enterprise for the impacts of climate change?  He is communicating to these directors that it is necessary for boards to disclose more about those plans.  The CEO’s letter was accompanied by a description of the framework that SSGA uses to evaluate public companies’ sustainability efforts.

In this week’s first Top Story, the highlights of the approach are described for you. Three criteria are used to evaluate and rank companies — as Tier One, Two and Three.  Tier One companies satisfy the three criteria.  The results are reflected in the proxy voting of SSGA, the #3 asset manager of ETF’s in the USA (Exchange Traded Funds).

There were 177 companies in the portfolio that SSGA evaluated in 2016; a mere 7% qualified as Tier One.  Tier Two totals 72%, which meant that companies had a sustainability program but had not integrated it into its overall business strategy, articulated how ESG factors affected long-term strategies, or established long-term goals aligned with ESG strategy. (Tier Three companies were described as not doing anything ESG-wise, 21% of companies in the portfolio, according to the Think Advisor story.)

Company boards and C-suite should consider that State Street is an active player in the coming proxy voting season.  SSGA supported 46% of climate-related proposals in 2016.  That’s important when you consider the competition:  the vote count was zero (voting) at Vanguard, American Funds, Black Rock and Fidelity — a source of concern and a growing level of activism on the issue among sustainable & responsible investing advocates.

In an interview with Bloomberg’s top environmental reporter, Emily Chasan in January (our second Top Story below), SSGA CEO O’Hanley said:  “We’re asking companies to make sure they are identifying and communicating both their risks and opportunities.  Climate change may be the poster child for risk out there.”

The Bloomberg Business Week story has a neat chart for you, with the voting records of “shares of proxy votes in favor of climate-related proposals.”  The Top 20 of the world’s asset managers’ voting records are presented.  State Street is the fifth-ranked (at the top).

Stay Tuned, as we often say, to the coming 2017 Proxy Voting Season at public companies.  ESG issues are front and center at some large corporate issuers and the action will be in the maneuvering around the shareholder-offered resolutions on climate change and other ESG issues by the entire voting body.

Story links below:

State Street Wants Companies to Focus on Sustainability
(Wednesday – February 01, 2017)
Source: Think Advisor – State Street Global Advisors, the third-largest provider of ETFs, wants more companies to incorporate sustainability practices into their long-term business strategies and will consider such corporate efforts in its upcoming

State Street Asks Boards to Disclose More on Climate Preparation
(January 26, 2017)
Source: BloombergBusinessweek – Climate change is no longer listed as a top issue on the White House website, but it’s very much at the forefront for $2.47 trillion asset manager State Street Corp.

The Best Intentions of C-Suite On Corporate Sustainability — Results in Are In With Sharing of Bain & Co Survey

This is not encouraging: the respected management consulting company Bain & Company surveyed the leaders of 300 companies engaged in “sustainability transformation” and conducted interviews with heads of sustainability recognized for outstanding results.

The question: What are the results of instituting sustainability as a top priority? The answer: Alas, not really encouraging for stakeholders, says Bain & Company. There’s an important “but” here with tips for CEOs and C-suite on how to overcome the odds of losing forward momentum in corporate sustainability efforts.

The management consulting firm published the results of its research in: “Achieving Breakthrough Results in Sustainability.” This effort found that for the 300 companies, only two percent (2%) of their corporate sustainability programs achieved or exceeded their aims when compared to the companies’ other transformation programs (which had a 12% success rate). There are “change traps” that keep companies from reaching their goals.

Key quote: “Too often, sustainability gets stuck in first gear, while the need for change is accelerating,” said Jenny Davis-Peccoud, who leads Bain’s Sustainability & Corporate Responsibility practice. “Once companies learn to navigate common roadblocks, they open the door to a transformational journey and the potential to leave a legacy,prompting companies to redefine what it means to be a leader in their industry.”

We see this in our analysis of corporate sustainability reporting as the Global Reporting Initiative data partners for the United States, United Kingdom and Republic of Ireland. The corporate leaders in sustainability have made “the journey” an integral part of strategy-setting, operations, marketing, employee motivation, stakeholder (including investor) engagement, and incentivizing internal behaviors. The “leaders” and “laggards” in sectors and industry categories self-identify through their reporting on achieved progress (and stalled progress is also apparent).

For 2016 our analysts reviewed more than 1,500 corporate sustainability / responsibility / environmental progress / citizenship reports published by companies and databased key characteristics, data sets, achievements, and more. This intelligence is leveraged in our client services, shared research and teaching programs.

One of the issues Bain found in its survey effort and conversations with managers is that the rank and file employees do not see sustainability as a business imperative — even though those at the top of the organization understand that enhancing the firm’s “public reputation” is a key driver for sustainability change. Two important factors emerged from the Bain effort: Less than 1/4 of the firms surveyed said employees were held accountable for sustainability through incentives; and, there was a lack of resources as well as competing priorities to deal with.

G&A Institute analysts look for the winning characteristics that overcome these obstacles in their report analysis. G&A has designed a series of tools and services to help companies engage more effectively with their employees on sustainability goals and initiatives that is proving to be very successful among our clients. Please let us know if you’d like to set up a call to discuss how we can help your company.

Among the four tips for CEOs and corporate leadership from Bain: “Highlight the Business Case.” (Helping to make the case: for brand marketers, those with a demonstrated commitment to sustainability grew four times faster than their peers in 2015, according to the Nielsen Global Corporate Responsibility Report.)

There’s more in the Top Story this week, along with information on requesting a copy of the report from Bain & Company. Inc.

Corner Office Sustainability Passions Get Trapped at the Top: Why 98 Percent of Companies Do Not Achieve Their Sustainability Goals
(Wednesday – January 25, 2017)
Source: CSRWire – A new report from investment leader and management consultants Bain & Company — “Achieving Breakthrough Results in Sustainability” — finds that only 2 percent of corporate sustainability programs achieve or exceed their aims, compared to 12 percent of other corporate…

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

by Hank BoernerG&A Institute

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

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

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

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

* * * * * * * *

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Sharing Thought Leadership

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

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

AND……..

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

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

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

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

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

And thank you, Washington DC Power Players!

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

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

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

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

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And Now to 2017!

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

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

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

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

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

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

 

 

The NYT Brings Us Encouraging News in the Swelter of Negative Reports as Sustainability Advocates Consider Possible Changes of Course in the New Year for U.S. Federal Government Policies

Leading Business readership publication focuses attention on the dramatic rise of ESG factors in investing over the past five years in wrap up story…

If you have not yet seen the story by Randall J. Smith that appeared in The New York Times Business Section on December 14th, we urge you to read it now, and to share it with your colleagues. Especially those occupants of the C-suite, board room, investor relations office — this will help to make the important case for ESG / sustainable investing. It’s our Top Story this week and the headline puts things in focus: investors are sharpening their focus on “S” and “E” risks to stocks.

This is a front page, Business Section [Deal Book] wrap-up feature that shares news, commentary and important developments at such organizations as MSCI, Vanguard, TIAA-CREF, Goldman Sachs, Perella Weinberg Partners, Rockefeller Brothers Fund, US SIF, Heron Foundation, Parnassus and other leaders in sustainable investing.

“Investing based on ESG factors has mushroomed in recent years,” author Randall Smith explains, “driven in part by big pension funds and European money managers, trying new ways to evaluate potential investments.”  The article helps those not yet familiar with sustainable investing to understand the increasing momentum in “sustainable” or “ESG” or “sustainable, responsible & impact” investing.

The organization MSCI is in sharp focus in the piece, with Linda-Eling Lee (the firm’s able head of global research) interviewed on the company’s approach to ESG research, ratings, equities indexes, and related work.  At MSCI, the assets managed using ESG approaches is now at $8 billion-plus — that’s triple the 2010 level.  ESG-related risks and opportunities are being closely evaluated as MSCI looks at publicly-traded companies, and as explained by the MSCI head of global research, 6,500 companies are followed by 150 analysts working in 14 global offices.

The recent US SIF survey results are heralded — $8.1 trillion in professionally-managed AUM assets in the U.S.A. are determined using ESG factors in analysis and portfolio management (the big driver is client demand).  The TIAA-CREF Social Choice Equity Fund is at $2.3 billion in assets under management — doubling in the past five years.  MSCI’s ESG indexes are at $3 billion — tripling over the past three years.  Vanguard’s social index fund is at $2.4 billion — quadrupling since 2011.  There’s a new CalSTRS low-carbon portfolio (using an MSCI index) set at $2.5 billion.

This article in the Business Section of a leading American daily newspaper provides an encouraging — and very timely! — look at the momentum that’s been building the capital markets signaling mainstream capital markets uptake and dramatic growth in adoption of ESG strategies and approaches for asset owners and asset managers.

As we suggest, it is a wonderful wrap-up of top-line developments in sustainable investing that also underscores the importance of corporate sustainability to individual institutional investors — and should help to make the investing and business cases for top management.

This news article is of course timely as corporate sustainability and sustainable investing professionals consider the potential changes on the horizon with a new administration and the new congress coming to town with a very different agenda – at least what has been publicly proclaimed to date.  There is clearly momentum in the capital markets for consideration of corporate ESG factors as investment dollars are being allocated.  This is good news heading into 2017 and the probable headwinds sustainability professionals will encounter.

Investors Sharpen Focus on Social and Environmental Risks to Stocks
(December 14, 2016)
Source: New York Times – Investing based on so-called E.S.G. factors has mushroomed in recent years, driven in part by big pension funds and European money managers that are trying new ways to evaluate potential investments. The idea has changed over the last three decades from managers’ simple exclusion from their portfolios of “sin stocks” such as tobacco, alcohol and firearms makers to incorporation of E.S.G. analysis into their stock and bond picks.