SEC Proposes Important Amendments to Corporate Disclosure & Reporting – Changes Are in the Wind — But Corporate ESG Disclosure Is Not Addressed in the SEC Proposals …

October 12 2017 – by Hank Boerner – Chair, G&A Institute

On October 11, 2017 important news was coming from the Securities Exchange Commission (in Washington DC) for corporate leaders and investment professionals: a comprehensive package of proposed changes (amendments) to existing rules for corporate disclosure and reporting was released for public examination and comment.

There are more than 250 pages of proposed changes and adjustments released for your reading (the document will be published now in the Federal Register for broad communication to stakeholders).

You’ll remember the April 2016 activities as SEC released a 200-plus page Concept Release that addressed a range of issues that could result in revamping the overarching parts of Regulation S-K and parts of Regulation Fair Disclosure (“Reg FD“) and other corporate disclosures required by Federal statutes.

We told you about this in our post of May 13, 2016.
Link: http://ga-institute.com/Sustainability-Update/tag/sec-concept-release/

We said then: Maybe…U.S. Companies will be required…or strongly advised…to disclose ESG Data and related business information…

There were great hopes raised when the Commission in circulating the Concept Release document devoted more than a dozen pages to discussion about ESG, sustainable investing, the possibility of “guidance” or perhaps amending rules to meet investors’ expectations that public companies would begin, expand, improve on, ESG disclosure.

Numerous investor interests provided comments to the SEC in support of the possibilities raised by SEC in the dozen pages of the Concept Release devoted to ESG et al.

The US SIF — the Forum for Sustainable and Responsible Investing, a very influential trade association of asset owners and managers — provided important input, as did the CFA Institute (the U.S.-based, global certification organization for financial analysts and portfolio managers worldwide).

Disclosure of material ESG issues was a key concern of the numerous responders in the public comment period.

This week’s development: The SEC Commission proposed amendments to existing regulations that are part of the “Modernization and Simplification of Regulation S-K,” citing a different package of legislation. (The FAST Act Modernization, which in part will the sponsors said will attempt to “prune the regulatory orchard” — this is part of the Fixing America’s Surface Transportation Act or “FAST”.)

The Commission referred to the proposals as an important step “…to modernize and simplify disclosure requirements for public companies, investment advisors and mutual fund (investment) companies under the FAST Act…”

This, said recently-appointed SEC Chair Jay Clayton, “…is the most effective way to update SEC rules, simplify forms and utilize technology to make disclosure more accessible…”

The proposed amendments were characterized as part of the overall, long-term review of the SEC’s disclosure system. Thus, the SEC said the proposed amendments reflect “perspectives developed during the staff’s broader review…including public input on the prior Concept Release.

The details are available for you in a new 253-page document, at: https://www.sec.gov/rules/proposed/2017/33-10425.pdf

You have 60 days of open comment period ahead during which to express your views on the proposals.

The proposed amendments mostly address corporate governance (G”) issues that if adopted would:

• Change such items as Description of Property**; the MD&A; Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act; Outside Cover Page of the Prospectus.

• Revise rules and forms to update, streamline and improve the SEC disclosure framework by eliminating risk factor examples listed in the disclosure requirement and revising the description of “the property requirement” to emphasize the materiality threshold**”.

Note that while “property” is usually a facility, this does not always apply to the service sectors.

• Update rules as needed to reflect changes since the rules were first adopted or last amended. (Including, “corporate governance” items, such as for Board Auditing, Compensation Committee operations.)

• Simplify the overall disclosure process, including treatment of confidential information; also, changes would be made to the MD&A to allow for “flexibility in discussing historical periods”. (The discussion on confidential info runs for pages – important to read for corporate managers involved in disclosure.)

• Treatment of subsidiaries.

• Incorporate technology to improve access to information requiring data tagging (XBRL) for items on the cover page and use of hyperlinks (HTML) by reference and in the EDGAR system.

Again – the public now has 60 days to submit comments on the proposed amendments (to such statutory authority as the Securities Act of 1933; Securities Exchange Act of 1934; Investment Company Act of 1940; and, regulations under these landmark securities protection laws of the land).

There are numerous sections within the proposed amendment document where the Commission is inviting public comment. To submit your comments, see: http://www.sec.gov/rules/proposed.shtml — file#S7-08-17

Disappointing News: There is no mention that we could find in the proposal document that addressed the many comments that were directed to the SEC staff in response to the earlier Concept Release by sustainable & responsible investor interests. And, in many investor conversations with SEC staff that acknowledged the growing importance of disclosure regarding corporate sustainability and ESG performance.

No mention of: Climate Change. ESG. Responsible Investment.

This is very troubling — no doubt members of the investment community and corporate leaders well along on their sustainability journey will be providing their perspectives to SEC — and the media, and elected officials — on this important oversight.

SEC guidance for corporate reporters regarding their ESG, sustainability, responsibility, citizenship, etc disclosures and reporting activities would be very helpful – right?  Of course, we are in a new political environment now, and perhaps that is helping to shape the agenda at the Commission as “reforms” are drafted and distributed for public consumption.

There is much more news to come when the response to the announcement begins. Stay Tuned!

P.S. – if you/your organization responds to the draft proposals, please do let G&A know so we can publicize your perspectives.

Conversation with Professor Baruch Lev at NYU: Is Accounting Outmoded?

The book: The End of Accounting.

July 17, 2017

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

Questions:  Is Accounting as we know it now outmoded … beyond Its usefulness to investors? We share with you today the views of a global thought leader on Accounting and Corporate Reporting — Dr. Baruch Lev of Stern School of Business at New York University.

Professor Lev’s shares his views of the vital importance of intangibles to investors, with his call for far greater corporate transparency being needed … including his views on the importance of CSR and sustainability.

His latest work:  The End of Accounting – and the Path Forward for Investors and Managers — authored by Dr. Baruch Lev and Dr. Feng Gu of the University of Buffalo/ SUNY.  The professors’  important new work is the result of three years of research and collaboration, In the book they that suggests new approaches are needed to reform “old” accounting practices to provide more information of value to investors, who are mostly ignoring corporate accounting.

And as read the book, we were thinking:  what about ESG – CSR – Sustainability – and other new approaches that do focus on many intangible aspects of corporate operations?  We had a conversation with Dr. Lev and share his views on this and more with you today.

After reading the book, readers may ask:  Is this about the “The End of Accounting?” Or, “The Beginning of Really Useful Financial Information for Investors?”  My view:  It’s both!

And we discuss needed reforms in corporate reporting, for you to think about:  Are U.S. public companies prepared to publish the authors’ recommendations for a Resources and Consequences Report for investors’ benefit?  Read on to learn more…

And for sustainability / CSR professionals: This is an important new work for your consideration that focuses on the importance of intangible information for investors to help guide their decision-making.

First, some background:

Accounting as we know it has been around for 500+ years. Fra Luca Bartolomeo de Pacioli, the Italian mathematician (c 1447-1517) set out the principles of the double-entry bookkeeping system for the merchants of Old Venice in his 1494 work, Summa de Arithmetica, Geometria, Proportioni et Proportionalita, a very important textbook of the day.

This “Father of Accounting” put forth the important concepts of ledgers, journals, credits and debits (and the balancing of same); A/R, A/P, Cost Accounting and much more. His is a rich legacy in the accounting and business worlds. **

But now, Professor Baruch Lev posits in his work with colleague Professor Feng Gu, we really need to reform this five-century-old approach to how we account for the financials and think and act way beyond the traditional.

Their Recommendations:

Let’s begin with the corporate “intangibles” – some investment professionals still speak of a company’s ESG / Sustainability / Responsibility strategies, programs and actions, achievements, and the burgeoning reportage of same (data & narrative) as addressing the intangibles (and not “the tangibles,” represented by the financial data).

But many analysts and asset managers look far beyond the financials to help determine the valuation of a public issuer. For example, veteran financial analyst Stephen McClellan, CFA, formerly VP and head of research for Merrill Lynch and author of the best seller, “Full of Bull,” has told conference audiences that as much as 80% of a corporate valuation may be based on the intangibles.

Writing for investors, Professors Lev and Gu put forth their suggestions for dramatic accounting and corporate reporting reform. They “establish empirically” in their work that traditional corporate accounting is failing investors and reforms are needed.

Their recommendation: have companies publish a “Resources and Consequences Report” with five main elements:

  • Development of [Corporate] Resources;
  • Resource Stocks;
  • Preservation of Resources;
  • Deployment of Resources;
  • Value Created.

Some of the information could be financial, as in today’s disclosures. But other information could quantify data, and there could be qualitative information as well. (Sounds like we are looking at some of the sustainability reports of corporate sustainability leaders?)

The elements of the report the good professors recommend:

Development of Resources: Detailed descriptions for investors of the company’s important internal research efforts, the R&D advances, the further development of present technologies to leverage to create value, etc. After “proof of concept,” how does the R&D contribute to the value of the company?

Resource Stocks: The company’s intellectual properties, the assets that are the foundation of investor value. (Patents, trademarks, processes, etc. — all “intangibles” that are in fact very tangible to investors.)

Preservation of Resources: The safety/security of such things as a company’s digital assets, IT, IP, and so on; are there cyber attacks? Was there damage – to what extent? What does the company do about these attacks? How does the company manage and secure its acquired knowledge?

Deployment of Resources: As the company creates “value,” how are the strategic resources deployed? How does the company use its intellectual assets?

Value Created: Here the professors would like to see reported the dollar results of all of the above. Companies would describe the changes in Resource value(s), and describe the nature of value (for a company with a subscription model, what is the value of the individual subscription; what is the value of a brand, etc.)

Notes Dr. Lev: “We suggest and demonstrate a new measure: adjusted cash flows.”

Highlights of our conversation:

G&A Institute: Your new book offers very powerful arguments for fundamentally changing present-day corporate accounting and the way that investors do or do not pay attention to that accounting in their analysis and portfolio decision-making. There are a lot of vested interests in the present system; can the accounting and corporate disclosure and reporting systems be changed to reflect your recommendations?

Dr. Lev: Things change very slowly in accounting policies and practices. The systems is changing, in that public company managements are disclosing a considerable amount of information that is beyond that required for SEC filings, in the areas that we touch on in examples in our book. So there is progress. But not fast enough, I believe, to really serve investors.

G&A Institute: The SEC months ago published a Concept Release requesting public input on the present methods of corporate disclosure. We were encouraged to see more than a dozen pages in the document devoted the question of ESG metrics, sustainability information, and the like. Your thoughts on this?

Dr. Lev: We have not seen any further communication on this and there are no rules proposed. Will the new administration take any of this seriously?

Observes Dr. Lev: There are now many corporate financial statements that virtually no one understands. There is great complexity in today’s accounting. When we look at the US Environmental Protection Agency and environmental rules, we see that once rules are in place, they are constantly debated in the public arena. Unlike the EPA situation, there is presently no public interest in debating our accounting rules.

G&A Institute: Well, let me introduce here the subject of the SASB approach — the Sustainable Accounting Standards Board (SASB). Of course, the adoption of the SASB approach by a public company for adopting to their mandated reporting is voluntary at this time. What are your thoughts on this approach to this type of intangibles disclosure?

Dr. Lev: Well, the SASB recommendations are built on top of the present approach to accounting and reporting. In effect they leave the financial reporting system “as is,” with their rules built on top of a weak foundation as we outline in the book. I’ve said this at the SASB annual conference and my comments were very well received.

I did point out that the SASB approach is quite useful for investors. But the demand for voluntary disclosure by companies could create an invitation for lawsuits all over the world, if certain disclosures were made regarding a company’s environmental impacts.

G&A Institute: Well, aren’t investors seeking information such as environmental performance, as well as related risk, opportunity, more of the “E” of ESG strategies, performance, and metrics?

Dr. Lev: It depends on the setting. Our book was in process over a three-year period. My co-author and I devoted an entire year to analyzing hundreds of quarterly analyst (earnings) calls. Keep in mind that an analyst may have just one opportunity to ask the question. There were no — no — questions ever raised about ESG performance, corporate sustainability, and related topics. We reviewed, as I said, hundreds of earnings calls, with about 25-to-30 questions on each call.

G&A Institute: What kinds of questions may be directed to corporate managers on the calls about intangible items?

Dr. Lev: There were questions about the R&D efforts, the pipeline for example for pharma companies. Customer franchise was an important topic. Changes in U.S. patent law resulted in much more information being disclosed by the U.SPatent Office related to the filings. The entire argument made for patent filing, for example, and this is a subject the analysts are interested in.

G&A Institute: Are there any discussions, analyst and corporate, about ESG/sustainability?

Dr. Lev: Yes, these questions are mostly in the one-to-one conversations. A challenge is that in my opinion, the ESG metrics available are not yet at investment-grade. There is a good bit of investor interest and discussion with companies about sustainability. The factors are quite relevant to investors. But the “how-wonderful-we-are” communications by large public companies are not really relevant to investors.

G&A Institute: What kinds of information about the CSR or environmental sustainability intangibles, in your opinion, is of importance to investors?

Dr. Lev: Think about the special capabilities of the public corporation. The organization typically has special capacity to do good. Not just to donate money, which is something the shareholders could do without the company. But to share with the stakeholder, like a community organization, the special know how and other resources to make good things happen. The world really expects this now of companies. Call it Corporate Social Responsibility if you like.

The Cisco Example

Explains Dr. Lev:  Cisco is a fine example of this. The Company has a Networking Academy, and they invite people to enroll and take free educational courses to learn more about networking. There have been millions of people graduating from this academy and receiving certificates. Cisco management leverages its special capacity in doing this. And it is a good idea if you think about the impact of this far-sighted approach to generate more interest in and business with Cisco.

The Home Depot Example

Another example he offers is Home Depot. The company teams with an NGO – Kaboom — to build playgrounds for children. In terms of special capacity, HD does provide materials, but also provides company legal talent to help situate the playgrounds in the neighborhood. That is far more than throwing money at a community need.

Dr. Lev Observes:  I think one of the issues is that the terminology is not clear. CSR — what is it? Good or bad for investors? Having good ideas and special capabilities is key, I think.

We asked about Dr. Milton Friedman’s Views on CSR

G&A Institute: This brings us to one of your former colleagues, Dr. Milton Friedman of the University of Chicago, who famously wrote in a New York Times magazine article that CSR is, in effect, hokum, and not the business of the company. Shareholders well being should be the main focus, and through dividends and other means, if a shareholder wants to give the money away, they can do that…not the company.

Dr. Lev: I was a student of Dr. Friedman and later a colleague at the University of Chicago after I got a Ph.D. He was a brilliant man. In my opinion, he was the greatest economist of the 20th Century and I put him on a pedestal. He liked to introduce a subject and then generate great debate on his suggestions, which he felt people could accept or reject. That, I think, is the case with his famous commentary on CSR. See, we are still debating his views today. He was proved right so many times during his time.

G&A Institute: Let’s conclude this talk with a question: Do you see a value for investors in accepting, or better understanding, such terminology as CSR and sustainability and sustainable investing?

Dr. Lev: Yes, these are important approaches for companies and investors. Four years ago I devoted a chapter to CSR in my book, “Winning Investors Over.” My views are fully set forth in the recent article, “Evaluating Sustainable Competitive Advantage,” published in the Spring 2017 issue of Journal of Applied Corporate Finance.

Notes Dr. Lev:  About “CSR” — there are other terms used, of course. Varying titles are very confusing. It is not always clear what CSR or sustainability may mean. For example, the Toyota Prius is a good approach to auto use. Is manufacturing that car “good CSR,” or just good business? A measure of sustainability? CSR is hard to define, sometimes. Good corporate citizenship is good for business and good for society, I believe.

G&A Institute: Thank, you Dr. Lev, for sharing your thoughts on accounting and the reforms needed, in your book and in this conversation.

# # #

Footnotes:

The book:: The End of Accounting – and the Path Forward for Investors and Managers … by Dr,Baruch Lev (Philip Bardes Professor of Accounting and Finance at the NYU Stern School of Business and Dr. Feng Gu (Associate Professor and Chair of the Department of Accounting and Law at the University of Buffalo).

Published by Wiley & Sons, NY NY. You can find it on Amazon in print and Kindle formats.

# # #

Dr. Baruch Lev is the Philip Bardes Professor of Accounting and Finance at New York University Leonard Stern School of Business; he teaches courses in accounting, financial analysis and investor relations. He’s been with NYU for almost 20 years.

Dr. Lev is author of six books; his research areas of interest are corporate governance, earnings management; financial accounting; financial statement analysis; intangible assets and intellectual capital; capital markets; and, mergers & acquisitions.

He has taught at University of Chicago; the Hebrew University of Jerusalem; Tel Aviv University (dean of the business school); University of California-Berkeley (business and law schools). He received his Bachelor of Accounting at Hebrew University; his MBA and doctorate (Accounting/Finance) are from the University of Chicago, where he was also a professor and (student of) and then academic colleague of Nobel Laureate (Economic Sciences-1976) Dr. Milton Friedman (1912-2006).

# # #

Dr. Milton Friedman’s article — “The Social Responsibility of Business is to Increase its Profits”; published in The New York Times Magazine, issue of September 13, 1970. The commentary for your reading is here: http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html

# # #

** Thanks to the “International Accounting Day” account of Luca Pacioli’s life, his work and his legacy. There is information available at: http://accountants-day.info/index.php/international-accounting-day-previous/77-luca-pacioli

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.

* * * * * * * *

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.

* * * * * * * *

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!