World Bank – G4 Reporting Pioneer!

559719_615384138487346_109625660_a[1]by Hank Boerner – Chairman, G&A Institute

Stay Tuned to the World Bank – it’s a Pioneer in G4 Sustainability Reporting!

The World Bank, composed of the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), is a vital source of financial and technical assistance to developing countries around the world.
Since its inception in 1944, the World Bank has expanded from a single institution to a closely associated group of five development institutions.

Their mission evolved from the International Bank for Reconstruction and Development (IBRD) as facilitator of post-war reconstruction and development to the present-day mandate of worldwide poverty alleviation in close coordination with their affiliate, the International Development Association, and other members of the World Bank Group: the International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID). Today the institution has a staff of engineers, financial analysts, economists, sector experts, public policy experts, and social scientists.

The newly-endorsed goals of the Bank are to end extreme poverty and promote shared prosperity by fostering growth at the bottom 40 percent of every country. To accomplish this, the World Bank — operating in over 130 countries around the world — offers its members low interest loans, interest-free credits, and grants as well as a wealth of technical assistance and knowledge sharing.

The World Bank sets an example for its clients and partners in reporting and public accountability.

So it is fitting that one of the first institutions to embrace the new GRI G4 (fourth generation) guidelines would be the World Bank. Spearheading the effort is Monika Kumar, the Bank’s sustainability coordinator. When the report landed on our platform, we reached out to Monika to ask her about the effort – here are highlights of our conversation.

G&A Institute: Monika, congratulations on being one of the first U.S. based institutions to embrace G4 for reporting. What was the experience like, moving from G3.1?

Monika Kumar: We started with the premise that the G4 would be similar to the G3.1, simply with a few additional indicators, but were pleasantly surprised. The emphasis on materiality was something that we had to understand better, and inform our internal stakeholders about. In our preparation, we reviewed each and every one of the Aspects and Indicators to assess the relevance to the World Bank, which falls within this unique mix of a public-financial-development institution. We also had to ensure to link content material to the Bank as a development institution, such as how we address issues of food security in our client countries, with the appropriate GRI indicators.

G&A: How long has the World Bank been reporting?

MK: Our first report was published in 2005, covering our 2004 fiscal year. We began first using G3 and then shifted to G3.1 for our Content Index and over time included the Financial Services and the Public Agencies Sector Supplements. In 2008, we moved to an on-line platform, with a standalone GRI index report where we addressed every GRI indicator, explaining inapplicable indicators where needed. So, every year, we’ve learned from our experience – trying to make our reporting process more efficient and the report more reader friendly.

G&A: Talk about your Materiality process – what is involved?

MK: G4 required that we dedicate a considerable amount of time to carrying out a materiality assessment and disclose that methodology in the specific indicator responses (G4-19-21).

We had to develop a methodology that applied to our development-oriented business model, incorporated feedback from our myriad stakeholder groups (clients, civil society, investors, to name a few), and simultaneously allowed us to determine the sustainability impact of the aspect considered.

We looked at the AA 1000 five-step process, ISO 14001, and the Natural Step process, and then created our own approach to meet our specific needs – one that looks at financial and reputational risk, stakeholder concern, and sustainability impact. This is the first time that we applied the approach and since G4 is so new, we really had no good examples to follow. You will note we have a simplified version of the methodology on our website currently. We hope next year to validate the process and upload a more robust response.

G&A: What’s the worldview of the institution as you prepare your “progress report” for the user base?

MK: Lots of exciting things are happening at the Bank right now. We are undergoing a period of change, one that would help us achieve the two goals we have set: reducing extreme poverty globally to 3 percent by 2030, and boosting incomes for the bottom 40 of the population in developing countries. President Kim has made it clear that sustainability frames these two goals – a sustainable path of development and poverty reduction would be one that: (i) manages the resources of our planet for future generations, (ii) ensures social inclusion, and (iii) adopts fiscally responsible policies that limit future debt burden.

In this effort, addressing climate change is key. We are currently working with 130 countries to take action on climate change—helping cities to adopt green growth strategies and develop resilience to climate change, developing climate-smart agricultural practices, finding innovative ways to improve both energy efficiency and the performance of renewable energies, and assisting governments to reduce fossil fuel subsidies and put in place policies that will eventually lead to a stable price on carbon.

A lot is happening, but I’m really excited that we began tracking the GHG footprint for specific sectors including energy and forestry within our lending portfolio. Within the next three years we expect to be publishing this information – as currently we only report on our corporate carbon footprint – in both our annual sustainability review and the Carbon Disclosure Project (CDP). We are working towards more comprehensive reporting.

This is important, not just for us being a model of a sustainable institution, but also for our stakeholders, especially sustainable and responsible investors who invest in our “green bonds,” that benefit projects related to climate change.

We are proud to say that the World Bank helped start the development of the quickly-expanding green bond market – the program recently reached a milestone of USD 4 billion in issuance, helping create and develop a market that raises funds to support climate activities – one that will support future climate finance.

I’ll stop there and urge the reader to read more about the Bank’s efforts to achieve its ambitious goals in the Sustainability Review online (http://crinfo.worldbank.org).

G&A: Thank you Monika. We will be watching as other financial sector institutions transition to G4 guidelines over the next two years. The World Bank example will be helpful to the financial sector partners, we’re sure.

Footnote: As we prepared this blog post, news came from the Global Reporting Initiative (GRI) that as of November 4, 2013, 84 organizations had signed on to the new initiative – the G4 Pioneers Program. Organizational Stakeholders (OS), organizations that support the GRI, commit to producing a G4 report in their next (reporting) cycle. The program is interactive, and designed to be knowledge-sharing (webinars, focus groups). We will be following the Pioneers and will bring you updates on the program’s progress.

CalSTRS Shows Way on Corp Gov Issues

One of the largest public employee pension funds in the USA is the California State Teachers’ Retirement System (CalSTRS), which has US$160 billion in Assets Under Management and serves 800,000 beneficiaries.  As the fund managers say, “We have an obligation to be responsible stewards of the retirement funds of California’s educators.”  And corp gov activists they are!

That includes being an activist and engaged institutional investor and focusing on issues [critical to fund managers] when CalSTRS engages with companies in the investment portfolio. The fund just issued  its very first Corporate Governance Annual Report (2013), which explains investment policies, governance philosophy, partnerships (example, with the Council of Institutional Investors/CII, the fund’s trade association; Ceres; UN Principles for Responsible Investment/PRI, of which CalSTRS is a signatory,  Investor Network on Climate Risk/INCR, a project of Ceres); and an explanation of corporate engagements.

Issues in focus for corporate engagement discussions include Exec Comp, Say on Pay; Majority Vote Standards; Diversity of Boards; and (of course) Sustainability.  The fund is an activist in filing and supporting other investors’ sponsored shareholder resolutions at proxy voting time.

In 2012 CalSTRS voted nearly 7,000 meetings — 3,000 U.S.A. and 4,000 non-US companies in portfolio.  Some 24,000 proposals were considered for the US companies and double that for non-US companies. 

CalSTRS believes that “good governance contributes to better long-term sustainable performance. Asset managers hired by CalSTRS take large positions in companies and are required to be active in engaging with boards and senior management to “undertake value-driving change…” Eight partnerships with asset managers are identified in the report.

This is a good primer if you are interested in learning more about what large US activist pension funds are focusing on in both the traditional governance and (newer) sustainability areas.  It’s available on line at the CalSTRS web site: http://www.calstrs.com/news-release/calstrs-releases-first-annual-corporate-governance-report

P.S.

Matthew Scott, Editor of Corporate Secretary in his timely and information email newsletter is informing his audience of influencers – corporate secretaries – of the CalSTRS governance report and suggesting that this is one way for board governance influential to better understand the large public fund’s focus on corporate engagements. He characterized the report as “a definitely a positive development for the corporate governance industry…”)  You can contact Matthew at Corporate Secretary magazine (Cross Border Publications) and follow him on Twitter – @corpsecmag

The Facts about FACTS / and New Name – Trust Around the World

G&A Institute’s Q&A With Barbara Kimmel – Trust Across America / Trust Around the World

We shared news in our May issue about TrustAcross America –now named Trust Around the World. Readers were interested in learning more about the organization and its activities. Here is our interview with co-founder Barbara Kimmel. Continue reading