ESG in Space: Sustainability in the Growing Space Economy

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Guest Post by Ian Christensen, Director of Private Sector Programs, Secure World Foundation

Without realizing it you likely use or access services provided from space systems on a daily basis.

Far from being just rocket launches or space exploration missions,  space-based applications, services, and data contribute to many societal services that are woven into the infrastructure of the global economy.

As our reliance on space technology grows, so do the concerns over the responsible use and sustainability of the space environment.

The space sector itself is emerging as a growth segment in private investment – with expectations of a trillion-dollar market within the next 20 years (growing from something around US$400 billion globally today).

Companies like SpaceX, Amazon Kuiper, and Planet are pushing new business-to-business and business-to-consumer markets while a wave of so-called “new-space” start-up companies push into emerging applications in areas as diverse as satellite life-extension, satellite traffic management, and lunar commerce.

All building on a base of space industry output from established companies such as Lockheed Martin, SES, Viasat, and others.

Today the majority of spacecraft in orbit are operated by the private sector – not by governments – as the space domain becomes increasingly characterized by commercial activity. Investors – and public markets – are only just beginning to understand the true nature of the space market.

As with any growth sector, this trend toward privatization calls into the economic sustainability while at the same time raising questions of on-orbit environmental sustainability.

Upcoming Event: On June 13th and 14th 2023, experts, policymakers, and industry leaders will gather at the 5th Summit for Space Sustainability in New York City to highlight the tools and approaches the global space community is using to address the risks to the sustainability of space activities and grow opportunities for all.

A key aspect of space sustainability is the reality that the actions of one actor in the space domain can affect the ability of others to safely operate. Growing a space economy – and returns from it – will be easier if the environment is stable. There are risks to this stability.

 Space is a naturally hazardous environment, from extreme temperatures, to lack of accessibility, to solar weather and radiation.
 Space debris is a growing concern that requires management. According to the European Space Agency, in low Earth orbit there are currently 36,500 space debris objects greater than 10 cm in diameter and 1,000,000 space debris objects between than 1 cm to 10 cm in diameter. All of which can be lethal to operating satellites.
 Increasing launch and satellite constellation deployment activity, providing societal and economic benefit, but introducing concerns about orbital crowding and terrestrial environmental impact , while highlighting the need for improved debris mitigation action.
 Geopolitical issues, including development of counter space capabilities and the conducting of deliberate, destructive antisatellite (ASAT) tests, could have long-term implications on the security of space and impacts on commercial space applications.

There is a need to think and operate intentionally about the impact of space activities for all stakeholders, including on the stability of the space environment; while at same time delivering business results for shareholders, investors, and companies.

Risks to space sustainability are also business risks, with the potential to impact the near and long-term returns from space-sector investments.

These trends have resulted a growing conversation about – and commitments to – space sustainability in the space industry. As a way to manage and communicate these risks, the principles of environmental, social, and governance (ESG) management, are being translated to space activities.

Companies are also beginning to consider how the topic of space sustainability integrates into their ESG priorities, risks, and opportunities:
1) How can the space sector create new business opportunities by contributing data and services to sustainability performance and monitoring on Earth?
2) What metrics, standards, or policies should be developed to ensure responsible management of the space environment and mitigate operational risk for all space actors?
3) How do responsible practices for operating in space support equitable access to, and use the space environment and its resources?

With a thematic focus on the corporate strategy and performance context for space sustainability, the Summit for Space Sustainability, will discuss the applicability of ESG principles to the space sector, both as a motivator for incoming investment and as a corporate management tool to address sustainability challenges in the space domain environment.

Can ESG be a meaningful way tool for addressing value, risk and performance in space sustainability?

ESG alone does not address all that space sustainability encompasses. Even with the increase of commercial and private sector space activities – space remains a government-driven market in terms of funding and in the role of national strategic interests in driving programmatic priorities.

Shifts in government priorities will have impacts on the ways use of the space environment evolves, and on the types of economic opportunity that might be realized.

Governance systems and frameworks – both domestically and internationally – will need to evolve, and will affect competition and cooperation in space development.

Space security trends will impact commercial and governmental operators.

The Summit for Space Sustainability

At the Summit high-level speakers representing industry, government, think tanks, and academia from around the world will give their thoughts on these important issues.

Keynote speakers include Lt. General John E. Shaw from USSPACECOM, United Nations Under Secretary-General Guy Ryder, and Julie Black from the UK Space Agency.

We’ll also be hosting senior international space industry speakers from Canada, UAE, Portugal, India, Luxembourg, and Mexico along with a significant contingent of US government presenters from the Office of Space Commerce, the National Security Council, the White House Office of Science Technology Policy, NASA, and the U.S. State Department.

The event will be held on June 13-14 at Convene on 117 West 46th Street, New York, NY. Registration is open.

Links:

The Summit, June 13-14 in New York City – https://swfsummit.org/

CNBC:  Space Industry on Way to Reach $1 trillion revenues by 2040 – https://www.cnbc.com/2022/05/21/space-industry-is-on-its-way-to-1-trillion-in-revenue-by-2040-citi.html 

Space News:  Guarding Against Greenwashing in Space – https://spacenews.com/op-ed-guarding-against-greenwashing-in-space/

ESG – Threat to Humanity? Opponents Think So –Pushback on Actions to Address the Climate Crisis

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

Question:  How long ago was it [that] when you mentioned “ESG”, people would say ‘huh” or ask, “what’s that”? 

We sure have moved pretty a far distance from those times.  Now ESG is seen in some quarters as “a threat” to the citizens and especially the well-being of public finance (at least in the Republican-led states),

Alas, also in the halls of Congress where we see frequent and heated “pro and con” debates about ESG, climate change, sustainable investing, corporate sustainability…and more.  ESG = the hot topic for some politicians!  Really?  Believe it!

“The Whole of Government” approach is scaring rightward-leaning politicos.

To remind us of an important development that helped to set the scene of the climate crisis debate:  in the first days of the Biden Administration (one week in, January 27, 2021), President Joseph Biden signed a sweeping Executive Order – “On Tackling the Climate Crisis at Home and Aboard” – that set out the rigorous contours of current and planned policies, actions and financing that were described as “the whole of government” — with federal, state and local governments to be focused on various climate change matters.

The EO offered the nation this perspective:  ”The U.S. and the world face a profound climate crisis.  We have a narrow moment to pursue action at home and abroad to avoid the most catastrophic impact…and to seize the opportunity that tackling climate change presents…”

The White House put the climate crisis in perspective and explained what the Federal government could and would do, also involving states and cities in a range of planned actions intended to mitigate climate-related damage to humanity, protect the national and global economies, and to protect and fortify public and private infrastructure, natural resources, oceans, and a range of physical assets.

Many people cheered (at last!) while others jeered.

The political opposition to the Biden plan was instant, and criticisms were thereafter steadily voiced at federal, state and local levels.

As the various arms of government began to develop policies, legislation, rules and regulations, there was consistent pushback by political opponents. The cabinet offices and Biden appointees to independent agencies put new or amended rules in place, or embarked on rule making.  Those specific actions enabled opponents to pounce.

Case in point:  the yes, no, yes, no again positions on ERISA oversight of pension funds. (ERISA – Employee Retirement Income Safety Act of 1974.)  This Federal law established minimum standards for most voluntarily-established employee  retirement and health plans in private industry to provide protection for individuals in the plans – supervision is by the U.S. Department of Labor.

You see, as ESG factors became more material to asset owners (i.e., the various public employee pension systems), and their appointed asset management firms (like BlackRock and State Street), the Department of Labor (a cabinet office now headed by Democrats) approved a Final Rule (December 29, 2022) to “address the chilling effect and other potential negative consequences caused by the Prior Rule with respect to consideration of climate change and other ESG factors”.

The prior rule (downgrading the importance of material ESG factors) was put in the place by the Trump Administration.

This ”yes, no” about ESG for pension funds goes back and forth goes back several decades, depending on who is sitting in power in the White House (and therefore appointing cabinet and agency leadership).

And so, the latest “chilling effect” put in place by DOL leaders was the Final Rule adopted in November 2020 during the Trump years that set out to discourage plan fiduciaries’ interest in considering ESG in managing investments.

This is but one skirmish in the public sector ESG arena, where we see “woke” [outside] asset management firms being punished or threatened to be punished by state and city elected and appointed public officials for embracing ESG issues and topics properly regarded as material factors in institutional investment management.

Another example we’re sharing with you of contours of the struggle in the ESG arena:  Governor Ron Desantis is busily organizing an “anti-ESG” alliance with 18 other state governors.

This to “protect individuals from the ESG movement that threatens the vitality of the American economy and  American’s economic freedom”. (This could be from one of the great Florida humorous fictions works of author Carl Hiassen!)

With this and other actions, we probably are seeing an important campaign platform shaping up for the 2024 state and national elections.  No ESG! No CRT! No woke here!

Of course, intelligent folks recognize all of this is a means of distracting, and directing attention away for the antics of certain state and federal elected officials.  Who have no real answers to today’s pressing ESG issues – like global warming!

The G&A Institute team continues to monitor and assess the actions of the public sector ESG opposition and we’ll share important developments with you in this newsletter.  Here’s a sampling of related actions in the U.S. and abroad.

Top Story/Stories

Also:  The Covington Law Firm has published an excellent review of the DOL’s new rule and the “ping-ponging” of rule making regarding climate and related matters:  https://www.cov.com/en/news-and-insights/insights/2022/12/dols-new-rule-on-erisa-investment-duties-and-its-relationship-to-esg

 

 

BlackRock CEO Larry Fink Addresses Key Issues For Investors

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March 2023

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

As the interest in ESG continues to rise in the capital markets and corporate community, in recent years the business and financial media have focused attention on the annual letter that CEOs of many publicly-traded companies receive from Larry Fink, Chair and CEO of BlackRock.  

The annual letters (one for corporate CEOs and one for BlackRock investors) has set out important themes for both corporate and capital market leaders to consider (including fiduciaries entrusting their assets to BlackRock to manage).   

The annual letter to corporate CEOs is described as “on behalf of our clients” – BlackRock’s fiduciary/clients. 

This year, BlackRock published one letter – for the firm’s investors, to be shared with stakeholders. 

In these much-anticipated annual missives, Founder/Chair/CEO Fink outlines what the world’s largest management firm has in mind as his organization helps to manage billions’ of dollars of portfolio investments for institutional clients.  

Explains Mr. Fink: “I write these letters as fiduciary for our clients who entrust us to manage their assets – to highlight the themes that I believe are vital to driving durable long-term returns and to helping them reach their goals.”

The recent annual letters have contained important information for both corporate leaders and the investment community. BlackRock is the world’s largest asset management team, with US$10 trillion in assets under management, 20,000 employees, offices around the world, and clients in 100-plus countries.

BlackRock clearly self-identifies as an asset management firm serving fiduciaries with strong ESG in focus, striving to be the leader of ESG investment in the capital markets.

In advertising in the United States of America, and on its corporate web site, BlackRock points out that it “helps 44 million Americans retire with dignity”. (This is through the management of assets in employee retirement programs.)

There’s good reason for that point of emphasis: In the U.S., a growing number of Republican political leaders have been criticizing asset managers BlackRock, State Street, and Vanguard as “woke” organizations, claiming that BlackRock caused such clients as public employee retirement funds to not achieve the best ROI by using the ESG lens.  (The opposite is true, BlackRock CEO Fink pointed out at the recent Davos gathering).

In recent years the closely-followed “Chairman/CEO-to-CEO” letters from BlackRock’s leader have focused on these themes:

2022: “The Power of Capitalism”
2021: “A Tectonic Shift Accelerates”
2020: “The Fundamental Reshaping of Finance”
2019: “Purpose and Profit” (this followed The Business Roundtable re-stating its mission to focus on “purpose” of the member corporations).

In 2023, the focus of the investor letter is on the positive aspects of sustainable investing — with the theme, “Making Investing More Accessible, Affordable, and Transparent to More People is Core to Our Mission at BlackRock.”

The reason? “As we start 2023,” Larry Fink writes, “it is clear to me that all of our stakeholders – BlackRock shareholders, clients, employees, partners, the communities where we operate, and the companies in which our clients are invested – are facing so many of the same issues. For that reason I am writing a single letter to investors, and we are sharing it with all of our stakeholders.”

Included in the 2023 letter: The BlackRock Story. Total returns since the company’s IPO In October 1999. An economy of fragmentation (describing important changes taking place in recent years). Building a hopeful future for retirees. Investing for the future as act of hope and optimism. Strategy for long-term growth. Helping clients navigate and invest in the global energy transition.

That last theme is at the root of some Red state leaders attacking the firms – oil & gas and coal companies are key constituencies.

Despite organized Republican opposition to BlackRock’s embrace of ESG factors in investment decision making, consider this is the BlackRock letter to its investors:

“BlackRock captured a leading share of long-term industry flows in 2022 and delivered a positive organic base fee growth for the year.

Over the past five years, BlackRock delivered an aggregate $1.8 trillion in total net inflows, or average 5% average organic asset growth, compared with flat or negative industry flows.”

Consider the “why” of Larry Fink’s letters:  “Part of supporting our clients includes speaking out on issues that are important to their investments. I’ve long believed that it is critical for CEO’s to use their voice in the world – and there’s never been a more crucial moment for me to use mine. I will do so whenever and wherever I believe it can serve the interests of our clients and the firm.”

We’ve included the link to the Annual Letter to Investor for your reading and a link to the Harvard Law School Forum on Corporate Governance (the Annual Letter is posted there in different format). This year’s letter is worth reading as we contemplate the effects of the Red state attacks on ESG and “woke” asset managers.

For your reference:

Larry Fink’s Annual Chairman’s Letter to Investors (Source: Black Rock):    https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter

Harvard Law School Forum on Corporate Governance review of the letter:

https://corpgov.law.harvard.edu/2023/03/17/larry-finks-annual-chairmans-letter-to-investors/


U.S. Large Cap ESG Progress – Barron’s Magazine Reports the Good News

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March 8, 2023 – by Hank Boerner – Chair and Chief Strategist, G&A Institute

Literally hundreds of thousands of loyal readers closely follow the content of Barron’s magazine, sister publication to The Wall Street Journal — because Barron’s is an important investor-focused publication reaching almost a half-million subscribers each week with keen interest in content about the capital markets.

Six years ago, Barron’s began to focus more intently on ESG and sustainable investment topics.  That was an important signal of the importance of ESG information to capital markets players and a wide range of investors. 

Each year since Barron’s has analyzed the largest U.S. publicly-traded companies and publishes its “100 Most Sustainable U.S. Companies” ranking.

The rankings are done in collaboration with Calvert Research and Management, a major asset manager and mutual fund advisory company that has been focused on sustainable investing for many years.

This year’s results are out; the methodology to rank the 100 most sustainable companies includes:

• Calvert starts with the largest 1,000 publicly-traded U.S. companies by market cap.

• Calvert researchers apply more than 230 ESG performance indicators for these companies using data from seven rating companies, including MSCI, ISS, and Sustainalytics, along with other data and Calvert’s internal research.

• The data is organized into 28 key topics sorted into five categories based on major stakeholder constituencies (Shareholders, Employees, Customers, Community, the Planet). For example, key topics for shareholders included board structure and exec compensation, while key topics for the planet included GHG emissions and water stress.

• Calvert assigned a score of zero to 100 in each category based on company performance and then created a weighted average based on how financially material the category was for that company’s industry. Poor performance by a company in any of the key categories that was financially material would be automatically disqualifying.

The featured story is edited by Lauren Foster, who writes: “ESG may sound like a meaningless acronym. To some politicians, it’s nothing less than a threat to American capitalism, and it needs to be reined in.”

The story goes on to punch holes in the Republican-led arguments that ESG is a threat to capitalism, or to state employee pension funds, or to investing in general.

Barron’s notes for its investment readers that 63 of the 100 ranked companies outperformed the S&P 500 Index® last year and the list overall outperformed the broad index, delivering a negative 9.5% return in 2022 vs a negative 18.1% for the entire S&P 500 Index.

This is an important feature story you will want to read and share with colleagues. The G&A team is pleased and proud to say that a number of our valued clients appeared on the 2022 list, including some for the first time. Onward, sustainable companies, and upward ESG investing!


Top Story:

• https://www.barrons.com/articles/most-sustainable-esg-us-companies-1b5f70fd?mod=Searchresults

Finding a Way Forward So ESG Advocates and Critics Can Get On the Same Page

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March 3, 2023

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

Woke! Woke!  And Anti-Woke!  The word is now an important part of the political and cultural conversation in such states as Florida, where it is becoming a vigorous political campaign cry.  Woke comes to Florida to die, the present governor eagerly proclaims. 

Where did the expression “woke” come from? Wikipedia offers us this explanation: “Woke is an adjective from African-American Vernacular English meaning [being] alert to racial prejudice and discrimination.”

Think about the impact of the tragedies of the George Floyd, Breonna Taylor, and Trye Nichols deaths and the founding of Black Lives Matter as importance pieces of the “alerts” to the Black communities across America. But woke moved to the mainstream as well. 

As the use of the term spread to a broader range of topic areas, we could say that more of the population is being “woke” — what this really is about is being “awakened” and “alert” to changes in certain areas of interest and importance in our business and personal lives.

Such as (one example) as the importance of ESG issues to asset managers and corporate leadership.  

Now, unbelievably, embrace of ESG in Corporate America and the financial markets is a “woke” thing  – something to be feared, says the governor of the Sunshine State.

The increasing awareness of the importance of ESG material issues accounts for the shift in focus beyond just the reported financial results by fiduciaries to consider an ever-widening range of corporate governance, environmental and societal issues. (Of course now including diversity, inclusion, equitable treatment for all stakeholders.)

Consideration of ESG is now a fundamental part of asset management and fiduciary duties in the U.S. and in Europe.  But — there is growing opposition to the success of sustainable investors (like asset managers embracing ESG.)  Really. 

We’ve been sharing news and perspectives about ESG and woke and the attacks by certain Red states attacks on both ESG and woke; these are strawmen for public sector leaders who now target and punish those asset managers adopting ESG analysis and methodologies in their management of clients’ assets.  

The issue now is front and center in the halls of Congress as well. 

The encouraging news there is that state pension fund managers are pushing back, recognizing that in their states ignoring ESG issues will cost their fund (with lower returns on investment). 

In the Harvard Business Review, Two authors put many of the issues in perspective for us as they offer possible solutions to rescue ESG from the Culture Wars. They are well versed in the many aspects of ESG, sustainable investing, and corporate sustainability.

One is former Harvard B-school professor Robert Eccles (now visiting professor of management practice at Said Business School, and a lifelong Democrat) and, Daniel Crowley, a long-time GOP leader who served as general counsel to House Speaker Newt Gingrich and who now leads the global financial services practice as K&L Gates LLP.

Bob Eccles is a founder of the Sustainable Accounting Standards Board (SASB); Daniel Crowley lead government relations efforts at the Nasdaq Stock Exchange and National Association of Securities Dealers (NASD). They speak about ESG from a deep and varied background in financial, business, research, and public policy.

A few highlights of their shared perspectives in the HBR piece:

• The planned congressional hearings on ESG presents opportunity to put facts on the record and begin the process of working toward a bipartisan consensus to take the “political passion” out of ESG discussions. (The 2024 president and congressional contests are just getting underway.)

• The key will be to bring ESG definitions back to an original intention, “as a means for helping companies identify and communicate to investors the material, long-term risks they face from ESG-related issues”.

• Climate change is such a risk; fossil fuel companies for whom future revenues would be greatly reduced if governments start to tax carbon.

• For capital markets to properly allocate capital, investors need companies to disclose material investment risks. ESG, they write, is simply about identifying material risk factors that matter.

• The coming House hearings on ESG could be political theater — or a learning opportunity to clarify what ESG is/isn’t.

This HBR feature article is compelling reading for those on both sides of the ESG equation, for both ESG advocates and critics. Framing the hearings as explorations of not about being “woke” but on the importance of materiality is the way forward, the authors posit.

We urge your reading and sharing of Bob Eccles’ and Daniel Crowley’s enlightening perspectives.

It is unfortunate that the U.S. Culture Wars now drag anti-ESG views into the vital conversations and political theater about addressing the climate change crisis.

The team at G&A Institute will continue to monitor and share top-line results with you as these vital conversations (and shouting matches) focus on the importance of ESG. 


The Harvard Business Review article for your reading – tune in to the “hopes” and solutions of the authors:

Rescuing ESG from the Culture Wars (Harvard Business Review)

https://hbr.org/2023/02/rescuing-esg-from-the-culture-wars


Beware, The Culture Warriors Have New Strawmen: Dangers of “ESG” and “Woke Capitalism”

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End of February 2023

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

New threats to ESG detected in America’s Red-controlled states:  The internal culture wars now include an unlikely frontal assault on the alleged “dangers” posed to institutional investors (state and city pension funds and the states; public financing) by professional asset managers who embrace sustainable investing approaches and who factor ESG analysis for their portfolio decision-making (in the management of client assets).  

Corporate sustainability leaders and savvy investment managers are asking, “huh?  “why”?

The threat of “ESG” joins such current strawmen as Critical Race Theory, “Woke” Capitalism, Don’t Say Gay (in the State of Florida), the allegations of certain “grooming” books being found in school libraries, and other specious arguments set up by political conservatives and Red state public sector leaders to gain points with the Republican base.  And with right-wing media outlets. 

The assault on ESG is mainly focused on the prominent asset management firms that serve state and city public employee pension plans and healthcare plans. These asset management firms are told to abandon ESG principles (and their focus on the risks brought by the climate change crisis to investments) and related portfolio management approaches — or lose the state and/or city investment and capital raising client.

Political leaders in such states as Florida, Texas, West Virginia, Louisiana, and Missouri are openly opposed to “woke capitalism” as they see it and have targeted BlackRock, State Street, Vanguard, and other large asset management firms embracing sustainable investment.  (Consider that these three organizations have significant levels of investments in many publicly-traded companies.)

The leading ESG ratings firms are also in the cross hairs; 20-plus Republican state attorneys general also challenged ISS and Glass Lewis as both advisory firms expanded their traditional governance work to including “S” and “E” issues through a more comprehensive ESG lens. (These firms advise and provide services to public sector pension plans.)

Some Red state leaders are cutting ties with BlackRock and other firms and moving to prohibit the Wall Street organizations from management of state monies (such as their public employee pension systems).

BlackRock CEO Larry Fink fired back at the annual Davos gathering to say that his firm, while losing about $4 billion in the public sector pullback of funds to be managed, has seen the flow of new money into BlackRock to manage dwarfing that – new funds to be managed by BlackRock topped $200 billion in year 2022, he told the Davos crowd.

In his annual letter to corporate CEOs, Larry Fink wrote in 2022 that “stakeholder capitalism is not about politics, it is not ‘woke’, it is capitalism….” Helping clients transition their investments toward a lower-carbon economy is helping BlackRock (with $9 trillion-plus AUM) to attract new assets to manage, CEO Fink explained.

The underlying concern of the Red state officials is really about protecting fossil fuels interests  – like their home states” oil, natural gas, and coal assets. Texas and Louisiana economics are heavily dependent on production of fossil fuels and that no doubt leads to  the political opposition to ESG and minimizing recognition of the dangers posed by the climate crisis.

While BlackRock and other asset managers may not yet eliminating fossil fuels from the assets managed, or in products offered to investors, there is trimming going on (at other major asset management firms and in a number of state investment funds).  There is also pressure being applied to traditional oil & gas firms to innovate and invest in renewable energy production. 

Consider:  in 2022, renewable sources accounted for 22 percent of energy production while coal accounted for 20%. 

Responding to the misguided opposition to ESG in nine states, Democrats in the House of Representatives formed a sustainable investment caucus to advocate for ESG policies and actions.

Said caucus chair Sean Casten of Illinois to The Hill editors: “Given the significant growth of AUM in funds that prioritize ESG factors, Congress has a duty to craft policies that provide investor protection and transparency ofd information to market participants.”

In an opposition move, House Republicans at month’s end moved to block the Biden Administration action on “allowing” pension plan administrator’s to consider ESG factors in their management of fiduciary funds.  The Republicans passed a resolution that would reverse the U.S. Labor Department rule that allows such consideration.  

This is a see-saw event; depending on which party is in the White House, under ERISA rules, fund managers have been allowed to consider ESG/and prevented from using ESG considerations in fund management.  

The House Republicans claim that using ESG would results in higher fees for “less-diversified” investments in “lower-performing” fund portfolios. (Read:  less fossil fuel investments in sustainable funds.)  

The Securities & Exchange Commission has a rule under consideration to mandate disclosure of GHG emissions by publicly-traded companies. It is expected that the Final Rule could be issued sometime in Q1 2023.

This move no doubt will set off a firestorm in Red state territory, and among the congressional delegations from those states. For public companies operating in those states that have, with sizeable operations in the European Union, new ESG disclosure rules are also being put in place in the EU.  

This year we will see significant conflict in the culture wars over climate change measures at the national, state and even city levels. 

The Federal government leads now in addressing the climate crisis, and Red state congressional leaders could challenge to the SEC’s legislative authority (to enact corporate ESG disclosure rules) when the Final Rule is issued (bringing legislative and judicial action).

The G&A team selected the Top Stories (below) on these conflicts.  We’ll keep you updated throughout 2023 on the culture war battles focused on climate change.

We are at an important inflection point in the effort to seriously address the climate crisis, and in ultra-partisan power circles now, the question posed is: which side are you on?

Top Story/Stories

• This group is sharpening the GOP attack on ‘woke’ Wall Street (The Washington Post) https://www.washingtonpost.com/climate-environment/2023/01/30/climate-change-sustainable-investing/
• House Democrats launch sustainable investing caucus (The Hill)  https://thehill.com/policy/equilibrium-sustainability/3830314-house-democrats-launch-sustainable-investing-caucus/
• Disclosure Rules On Track for Issuance by June (Thomson Reuters) https://tax.thomsonreuters.com/news/new-climate-and-sustainability-disclosure-rules-on-track-for-issuance-by-june/
• Politicians Want to Keep Money Out of E.S.G. Funds. Could It Backfire? (The New York Times – subscription required)  https://www.nytimes.com/2023/01/30/your-money/red-states-esg-funds-blackrock.html
• What’s Behind The ESG Investment Backlash (Forbes)  https://www.forbes.com/sites/christinero/2023/01/29/whats-behind-the-esg-investment-backlash/?sh=5929816c3158
• Davos 2023: BlackRock U.S. inflows dwarf $4 bln lost in ESG backlash -CEO (Reuters)  https://www.reuters.com/business/finance/davos-2023-blackrock-us-inflows-dwarf-4-bln-lost-esg-backlash-ceo-2023-01-17/

It’s 2023 – What Will We See in Climate Crisis Action in the Public Sector? Stay Tuned!

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January 2023

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

Here we are weeks into Year 2023 – and so as we plunge into the new year, we could ask, what is in store for public sector action to address critical climate change challenges?

To remind us, we are now in year three of the Biden-Harris Administration’s “Whole of Government” strategies (they took office January 2021).

Upon settling in the Oval Office President Joseph Biden quickly returned to the historic Paris Agreement that was abandoned by his predecessor.

In just a few more days, the president’s Executive Order (issued January 27 2021) created a sweeping approach to aligning Federal government strategies, action, finances and more — formalized in an Executive Order titled, “Tackling the Climate Crisis at Home and Abroad”.

Main sections with volumes of details for actions included:

• “Putting the Climate Crisis at the Center of US Foreign Policy and National Security”;
• “Taking a Government-Wide Approach to the Climate Crisis;
• “Use of the Federal Government Buying Power and Real Property and Asset Management”;
• “Empowering Workers Through Rebuilding Our Infrastructure for a Sustainable Economy”;
• “Empowering Workers by Advancing Conservation, Agriculture, and Reforestation”;
• “Empowering Workers Through Vitalizing Energy Communities”;
• “Securing Environmental Justice and Spurring Economic Opportunity”.

The introduction to this sweeping Executive Order stated: “The U.S. and the world face a profound climate crisis. We have a narrow moment to pursue action at home and abroad in order to avoid the most catastrophic impacts of that crisis and to seize the opportunity that tackling climate change presents.”

President Biden enlisted all of the cabinet agencies and many important organs of the Federal government in the effort, and instructed that “the buying power of Federal procurement and real property, public lands and waters, and financial programs” be aligned to support robust climate action. 

Keep in mind the Federal government of the United States of America is the largest buyers of goods & services in the nation.  Just think about all of the government vehicles on the road today – and the EV’s that could replace them.  And the many buildings that the Federal agencies lease, rent or own.  (These will have to meet new climate resilience measures.)  Think about the huge purchases by the Department of Defense.  And on and on!

The President explained in 2021:  An “immediate, clear, and stable source of product demand, increased transparency and data, and robust standards for the market…will help to catalyze private sector investment into, and accelerate the advancement of America’s industrial capacity to supply, domestic energy, buildings, vehicles, and other [necessary] products and materials.”  The stuff of the American nation’s sustainability efforts. 

The power and prestige of the United States would be a priority in relations with other nations and such multilateral organizations as the G7, the G20, and other forums on climate change actions. In focus: clean energy, aviation, shipping, the oceans, the Arctic, sustainable development, and migration (a 2023 critical issue for sure).

How are we doing?  We’ve selected for you a few timely updates on “how we’re doing” with the very comprehensive Biden climate crisis plan.

The recent storms battering California, the Heartland states, and coastal areas, are constant reminders of how serious the climate crisis has become. Snow, volumes of rainfall, floods, tornadoes, hurricanes (cyclones), high winds, fires and more fires — all signs the climate is changing (for the worse). 

We are seeing public sector action increasing along the same lines on the European continent as well, and European Union climate change actions that will affect many U.S. multinational companies,

As we think about all of this, despite political pushback in 2032 we should not lose sight the sweep of the January 2021 Executive Order issued as the very first days of the Biden Administration.

Here’s the document for you: https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/

And here is a brief example of the kinds of follow up f- rom July 2021:
https://www.whitehouse.gov/briefing-room/statements-releases/2022/07/20/fact-sheetpresident-bidens-executive-actions-on-climate-to-address-extreme-heat-and-boost-offshore-wind/

Top Stories – Focus on the U.S.

Biden-Harris administration releases first-ever blueprint to decarbonize America’s transportation sector (US Department of Transportation)

What to expect on climate change from the New US Congress (Brookings Institution)

Inflation Reduction Act will see US get serious on climate action in 2023 (New Scientist)

Davos 2023: EU to counter U.S. climate game changer with own green deal (Reuters)


Here’s the Details on USA Corporate ESG Reporting Trends

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December 1, 2022

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

In the early issues of our company’s newsletter (G&A Institute’s Sustainability Updates) more than a decade back, we had a feature that seems quaint today: we published the list of U.S. corporate ESG reports that we had found in manual searching for that issue.

The reports we “captured” required considerable time and effort to find.

You see, most companies would publish their “corporate social responsibility”, “corporate environmental”, and (a few) “sustainability” reports with no fanfare, no announcement, no call to readers to come look at the report.

And so we had to look here, there and everywhere to find a new corporate report to share with our newsletter readers.

The percentage of reports published compared to the total universe of large caps that could have published reports was tiny – very tiny, indeed.

But we noticed in our constant monitoring that the number of such reports published by U.S. headquartered companies while small was steadily increasing.

We wondered then, what was happening in the universe of S&P 500 Index© firms, representing a huge part of the available equity investments on stock exchanges.  The S&P benchmark represented more than 80 percent of large-cap publicly=traded companies (to invite in). 

In those early days of what is now ESG reporting the European peers of U.S. companies published many more reports – so when a US company published a report, that was news we wanted to share!

We began a thorough examination of U.S. corporate ESG disclosure, looking at calendar year 2010 reporting to share in our first trends reports that we published in 2011. We found that just under 20% of U.S. firms included in the S&P 500 Index had published a report. That was encouraging, right?  A good sign for the future!

The following year (for our trends report of 2012, for 2011 corporate reporting) we were quite surprised to find that now more than half of the S&P 500 firms were publishing reports. And that volume rapidly increased to almost three-quarters of the firms by the next trends report (in 2013 for 2012 reporting).

And soon enough we were at nine-out-ten of the index companies were publishing ESG reports (far too many to list in the newsletter!).

Many readers of the annual trends report began to regularly ask us about the reporting activities of the next batch of publicly-traded companies large caps – those companies included in the Russell 1000 Index®.

We expanded the S&P 500 research four years ago to all of the R-1000 companies. Over the years we’ve seen U.S. corporate ESG/sustainability reporting become more sophisticated, more in-depth, and the content more valuable to stakeholders seeking ESG data sets and other information.

Today we devote many months of the year to in-depth research and analysis on corporate ESG reporting for these trends reports. This has become our signature research effort.

A talented team of G&A team members work with a highly-qualified team of analyst-interns (most of them participating in Master’s degree studies in sustainability topics) who scour corporate reports for details that we share in the trends report. You’ll see their names and backgrounds in the trends report.

From the beginning of this exercise in 2010 we have invited the best-of-the best of advanced sustainability academicians to be part of the journey. (We started with two outstanding analyst-interns that year for the first trends report – Dr. Michelle Thompson and Natalia Valencia).

Over the following years we’ve had an outstanding team each year to develop the contents of the trend report – and they’ve gone on from G&A internships to great careers in various sectors, we’re proud to say.

We always made the trends report available to all (at no cost) in the belief that the more information and intelligence on corporate ESG reporting that is available the more that stakeholders will use the information — and pass on their expectations to companies to provide more details in their periodic ESG disclosures.

That has worked, we’re told by a number of experts, to help encourage still more ESG disclosures by U.S. companies and to encourage asset owners and managers to look closely at the data and narratives disclosed by publicly-traded enterprises.

Over time, the content examined and data/narrative captured has become a powerful resource for the G&A team as they assist publicly-traded and privately managed firms with their ESG disclosure and reporting.

We have more to say about the trends report project in the 2022 edition.for 2021 reporting).  Here’s the link to the Trends report if you have not read it yet: https://www.ga-institute.com/research/ga-research-directory/sustainability-reporting-trends/2022-sustainability-reporting-in-focus.html

Our Honor Roll of present and past analyst-interns is here: https://www.ga-institute.com/about/careers/internship-honor-roll.html

Sustainability is a Talent Issue

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Guest Comments from Katheryn Brekken, Ph.D., Senior Research Analyst, Institute for Corporate Productivity (i4cp)

G&A Institute is a partner of i4cp, a global human capital research firm. We are pleased to share a post from Dr. Katheryn Brekken explaining the findings of a recent study by i4cp on the impact of human resources on sustainability.

Leaders wanting to make progress on their organization’s sustainability goals should look to human resources.

Research by the Institute for Corporate Productivity (i4cp), a global human capital research firm, found that organizations that make progress on their sustainability commitments are far more likely to have HR leaders who are highly involved in designing the strategy for social goals and programs and governance and environmental ones as well.

The study included survey data representing 191 business and HR leaders from 20 countries and explored HR’s role in organizations’ environmental, social, and governance (ESG) programs.

Among those reporting that their organizations are making progress on ESG goals, 79% said HR is highly involved in designing strategy for social goals and programs, 29% reported HR is highly involved in governance goals and programs, and 18% said HR is highly involved in environmental goals and programs.

The data found that organizations with solid market performance were far more likely to have a cross-functional team or group overseeing ESG and HR. Most respondents who reported that their organizations have been making major progress on their ESG commitments in the past two years have cross-functional teams that include HR, sustainability officers, legal counsel, and public or corporate affairs. For example, at Citi, the head of HR is part of an executive leadership team that drives the company’s ESG strategy.

“Given the labor market, and being the global bank that we are, it’s really important for us to think about human capital interests as part of our ESG strategy,” said Sam Santos, Citi’s Head of Diversity and Inclusion Strategy.

Having a diverse and inclusive global workforce is an important goal for Citi, so much so that they met their three-year aspirational representation goals and recently announced new ones.

And ESG goals are intertwined throughout other HR functions. For example, diversity, equity, and inclusion, including representation of women and racial and ethnic minorities at the managing director level, are part of senior executive performance management scorecards. This ensures that leaders are held accountable for making efforts toward diversity, equity, and inclusion, and other related ESG goals.

i4cp’s research identified specific workforce strategies that were significantly more likely to be adopted by organizations reporting making major progress on their ESG goals. These involve:

  • Including information about ESG commitments in onboarding materials
  • Providing compensation programs that incentivize progress on ESG commitments
  • Offering trainings to reduce waste and /or save energy and resources
  • Providing training to employees about policies such as anti-corruption or anti-harassment
  • Providing training to employees to reduce bias and microaggressions
  • Supporting employee resource groups/business resource groups) related to ESG
  • Offering elective discounts or benefits that promote certain ESG-supporting behaviors, such as subsidies to purchase electric cars, or paid leave to volunteer in the community
  • Organizing volunteer events that support ESG goals
  • Providing leadership development that promotes behaviors aligned to ESG goals

Among these strategies, involvement on the part of the learning and development team is clearly critical to help organizations make progress on their sustainability commitments.

An example of this from Citi is its Owning My Success (OMS) program, which provides mentoring and development to Black colleagues. The program provides participants with exposure to Citi’s senior leadership and supports professional and personal development. Over the course of several months, participants join group coaching circles, led by an external executive coach and a senior leader at Citi. Managers also take part in group coach­ing to better understand the experience of Black colleagues in the workplace. More than 700 Black leaders have participated in OMS since the program began in 2018, and the company recently promoted one of the largest and most diverse managing director classes in recent history.

“We have this wide range of stakeholders across the organization involved in our ESG efforts and HR is one of them. We engage our employees as part of this. We use the voice of our employees from surveys and our affinity networks are groups that are heavily involved as well. If you think about social change and how we can improve the environment, it’s through our own employees,” Santos said. “They further these initiatives.”

Click here to read i4cp’s full research paper.

COP 27 in Egypt: The United States Got Back To the Table

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November 2022

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

The top stories in ESG and sustainability in November included the coverage of the annual global climate meetings that took place in Egypt – COP 27 (the Conference of Parties), convened by the United Nations.

These meetings of about 200 sovereign nations’ leaders and other global influentials began in Rio de Janiero in 1992 (President George H.W. Bush was in his last year in office).

The position of the United States in the global talks (and the agreements that result) have see-sawed over the years in terms of staying at the table, and exerting leadership or not. The welcome news for 2022 is that the U.S. is back at the table. And at least for now, attempting to lead. 

This year’s meetings saw President Joseph Biden drop in to address the gathering. ormer Secretary of State John Kerry, now the U.S. Special Presidential Envoy for Climate, appeared to be playing a much more visible role than was the case during prior years (during when the Trump Administration was in charge and moving away from the COP talks and the Paris Agreement of 2015).  

It is fitting for the United States of America attempting to lead in the global efforts to address climate changes and the challenges posed  — the U.S. is the world’s largest economy and the second largest emitter of Greenhouse Gas Emissions. Use of oil and natural gas define the American economy and the culture of the nation.  The US is a major producer of and user of fossil fuel products. 

In his remarks at COP 27, President Biden “reclaimed” the country’s role as global leader in climate change actions and committed to help to address global warming at home and abroad.

The Biden Administration’s “Whole of Government” comprehensive approach to climate change was the centerpiece of his commentary to the gathered at COP 27.

Emphasizing the U.S. commitment to address climate change, President Biden told the summit participants: “I introduced the first piece of climate legislation in the United States Senate way back in 1986, 36 years ago. My commitment to this issue has been unwavering.

“And today, finally, thanks to the actions we’ve taken, I can stand here as President of the United States of America and say with confidence: The United States of America will meet our emissions targets by 2030. We are racing forward to do our part to avert the ‘climate hell’ that the U.N. Secretary-General so passionately warned about earlier this week. We’re not ignoring the harbingers that are already here.”

For domestic U.S. audiences, President Biden had this important news: “The United States became the first government to require that our major federal suppliers disclose their emissions and climate risks and set targets for themselves that are aligned with the Paris Agreement.

“As the world’s largest customer, with more than US$630 billion in spending last year, the government of the United States is putting our money where our mouth is to strengthen accountability for climate risk and resilience.”

However, while the U.S. government could leverage almost US$400 billions committed by Congress and the Administration to make investments in climate change solutions, “missing” are major investments to help other less-wealthy nations in climate change mitigation.

Not that President Biden was unsympathetic about helping other nations — . he has pledged to help developing countries with $11 billion each year to 2024 for transitioning to wind, solar, and other renewable energy sources.

Who Will Pay?  A Question Floating Above the Conversations

“Reparations” was the a key word circulating at COP 27 — who will help the less fortunate nations to address climate change issues? The expectations of less developed economies is that the rich peers, who generate the carbon emissions that affect the climate, will come to the aid of the nations they are negatively affecting.

While the U.S. expresses ambitions to help, with a divided U.S. Congress (keepers of the purse strings), the U.S. is not likely near-term to commit funds for other countries to address their climate change challenges.  The present state of affairs in US governance poses the question of whether the nation itself can continue on course to meet the goals of the “whole of government” approach to addressing climate change over changes of administrations. 

The “reparations” are about “loss and damage”. As The New York Times pointed out in its coverage of the COP meetings –  determining “loss and damage” funding is very difficult to define and loaded with potential legal liability for donating nations (such as for the U.S. and European powers).

Not that President Biden was unsympathetic about helping other nations. He has pledged to help developing countries with $11 billion each year to 2024 for transitioning to wind, solar, and other renewable energy sources.

One of continuing stories we see as this conference (COP 27) ends and the almost 200 nations that participate in the Conference of Parties are back at home dealing with climate change will be increasing focus among the participants on the “who pays” question going forward. The G&A team will be being staying tuned and will keep you updated as we move toward COP 28.

President Biden’s Comments at COP 27:
https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/11/11/remarks-by-president-biden-at-the-27th-conference-of-the-parties-to-the-framework-convention-on-climate-change-cop27-sharm-el-sheikh-egypt/