So If The US Equities Market Cools Off — What Happens With ESG Investing Strategies?

Michael Shagrin writing in Fundfire (a Financial Times service) poses the rhetorical question:  Will ESG investing strategies be set up for a fall “if the U.S. equity markets cool off”?  He examines the results of a recent survey by Commonfund that suggests that institutional investors may grow “suspicious” of ESG strategies in a downturn.

Just below half of survey respondents said they didn’t expect that SRI criteria (such as ESG strategies) would be an important part of their investment policy over the next three years — and 25 percent said that ESG would play a greater role in portfolio management at their firm.

Why the “suspicion” or lack of interest? Could be a mis-perception that ESG strategies are “confining,” and reduce a manager’s ability to produce “top flight returns?”  On the other hand, ESG strategy proponents expect to sleep more soundly and have better returns than the “un-convinced,” Shagrin reports.

Could be lack of understanding of ESG strategies that is back holding greater institutional investor acceptance of the approach?  Commonfund’s president, Keith Luke, thinks that is part of the thinking behind responses to the survey.

G&A EVP and partner Louis Coppola adds his perspective: “In our experience, during market downturns (note: like 2008-2009), money flow to safety and we have seen evidence of faster recovery of companies with sustainability integrated into their strategies…”   Read the full for an informative look (in the survey results and perspectives offered) at “ESG’s Future…”

Investor Confusion Clouds ESG’s Future
(Thursday – March 26, 2015)
Source: Michael Shagrin, Fund Fire – Environmental, social and governance (ESG) strategies were hit hard by outflows in 2013 and 2014, and new data suggests that may just be the tip of the iceberg…

Capitalizing on Capital Markets Through ESG – A Commentary This Week on Forbes’ Blog by Chris Skroupa…

In the American investment community, asset owners, their managers, and a growing number of financial analysts are considering the ESG strategies, performance and outcomes of companies in portfolio – or being considered for portfolio or inclusion in benchmark or index.  That has been the case in Europe for a much longer period.  U.S. corporate boards and managements are adopting effective ESG strategies to guide their “sustainability journey,” and to address the investor concerns.

And so there is the “business case” and the “investment case” and the “supply chain case” and so on – responding to the rising interest in ESG performance and the sustainability journey on the part of stockholders and stakeholders.  This is creating the “new, new normal” in investing, and in corporate strategy-setting.  Result?  In our survey of S&P 500 Index companies’ focus on sustainability, we found that in 2013 three out of four U.S. companies in the widely-used benchmark were publishing reports to tell the story of their sustainability journey.

This week, Forbes’ contributing commentator Chris Skroupa of Skytop Strategies published an interview with G&A Institute’s leadership, Hank Boerner and Louis D. Coppola:  Capitalizing on Capital Markets Through ESG.”  Chris came to know and appreciate the work of the G&A team through our collaboration to present an important event at the NASDAQ Market Site in June.  There’s information in Chris’s report.

Here’s the link to the story:
Capitalizing on Capital Markets Through ESG
(Source: Forbes | Monday – March 16, 2015)

Communicating About Corporate Sustainability – The Challenges

Some interesting perspectives are shared on corporate sustainability strategies and actions by the famed Wharton Business School at the University of Pennsylvania in its current Knowledge@Wharton essay: lessons learned in how to communicate about corporate sustainability. As managers involved in CR and sustainability know, it is not always easy – whether it is internal or external communication.

Of course, it’s important who the audience in focus is when communicating. And, what will interest them most so that they will tune in and receive the message. (And not tune you out!)

There are challenges in discussions about “change.” Not all sustainability efforts have immediate financial gain. They may cost more to do early on (with longer-term cost reductions in mind). Need buy-in? Don’t talk about “benefits” to justify a project cost, advises John Frey, Hewlett-Packard sustainability innovation technologist. He observes: “The challenge is to tell the story in a way that is meaningful to someone who does not speak sustainability-ease, to translate our message into a relevant conversation with a customer…”

Another approach may be to s-t-r-e-t-c-h the time horizon of a project so that what looks like an increased cost in the short-term may well save money over time, advises Janet Howard, director of facility engagement at non-profit Practice Greenhealth (PGH).

Explaining the strategic business advantage of a sustainability program may be a way to gain attention. Shawn Mason, associate director of outcomes research and data analytics at Johnson & Johnson’s Health & Wellness Solutions talks up the metrics developed around employee health and productivity. This could be a strategic business advantage to leverage.

For sure, based in the many conversations that the G&A Institute team have with corporate managers, talking about the company’s sustainability journey is not always easy. It’s along the lines of what Joel Makower, publisher of Greenbiz has said: “The real job of the chief sustainability officer is to be a chief translation officer…”

There’s more solid advice and perspectives shared by sustainability professionals from Knowledge@Wharton in the article How to Talk about Sustainability When It’s Not a Simple Win-Win from Thursday – March 05, 2015.