“Sustainability” – What Does It Mean To Most People? Is it Ambiguous?

From the University of Buffalo (NY) Law School we have a new book about the meanings of sustainability – for experts and the lay audience.  What does the term mean?  Many things to many people, author Jessica Owley (associate professor) thinks.  We need to move beyond what may be too “squishy/mushy” terminology, she posts.  With co-author Albany Law School (NY) faculty member Keith Hirokawa, the voices of various thinkers are presented in the book – “Rethinking Sustainability to Meet the Challenge of Climate Change.”

One question the authors post:  Has “sustainability” as a term reached the end of its useful life?

They think the term has to be re-examined, refiners or articulated in greater detail to more publicly address the “daunting issue of climate change.”  The voices of the Environmental Law Collaborative, a groups of scholars that Owley assembled, comprise the heart of the book.

The authors say the book is about the importance of tackling climate change without losing sight that it is a “wicked, multi-faceted problem with people (us!) at its core.”  Addressing climate change is about public health, livelihoods, and well being.”   The book is one more contribution to the broadening public dialogue about sustainability, climate change, global warming and related topics.  Highlights are in the story linked below:

UB environmental law expert tackles ambiguous – but essential – concept of ‘sustainability’
(Friday – July 24, 2015)
Source: University of Buffalo – Sustainability may be one of those “squishy/mushy” buzz words too vague to be much use. But the principle behind it demands citizens come to grips with the grave problems it was created to solve.

Brands & Sustainability – Saying / Doing Both Matter to Stakeholders

We think the Sustainable Brands annual conference is one of the “must attend” gatherings of sustainability managers and service providers.  This year’s theme was “How Now,” with focus on “how” companies can support, strengthen and innovate their brands [for sustainability] – “now!” (This was the organizations’ 15th annual conference.)

Outstanding experts in branding and related fields share their wisdom and experience.  This week we are focused on the story: Sustainability is Not What Your Brand Says/It Is What It Doesas originally published on the Huff Post platform.  Author Karen Monson, Senior Director of Global Citizenship and Sustainability at pharma company Janssen, shares her perspectives on the conference.  She focuses on a graphic used by author Denise Hohn – “A Brand is What You Do and How You Do It” and expands on the theme.

Janssen, she explains, explores new ways to address sustainability for people, planet and its business.  Partnering as a “big company” with smaller, emerging healthcare companies, Janssen encourages these incubating entities to innovate. Janssen also invests in the local communities. Conferences like those staged by Sustainable Brands, she writes, helps her to learn about best practices, trends, and provide inspiration.  But returning to the home office, she observes, you have to take action on purpose-driven issues…a brand is about what you do / not what you say.  And she asks, what does your brand do?

This is an insightful article worth reading.  Our view:  The brand is the logo, in ancient Greek language, meaning the “sign,”, the “word,” what goes before us to market and represent the values of our enterprise, to remind prospects and customers of the trust in our product or service, and the brand is an important part of motivating people (to follow, to buy, to be loyal to the brand).

More and more, as we see in our extensive monitoring and analysis of volumes of corporate sustainability reports each month, the sustainability journey [of the business enterprise] is an important foundation for strengthening, protecting and projecting brand trust and brand value.  It is the sustainability “doing” as well as the “saying” (disclosure and reporting) that matters to stakeholders. The doing and saying go hand-in-hand, in our opinion.  If the doing does not match the saying, serious dissonance occurs – undermining brand value.

What say you? Read the whole story:

Sustainability Isn’t What Your Brand Says; It’s What It Does
(Monday – July 13, 2015)
Source: Huff Post – Recently, at the 2015 Sustainable Brands Conference, I was struck by something Harvard Business Review contributor and the author of “What Great Brands Do,” Denise Yohn, showcased on the main stage. Her visual read: “A BRAND IS…

Reporting 2025 – Perspectives: Sara Parkin, Founder/Director, Trustee for Forum on the Future (Video Interview #11)

The GRI global organization is conducting a series of interviews with thought leaders to gain their perspectives on what they expect the main issues to be on corporate agendas and their public reports in 2025.  These are produced monthly and G&A Institute will share these through our websites, newsletters, blog, social media, and various other channels to raise awareness of this important initiative.

Interview #11:  Sara Parkin, Founder/Director, Trustee for Forum on the Future.  She believes that collaboration will be key for society and companies – what will be “good” when it comes to sustainability performance?
See also the interview summary

Are Unilever, Nike, Wal-Mart, GE, and Many More Companies Really “Sustainable Multinationals?”

This week we bring your attention to a Forbes/Poland story posted by CSR editor Magdalene Krukowska, who looks critically at a research and ranking effort by SustainAbility (UK) and GlobeScan (Canada) – the firms analyzed the efforts of leading multinationals that are generally considered to be sustainability leaders.

She offers negative views on the efforts of these large multinationals that are striving to be more sustainable in their operations.  Here at G&A Institute we scour these companies’ (and their peers) disclosure and structured reporting on ESG, sustainability, responsibility, citizenship efforts.  (The titles are still interchangeable in practice, which investment professionals see as more confusion than clarity, but that’s another story.)  We would generally disagree on a number of points with the commentary, but we suggest that you read it for yourself.

The author looks with skepticism at Unilever; Hershey’s; Nestle’s (“cocoa and chocolate peers”); Nike; Coca Cola; BASF; Wal-Mart Stores…and others, and wonders whether they can truly “do the right thing” and institute sustainable strategies and operationalize this across their global platforms.  The basis of the research was to assess the progress being made since the 1992 Rio Conference and whether large multinationals are part of the problem or part of the solution.

We’ll let you decide where the author comes down on these issues.  We suggest you look at the sustainability reporting of the companies in view in this piece and judge for yourself whether or not the companies are walking-the-talk on sustainability.  Check the recently enhanced GRI global database for access to the company reports (there are thousands of corporate reports in the database now)– at http://database.globalreporting.org/

Can Multinational Corporations Be Sustainability Leaders?
(Tuesday – July 07, 2015)
Source: Forbes – How can international corporations like Unilever, Ikea and Nestlé place highly on a list of the most sustainable companies in the world? Could a study that champions the environmental merits of business behemoths like Patagonia,…

Interview With John H Streur of Calvert

By Louis Coppola, Governance & Accountability Institute

Calvert has a substantial presence at the 3rd Annual CSR Investing Summit.  Why was Calvert motivated to get involved with the conference?

We are big fans of S-Network. We recently chose S-Network to provide the underlying index construction and daily maintenance associated with the Calvert Responsible Index Series, and I think our reasons for sponsoring the conference are very similar to our reasons for choosing them for that task. S-Network really is a leader in custom index creation and they have a particular niche in understanding and working with Environmental, Social and Governance (ESG) data and “smart beta” indexes. We have had a long-standing relationship with them through work they already do providing custom indexes for two of our actively managed global investment strategies. Supporting the S-Net CSR Investing Summit is also one of the ways that Calvert can act on its commitments as a signatory to the UN Principles for Responsible Investment (PRI). We see forums like this as an opportunity to help educate others within the investment industry – particularly those who might be newer to responsible investing. We know that S-Network will bring together a conference agenda that is really at the cutting-edge of how best to define, manage and measure responsible investing. It’s in venues like this that the responsible investment community can work collaboratively to enhance how the UN PRI is being implemented within the field.

I understand that Calvert is presenting some new research for the first time.  Could you elaborate on this please?

Sure. As an integral part of Calvert’s fixed income investment process, we have long evaluated ESG factors alongside fundamental security analysis. Over the years, our relative-value analysis has identified significant ESG performance impacts (or you could think of these as insights) in many areas, such as sector analysis, credit ratings, credit spreads, duration, and security selection. We’ve recently published a paper explaining our finding that ESG factors appear most influential on spread performance for companies that exhibit combined outlier fundamental and ESG characteristics.  Specifically, we’ll be sharing the results of a paper in which we designed an empirical, back-tested study of the impact of ESG on the performance of credit default swap (CDS) spread performance over a 10-year period. We used six distinct scenarios, or simulations, and I don’t want to be providing a spoiler, but the exciting thing is that for all six simulations, the data demonstrated that ESG analysis added value, positively impacting performance.

I’m also excited to share that Calvert is working with George Serafeim, the Jakurski Family Associate Professor of Business Administration at Harvard, to conduct additional research that we’ll be sharing later this summer and throughout the fall in a series of thought leadership papers. George and several members of the Calvert team are exploring a range of topics and the exciting thing about this partnership is that we can really pair George’s intellectual curiosity with the proprietary insights and data from the Calvert research system.

You say that Calvert’s approach to Responsible Investing is shifting from being primarily values-driven to primarily research-driven.  What do you mean by that?

There is a lot of baggage that can come with the word “values.” It is a word that has gotten a bad rap lately and I want to be very clear about the fact that everything Calvert Investments does on behalf of our clients – whether it’s a large institutional asset owner or an individual investor – reflects a set of values that we refer to as the Calvert Principles of Responsible Investment.  These Principles outline our perspective on the role of corporations in society, the ways that we believe corporations should interact with our natural environment, how they should contribute to building equitable societies and how we believe they should be governed. So we’re not moving away from our principles.

Often when you hear someone talk about a “values-based” approach, that’s a euphemism for employing negative screens. Our new research system puts us in a very different position to be able to differentiate between companies that are minimally acceptable – those that barely clear the bar – and those companies that are good, better and best. This much more methodical approach allows us to make more nuanced decisions without the performance trade-offs of less sophisticated approaches.

Getting very tactical about how this works, Calvert’s sustainability analysts have developed performance indicators and models in conjunction with our equities and fixed-income analysts for all 156 GICS sub-industries. The research system is focused on the materiality of specific ESG factors. It’s a very holistic approach.

It sounds like change is a consistent theme at Calvert these days. As a Chief Executive Officer, how are you communicating this change – both internally and externally?

Change is another word that can be loaded. I have great respect for Calvert’s history as a leader and a pioneer in the socially responsible investment space. I think that the next step forward for our firm – our next evolution – is to become a global leader in responsible investing.  The differences in the language seem subtle, but the expectations we have of ourselves as a steward of other people’s capital are profound. Being a responsible investor means that you are balancing your responsibilities to many stakeholders.

First and foremost, we have to produce an expected investment return consistent with the risk budget of each client. It is fundamentally what we do. But truly responsible investors (and other large asset owners) do that in a particular way. The “how” is also important. We look at the full scope of impacts – risks and opportunities – associated with the non-financial characteristics of each company in which we invest. We see these environmental, social and governance (ESG) factors as a two-way street. Companies can create risk through their behaviors or they can be exposed to risk because of the changing natural environment, shifting social norms, changing regulations, etc. The third aspect of a responsible investment approach is being an engaged shareholder. This means voting our proxies in a way that is consistent with our Principles, it means shareholder advocacy – bringing resolutions where companies are not acting fast enough. It can be dialogues and multi-stakeholder initiatives to raise awareness of issues that are going to be critical in the future. We are an active and engaged shareowner in the companies in which we invest. And finally, responsible investment is also about acknowledging the obligations that companies have to the communities in which they operate. That includes Calvert and the companies we hold. Responsible investors understand that we must work to solve the most vexing problems facing society today. I would point to global poverty as one of those issues. How can we create inclusive prosperity? At Calvert, we do this through our own philanthropic giving and we enable investors to do this through community investing and an ability to channel assets toward early stage companies that are creating solutions to global problems.

What primary shifts have you observed in institutional attitudes toward responsible investing and products tied to ESG?

Leading institutions have literally gone from being somewhat antagonistic about the value of incorporating sustainability (or ESG factors) into investments to essentially requiring that asset managers consider these factors. I think there was always some perception or validation around the idea that there were brand risks tied to obvious social factors such as human rights abuses in the supply chain. However, after the collapse of the financial markets in 2008, we began to see an accelerated level of conviction around the role that good governance – accountability, transparency, diversity – could play in the financial services sector, specifically banks. At the same time, leading companies were demonstrating how better management of environmental resources could cut costs, lead to innovations, etc. Corporations are integrating ESG into their own understanding of business risk and opportunity. I think that smart institutions are focusing on two key demographics as well – women and Millennials – both of whom have been shown to prefer a responsible approach.

On June 19, Calvert announced substantial changes to its existing core Responsible Index along with the launch of two additional indexes in the large cap growth and value spaces.  Could you describe these strategies in more detail along with the motivations behind the launches?

The Calvert Social Index has been a gold standard in responsible indexing for 15 years. We’ve definitely been hearing from existing clients that they wanted to be able to have exposure to more areas of the market and at the same time, there’s an undeniable trend toward lower-cost investment options. It seemed Calvert was uniquely positioned to address both of these needs. The Calvert Social Index became the Calvert U.S. Large Cap Core Responsible Index as of market close on June 19th. At the same time, we launched two additional indexes – the Calvert U.S. Large Cap Growth and U.S. Large Cap Value Responsible Indexes.

The starting place when thinking about index construction is with the S-Network U.S. Large Cap 1000 (SNET 1000) which is 99.9% correlated to the Russell 1000. When we apply our Principles of Responsible Investment, we come up with about 700 constituents that meet the criteria that we have selected. From there, we rank those constituents on a float-adjusted market cap weighted basis which is similar to the way most indexes are constructed. We then do an analysis based on the top 10 GICS sectors and look at how our constituents weigh out in those ten GICS sectors relative to the S Net 1000 sectors. We make adjustments to ensure that the Index remains sector neutral. The elimination of these potential sources of variance is advantageous – in particular it helps to minimize tracking risk for our indexes and identify company-specific criteria that are adding value to the index as opposed to cyclical factors that are happening in the economy.

From our large-cap core index we construct a growth and value index based on the same 700 constituents. Think of them as stack-ranked from most growth-oriented at the top to most value-oriented at the bottom. The top 30% are exclusively in our growth index and the bottom 30% exclusively in our value index. The 40% that are in between will appear in both indexes.

Are these new indexes a harbinger of things to expect in the future?  If so, why now?

Definitely. By bringing the new Calvert research process to more global capital markets we can create additional indexes and we can also strengthen our active portfolio management. It is only by having this quantitatively oriented dataset of the full rankings and ratings of ESG risk and opportunity that the best investment decisions can be made.

You will see us bringing this approach to several additional investment universes in the coming months including small cap, mid cap, non-U.S. developed markets, emerging markets and the fixed income space.  Additionally we have the ability to customize passive solutions for clients and I think that’s a great application and additional evolution of passive investing – custom passive investing.

I see you are scheduled to deliver the closing remarks for the conference. What roles do conferences such as this one play for its participants and audience members in terms of the overall direction of the investment industry?

Conferences like the S-Net Summer in the City CSR Investing Summit are really important because they aren’t designed to be sales-focused, but really thought leadership focused. It’s a very different environment when you bring together expert practitioners such as plan sponsors, endowments, consultants, academics, non-governmental organizations, the sell side, and even the media.  I think when you look at the agenda; you see opportunities to really challenge your own thinking, challenge assumptions about where the industry is headed and how we should get there. I am eager to engage with fellow practitioners, both those who are actively engaged in supporting the UN PRI and those who are new to that framework, to identify what’s new, what’s next, and how we can best further the goals of responsible investment.

About Calvert Investments
Calvert Investments is a global leader in Responsible Investing. Our mission is to deliver superior long-term performance to our clients and enable them to achieve positive impact. Founded in 1976 and headquartered in Bethesda, Maryland, Calvert Investments had more than $13 billion in assets under management as of May 31, 2015. Learn more at www.Calvert.com.

The times, they are a changin’

by Larry Checco, Principal – Checco Communications

Question:  What do Sen. Elizabeth Warren (D-Mass), Sen. Bernie Sanders (I-Vt), a bevy of Republicans running to be president of the U.S.A., and a handful of billionaires have in common?

Answer:  To greater and lesser degrees, and in their own inimitable ways, they are ushering the pressing issue of income and wealth inequality on to center stage.

Senator Warren got the snowball rolling down the hill with her “the game is rigged” epithet. The issue is now gaining ever-greater momentum with Senator Sanders’ “enough is enough” stump-speech slogan as he runs for president—and as his poll ratings continue to rise.

To avoid the avalanche, a number of top-tier conservative presidential candidates also appear to have wealth inequality on their radar screens (although it should come as no surprise that they blame inequality on the current administration).  Some examples:

  • Sen. Ted Cruz (R-Tex): “It is true that the top 1 percent are doing great under Barack Obama. Today, the top 1 percent earn a higher share of our national income than any year since 1928,”
  • Sen. Rand Paul (R-Ky): “Income inequality has worsened under this administration. And tonight (in his 2015 State of the Union address), President Obama offers more of the same policies — policies that have allowed the poor to get poorer and the rich to get richer.”
  • Former Florida Governor Jeb Bush: “While the last eight years have been pretty good ones for top earners, they’ve been a lost decade for the rest of America.”
  • Even former presidential candidate Governor Mitt Romney seems to have had a change of heart: “Under President Obama, the rich have gotten richer, income inequality has gotten worse and there are more people in poverty than ever before.”

Think and say what you will, it’s a far cry from “makers and takers”.  Or that 47 percent of Americans “pay no income tax” and don’t take “personal responsibility…for their lives.”

But all of this change of heart, if that’s what it can be called, goes further than politicians running for office.

The American Enterprise Institute (AEI) is a prominent right-leaning Washington think tank and bastion of supply-side economics from which many conservative politicians take their cues.

Last month, AEI’s president, Arthur C. Brooks, stated in an interview “That our new market is poverty.  We need to craft a poverty-reduction program from the right, where we’ve been missing in action.”

Granted, progressives and conservatives come at reducing income and wealth inequality from vastly different political and philosophical points of view.  But to resolve an issue, it must first be acknowledged.

And it appears that that acknowledgement is even beginning to come from a small sector of the economy that one would least expect—billionaires!

Recently, The New York Times published an article that quoted billionaires saying things like income inequality is “unfair and it is not sustainable.”  Say what, Mr. Billionaire!

Prime among this out-spoken group of heretics to their class is Nick Hanauer, a tech billionaire from Seattle.  Last summer Hanauer wrote a polemic for Politico in which he said to the planet’s “zillionaires”: “I have a message for my fellow filthy rich, for all of us who live in our gated bubble worlds: Wake up, people. It won’t last.”

Hanauer’s TED Talk, titled Beware Fellow Plutocrats, the Pitchforks are Coming is  must watch video:  https://www.ted.com/talks/nick_hanauer_beware_fellow_plutocrats_the_pitchforks_are_coming?language=en

So 99 percenters, take heart. 

A couple of years ago, who would have thought that a $15/hr. minimum wage—more than twice that of the current federal law—would even be on the burner.  Today, the cities of Seattle, San Francisco and Los Angeles already have passed $15 minimum wage laws, and other cities are in the process of raising theirs.

Not to go too far afield, but to make a point, a few years ago who would have ever thought that same-sex marriage would be legal nationwide?

Or that 16 million more Americans would have access to medical care?

Or that South Carolina would be voting to take down the Confederate flag?

Or that there would be a pope advocating to stop global warming?

Regardless of where you stand on any of the above, there’s no denying that change is in the air.

But change doesn’t come from thin air.  It takes people committed to causes they believe in to make these kinds of changes happen, people standing at the top of the mountain with that first fistful of snow.

Think about it.

Content Copyright by Larry Checco © 2015

Sustainable Products & Services — Growing Demand Driving Revenue Growth — That’s MONEY!

Sustainability?  Green products & services?  That’s nice.  One might still hear this in the company’s executive suite.  But the word is fast getting around in the board room and C-suite corridors of power.  That’s MONEY we are talking about.  The Conference Board just released a study – “Driving Revenue Growth Through Sustainable Products & Services,” authored by Thomas Singer and supported by the Investor Responsibility Research Center Institute (IRRC).  Findings:  Leading companies are realizing a substantial and positive impact on revenue from their sustainable products and services.

The researchers looked at a dozen large-cap enterprises:  Allianz; BASF; Caterpillar; Dow Chemical; DuPont; General Electric; IBM; Johnson & Johnson; Kimberly-Clark; Phillips; Siemens; and Toshiba.  Among these companies, revenues from sustainable products & services grew at 6X the rate of overall company revenues (from 2010 to 2014).

Sustainable products represent on average 21% of total revenues.  Capital sources – banks, investment bankers – play an important and increasing role in financing the development of large-scale products / solutions, mostly through asset finance and green bonds.

Among the companies in the Conference Board survey, customer demand for solutions that address global sustainability challenges (climate change for example) is a driving force. Also – increasing resource scarcity.

The story below is a must read for company managers., investors, analysts, asset managers, and others who may still be on the fence about the business case for corporate sustainability.  And, green products and services…and the value in being a trailblazer in this space.  And do clip the story and pass it around the C-suite when the questions come up…”sustainability?” What’s the purpose of that?

Sustainability Initiatives Can Drive Corporate Revenue Growth And Innovation, New Research Shows (Thursday – July 02, 2015)
Source: PR Newswire – Sustainability innovation is powering business growth, according to a new research report published this week. Between 2010 and 2013, revenues from company-defined portfolios of sustainable products and services grew…