ESG from a Corporate Vantage Point – Anniversary Update

Important Perspectives shared by Pamela Styles, Fellow G&A Institute

Foreword by Hank Boerner, Chairman & Chief Strategist, G&A Institute
One year ago, the National Investor Relations Institute (NIRI) IRUpdate quarterly magazine published its Winter 2021 edition that was dedicated to ESG topics and issues — which G&A Institute shared with publishers’ permission.  G&A’s executive leaders and IR professional and G&A Fellow Pam Styles each contributed an article to the edition to provide three different perspectives and vantage points.

It is with great pride that we congratulate our IR Fellow, Pam Styles, for being named Gold Winner of the DeWitt C. Morrill Editorial Excellence Awards for her article in that magazine, titled: “A Practical Approach to ESG From a Corporate Vantage Point”.

She was be honored by NIRI and presented the award in-person at the NIRI Annual Conference which held June 5-7 in Boston, MA.

G&A Institute coverage of many rapid changes across ESG-related issues bridges two important spheres of influence in our modern economy – the corporate sector and capital markets.  

To that end, Pam has taken time to summarize and briefly update three topics touched on in her original article – SEC, ESG Raters and Voluntary Frameworks – to highlight some major announcements and trends in the last year that should be useful to corporate executive and investor relations perspective.  Here is Pam’s April 2022 award-winning commentary:

Anniversary Update
The full title of my original article one year ago, “A Practical Approach to ESG from a Corporate Vantage Point”, started with “A Practical Approach…” and continued with “…to ESG from a Corporate Vantage Point”.

The reason for this was and still is that the ESG landscape has been changing so rapidly as to be humanly impossible for any one person or company to stay on top of without practical focus and strategy of approach.

Much of that article about launching and maintaining a successful company ESG reporting program, including supporting strategies and resources, remains relevant today.  The most important thing is for companies to be organized and deliberate to make sure that, no matter how much or how little ESG-related policies, disclosure or other communications they can provide, it all can be easily found via the company’s website by human stakeholders and AI research tools alike.  This is to make sure that the company is getting as full credit as possible for all it is doing and communicating with regard to ESG matters.

The article goes into far greater specifics and, even one year later, is worth the (re)read.

Three topics warrant brief update to highlight some of the major announcements that have occurred just in the one year since the article was published – as listed in the table below.

Major Announcements in One Year
Roughly Spanning Winter 2021 to Winter 2022
(Partial list only)

Securities and Exchange Commission (SEC) Major ESG Raters and Rankers1 Voluntary Reporting Frameworks1
May 20, 2022 – deadline for comment letters on Pending rule proposal on climate risk and GHG disclosure.  Proposes TCFD-like reporting requirements within Reg S-K and financial metrics within Reg S-X, with phase-in 2023-2026 based on registrant filer status. Additional Highlights. April 24, 2022Crowded ESG Ratings Landscape Sows Confusion for Investors, the days of largely unregulated ESG ratings providers may be numbered. January 2023 – GRI “Universal Standards” will go into effect, which will include supply chain. Additional Highlights.
March 9, 2022 – Pending rule proposal on cybersecurity. Summary sheet.  (Data Security and Privacy falls under “S” of ESG) February 2022 – call for ESG ratings regulation in ESG Ratings and ESG Data published by Accenture UK and the International Regulatory Strategy Group (IRSG).  Reason: due to huge variation and significant inconsistencies, lack of transparency, frustration and confusion for reporting companies, conflicts of interest with fee models, and a low correlation for ESG ratings (as low as 0.38) compared to credit ratings (as high as 0.99), all which impact investment decisions. March 24, 2022 – The IFRS Foundation and GRI announce they are taking the latest step toward a more closely aligned set of global ESG reporting frameworks.  Part of global moves toward consolidation.
July 26, 2021 – earlier call by International Organization of Securities Commissions (IOSCO) initiate for ESG ratings regulation. GRI and IFRS are just one example of multiple frameworks that have been announcing collaborations and harmonization efforts.  A common reporting standard may not happen for a while.  Additional Highlights.

1 As defined in “The Complexity of ESG Reporting and Emerging Convergence Trends”, by Louis Coppola, EVP & Co-Founder, Governance & Accountability Institute

Rapid Changes
The U.S. has been rapidly catching-up with the UK and EU in terms of ESG public discourse in general.  As simplified in his article “The Surging Volume and Velocity of ESG Investing”, Hank Boerner, Chairman & Chief Strategist of Governance & Accountability Institute, indicated 2020 was the year of Human Capital Management focus and 2021 would be the year of Climate Change/ Climate Crisis focus.

Looking ahead, I predict that 2022 may end up being a year of Practical Stress Testing. Global dislocation (economic, human, energy, security, etc.) brought on by protracted pandemic conditions in China and the Russia-Ukraine military conflict with implications to energy, natural and agricultural resources, are both critically affecting the global supply chain and have opened a lot of eyes as to the speed at which ESG net-global progress may actually be being made.

Certain realities and practicalities seem to have been missed in haste to press ESG initiatives that need to be addressed.  Here’s to hoping honest brokers can be up to the task.

In the meantime, a lot of companies are still in ESG journey catch-up mode, especially in the U.S.  With ESG here to stay, it is important for companies to make as much progress as they can in areas of ESG strategy, execution and disclosure that make sense to address at this time.  But keep an eye on major announcements and build flexibility into your company’s ESG communications and disclosure capabilities – as a lot of changes are yet to come.

About the Author
Pamela Styles is long-time Fellow of G&A Institute and principal of Next Level Investor Relations LLC, a strategic consultancy with dual Investor Relations and ESG / Sustainability specialties.