Is Your Mutual Fund or ETF Really “Green” or “Sustainable”? How Do You Know? More Disclosure by Fund Managers and Advisors May Be Coming…

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

What is it about an investable product – a mutual fund, an exchange traded fund (ETF) – that would qualify it as an “ESG” or “sustainable investment” offering to the retail or institutional investor?

That’s a question getting more attention recently.

S&P Global has issued a report that says only 12 percent of so-called “green” or “environmental” investment funds are on track to meet the global climate goals agreed to at the Paris Agreement / COP 21 meetings in 2015.

The goals agreed to by the community of almost 200 nations at that time: try to limit the global temperature to below 2 degrees Centigrade above pre-industrial levels and aim for limiting the increase to 1.5C.

We are sharing some analysis of the S&P report by Mark Segal as published in ESG Today (he’s the founder of the web site).

He explains: S&P Global looked at about 12,000 equity funds and ETFs with US$20 trillion in total market value. Findings: about 300 funds (with $350 billion total valuation) used “green” in their name or investment objectives.

Looking then at the holdings (equities of corporations) using the S&P Global Trucost Paris Alignment Data for 17,000 companies in the universe of 12,000 funds, only 11% were really aligned with the Paris Agreement goals.

What about the smaller universe of 300 (the “green” funds)? Only about 12% were on track to meet Paris goals.

S&P Global noted that some funds are screening out publicly-traded fossil fuel companies for portfolios, including renewable energy companies, and some are engaging with portfolio companies to urge the firms de-carbonize their operations.

Conclusion: “Our analysis,” reports S&P, “points to a systemic issue. Few funds, even those that describe themselves as using green or climate-specific language, are on track to meet the goal of the Paris Agreement. Understanding the trajectory is an important step toward planning for a low-carbon future.”

The marketing of mutual funds and ETFs as “green” is being closely looked at by the Securities & Exchange Commission. SEC is focused on “enhancing ESG investment practices” of certain capital market players.

The agency in May proposed amendments to rules and reporting requirements of investment advisors and investment companies (that manage mutual funds and ETFs) to “promote consistent, comparable, and reliable information for investors” about funds’ and advisors’ incorporation of ESG factors.

The proposed rule would aim to categorize types of ESG investment strategies and require funds and advisors to be more specific in disclosures (such as in prospectuses, annual reports, brochures) to inform investors about ESG strategies being pursued.

Funds with strategies focused on the consideration of environmental factors would be required to disclose the greenhouse gas emissions associated with their portfolios. (That is, the GHG emissions of companies in the assembled portfolios of the mutual funds or ETFs.)

And, funds that use proxy voting and engagement with corporate issuers would be required to disclose their voting and engagement with companies on ESG-related matters.

Morningstar rates “sustainable mutual funds” among the thousands of funds rated by the firm’s analysts and its Sustainalytics unit.

Here’s a look into the challenges fund companies may face if the SEC rules are adopted: “This year has been difficult for many ESG funds,” writes Morningstar’s Katherine Lynch. “After years of solid performance, sustainable investing mutual funds have been roughed up, but a handful of strategies have been able to outperform.”

Which ones? Those holding energy stocks, which some investors in ESG try to avoid. Energy stocks are now outperforming, and most sustainable funds hold little or no oil companies in portfolio because of the connection of oil and gas consumption and climate change.

The conversation about “sustainable investing” and the criteria used by mutual fund management companies is sure to get more complicated in the days ahead.

Our G&A Institute team will continue to monitor developments and keep you updated on the changes to the mutual fund / ETF disclosure requirements.

Here are Top Stories for you to learn more:

  1. Less Than 10% of Climate Funds are Aligned with Global Decarbonization Goals: S&P (ESG Today )https://www.esgtoday.com/nearly-90-of-green-funds-are-not-aligned-with-global-climate-goals-sp/
  2. SEC Proposed to Enhance Disclosures by Investment Advisors and Investment Companies About ESG Investment Practices: https://www.sec.gov/news/press-release/2022-92
  3. 2022’s Top Sustainable Fund Weather a Tough Market: https://www.morningstar.com/articles/1097780/2022s-top-sustainable-funds-weather-a-tough-market



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.

Common Sustainability Reporting Standards Remain Elusive

December 21, 2021

by Bernie Kilkelly – VP and Director of Corporate ESG Disclosure, G&A Institute

Efforts by various international organizations to develop common global sustainability reporting standards continue to run into roadblocks, as different groups propose diverging approaches and methodologies to enhance ESG disclosure.

As reported by Responsible Investor (link below in our Top Stories), the G7 Impact Taskforce that was created in July (under the UK’s presidency of the G7), recently commented about reporting standards being developed by the International Sustainability Standards Board (ISSB), an even newer group launched at COP26 in Glasgow.

Rather than helping to find common ground around simplifying the alphabet soup of reporting frameworks and standards, the comments by the G7 Impact Taskforce (ITF) seemed to add to concerns that reporting standards could become more fragmented.

The ITF said it supports the approach of the ISSB, which is governed by the International Financial Reporting Standards (IFRS) body, to develop a global reporting baseline focusing on the impact of sustainability factors on company enterprise values.

But at the same time, it recommended that countries “build upon this” approach to include other impacts on stakeholders that this reporting baseline would not address.

The ITF’s comments seemed to show support for the broader “double materiality” reporting approach that focuses on the impacts of business activities on society and the environment.  The “double materiality” approach is being used by the European Union’s accounting body —  the European Financial Advisory Group (EFRAG) — to develop a new set of corporate sustainability disclosure standards.

While the ITF’s statement calls for mandatory impact accounting for businesses and investors that would include “harmonized standards,” the elusive search for a common global approach to sustainability reporting continues.

As we close out 2021 and embark on a New Year, the G&A Institute team will continue to monitor the efforts of these organizations and help you make sense of the ever-changing world of sustainability reporting and disclosure.

Best wishes from the G&A team to all for a Happy New Year!

Top Stories

The World’s Eyes on the USA as FSOC Agencies Engage on Climate Risk

October 31, 2021 – As The Family of Nations gathers for COP 26 climate talks in Glasgow – the USA is back at at the table. 

What is President Joe Biden and the American delegation bringing with them to Scotland?  A big announcement from the White House just a few days ago that signals “we are serious”. Especially in regulatory and financial matters.

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

The gathering of the family of the world’s nations in Glasgow, Scotland for “COP 26” (the annual UN climate summit) is at hand!

There has been an increasing flow of news and opinion related to the big event as the United Nations, almost 200 sovereign governments, NGOs, corporations, and other constituencies announce a widening range of developments related to the summit now underway

In the United States, a significant announcement came in October as the Federal government’s FSOC – the Financial Stability Oversight Council “engaged on climate change”.

We’re sharing the important background with you:

You may recall that in May 2021, soon after taking office, The Biden-Harris Administration detailed the policies and actions of its “whole of government” approach to climate change in the “U.S. Climate-Related Risk Executive Order” (the “EO”) originally issued in May 2021.

The EO set out the federal government’s climate risk accountability framework and the implementation strategies for the “whole of government” approach to climate-related financial risk.

Think about the agencies affected by the EO: NASA; DoD; Labor; Interior; HHS; Education; the Federal Acquisition Council (considering GhG emissions when making buying decisions)…and many more.

The policies in the EO and in then implementation steps by Federal agencies are again in public view as President Joe Biden prepared to participate in the COP 26 meetings.

The White House reminded us of EO 14030 in a news announcement (“A Roadmap to Build a Climate-Resilient Economy”) on October 14th.

This was the backdrop for the announcement from the powerful FSOC via U.S. Treasury Department for planned measures to protect retirement plans, homeowners, consumers, businesses and supply chains, workers, and the federal government from the financial risks of climate change.

Policies and actions were outlined for us as the FSOC on October 21 at identified climate change as an emerging and increasing threat to financial stability.

To review: there are six important “workstreams” in the Federal government’s framework to address climate-related financial risk:

• Protecting the resilience of the U.S. financial system.
• Protecting life savings and pensions.
• Using Federal procurement (federal agencies are the largest buyers of goods and services in the nation).
• Incorporating the risks into Federal lending and underwriting.
• Incorporating the risks into the Federal financial management and budgeting.
• Building resilient infrastructure and communities.

In the historic May 2021 EO “financial regulation” was among the issues addressed; now we are seeing the implementation plans of the government’s Financial Stability Oversight Council (the FSOC), the member group of key regulators as the agencies of the council spell out approaches to engagement on climate change issues.

Important: the work of the regulatory agencies in the FSOC affects many aspects of the American society: the Federal Reserve System and 12 district banks; Department of Treasury; the Office of Comptroller of Currency (OCC), part of Treasury that regulates national banks; Securities & Exchange Commission (SEC); Commodity Trading Futures Commission (CTFC); and, Federal Housing Finance Agency (FHFA).

The FSOC’s new report demonstrates the Council’s and member Federal agencies’ commitment to building on and accelerating existing efforts on climate change through “concrete recommendations” to the individual member agencies.

In our conversations with corporate managers and investment professionals we often explain that after the 2008 financial crisis, the member nations of the G20 came together to address financial risk matters in the new Financial Stability Board (FSB). This is a “think tank” approach to developing policies that each G20 nation can bring back to their regulatory agencies for consideration.

The FSB created the TCFD (Task Force for Climate-related Financial Disclosure), chaired by Michael Bloomberg. Important to keep in mind: the representatives to the FSB are the Secretary of the Treasury; the Federal Reserve chair; and, the SEC chair.

Each of those regulatory agencies and their leaders are members of the Federal government’s Financial Stability Oversight Council.

Commenting on the latest developments at FSOC, former Federal Reserve chair, now Secretary of Treasury Janet Yellen noted: the FSOC report puts climate change squarely at the forefront of the agenda of [Council member agencies] and is a critical first step forward in addressing the threat of climate change…it will by no means be the end of this work…”

We share the important documents related to these development as President Joe Biden and his delegation start their conversations at COP 26. 

Top Story/Stories

U.S. Financial Stability Oversight Council Engages on Climate Change
https://home.treasury.gov/news/press-releases/jy0426

Secretary of Treasury Janet Yellen Comments
https://home.treasury.gov/news/press-releases/jy0424

From the White House: Executive Order #14030
https://www.whitehouse.gov/wp-content/uploads/2021/10/Climate-Finance-Report.pdf




The U.S.A. & the 2015 Paris Accord: Five Years On, the Largest Economy on Earth Promises to Return – With a Cabinet of Climate Change Champions Preparing for Action

December 20 2020 – published again in the blog in October 2021 as President Joe Biden travels to the Stockholm meeting of the COP 26.

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

Seems like just yesterday we were celebrating the great promise of the 21st Century in 2015 – the Paris Accord. Can you believe, it is now five years on (260 weeks or so this December 2020) since the meeting in the “City of Lights” of the Conference of Parties (“COP 21”, a/k/a the U.N. Paris Climate Conference).

This was the 21st meeting of the global assemblage focused on climate change challenges.

The Promise of Paris was the coming together of the world’s sovereign states – the family of nations — to address once more what for many if not all of the states is an existential threat: climate change.

The parties agreed to a binding, universal agreement – the Intended Nationally Determined Contributions (“NDC”) to attempt to limit global warming to 2.7C by 2100.

The United States of America was [then] prominent among leading economies of the world at the Paris gathering, signaling the intention to play a significant role in addressing climate change matters. In fact, the final agreement was signed in New York City on Earth Day in April 2016.

Promises made, promises broken – in his campaigning and then almost immediately upon taking office, President Donald J. Trump said the U.S. would leave the historic agreement and nearing the end of his term in 2020 had just about completed the exit.

To the family of the world’s nations was this message: Do it without the United States of America.

Then, the recent good news: President-Elect Joseph Biden has indicated that his would be the “climate administration” beginning in January 2021 and quickly named former Secretary of State John Kerry to be his “climate czar”, the influential voice on the world stage to signal the USA is back in addressing the challenges of climate change.

Secretary Kerry was the U.S. representative to the COP 21 meetings in Paris and guided the nation’s inclusion in the Paris Agreement.

Forward to the last days of 2020: This is a climate emergency, President-Elect Biden said, and former US Senator and Secretary of State Kerry would lead the effort to elevate the nation’s response to the ever-escalating crisis, influencing policy and diplomatic initiatives on the world stage. (

Secretary Kerry will officially be on the National Security Council and report to the President of the United States after January 20, 2021.

Speaking to ProPublica, Secretary Kerry said “…the issues of climate change and human migration are intertwined… people are moving to places where they think they can live…and they will fight over places they want to move to… we will have millions, tens of millions of climate migrants…”

Come 2021, the family of nations can begin to celebrate – the United States of America will be back on the front lines in meeting myriad challenges related to the climate crisis.

As we prepared our commentary for the G&A Sustainability Highlights newsletter, President-Elect Biden named his dream team of climate change champions to lead the nation’s efforts:

Gina McCarthy, former head of the US EPA, will be the domestic climate change advisor (heading the White House Office of Climate Policy).

Governor Jennifer Granholm is the nominee to head the Department of Energy (her home state of Michigan is the home of the auto industry – she was the state’s governor).

Congresswoman Deb Haaland will be the first Native American when confirmed to be named to a cabinet post. She’s member of the federally-recognized Pueblo of Laguna, the New Mexico tribe whose 500,000 acres of land are near to Albuquerque. They refer to themselves as “Kawaik People”.  As Secretary of the Interior, she will have responsibility for jurisdiction over tens of millions of acres of tribal lands). Interior’s Department of Indian Affairs (BIA) is charged with “…promoting safe and quality living environments, strong communities, self-sufficiency and enhancing protection of the lives, prosperity and well-being of American Indians and Alaska Natives”.

Michael S. Regan, who worked in both George W. Bush and Bill Clinton administrations, and who is head of North Carolina’s Department of Environmental Quality, is Biden’s nominee to head the US Environmental Protection Agency.  He will have the daunting task for rebuilding the nation’s environmental regulations that were unraveled during the Trump Administration.

Brenda Mallory, experienced federal government attorney, will had the Council on Environmental Quality.

This is also a team, Biden and supporters point out, “that looks like America”.

Leveraging the strategies, policies, actions, and programs designed to address climate change challenges, the team and colleagues will “build back better” with green infrastructure initiatives at the core.

In the December 2020 issue we brought readers a selection of current news and opinion and shared perspectives on the Paris Accord, now five years in.

As we neared year-end 2020 much of the news was about climate, climate, climate in the context of the peaceful transition of power in this, the world’s most influential democracy.

A nation that for many years had been that Shining City on a Hill for other peoples and nations.  Will the USA be that again?

Stay Tuned to climate change crisis responses that have the potential to be at the heart of many of the new administration’s public policy-making efforts. On to year 2021…

TOP STORIES in the Newsletter Dec 20 2020

Against the above context, we share here a selection of the perspectives on the 5-Year Anniversary of the Paris Agreement.  Where we are now as we prepare for the transition year 2021 in the USA:

“APAC” & Corporate Sustainability Journeys – Monitoring Progress & Demonstrated Leadership on the Rise in This Vital Global Region

May 24 2021

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

Business and financial activities in “APAC”, the Asia / Pacific Basin Region are vital to the economies of the rest of the world.

Think of the region’s leading sovereign economies…in order of magnitude, consider the impact of the economies of China, Japan, India, South Korea, Australia, Indonesia (the top economies).

These six countries are;

  • home to some of the world’s lower cost manufacturing and assembly centers,
  • sources of financing for companies and other government entities, sourcing points for many of the world’s natural resources and food and industrial ingredients,
  • sources of value-added manufactured products (such as the chips used in a multitude of consumer and business IT applications such as smartphones and electric vehicles).

The good news is that the region is also home to a growing number of corporate sustainability leadership companies. 

For example, CDP reports that “despite many challenges in 2020” companies disclosing on TCFD-aligned reporting reached a global high — and that included more than 3,000 companies in 21 Asia Pacific Region (“APAC”) countries responding to CDP for the first time…and that now account for almost a third of CDP’s global corporate responses.

ESG Leadership Progress:  The majority of the 3,000 APAC companies report having a board-level oversight on climate-related issues (79%) and say that they are beginning to integrate climate issues into business strategy.

Half say they have integrated incentives in management of climate issues, including attainment of targets.

Three of four APAC companies responding to the CDP survey say they have identified climate risk as maybe having substantive impact on their business and 60% of these are transition risk.

Climate Change Impact:  CDP in its Global Climate Risk Index 2021 found that 60% of countries most affected by climate change from 2000 to 2019 are in Asia.

McKinsey consultants estimates that the impact on labor productivity due to chronic increases in heat and humidity could cost Asia as much as US$4.7 trillion in of annual GDP by 2050.

We are sharing CDP’s recap of the survey responses for 2021 as a Top Story.

Looking at the smaller economy of the region, Sustainalytics’ manager Frank Pan focuses on ASEAN-6 nations and reports that in the context of sustainable investing moving from “niche” to mainstream, this trend is still limited those Southeast Asian countries — even though the region is an economic block with one of the world’s fast-growth rates.

The ASEAN-6 countries: Singapore, Malaysia, Thailand, Vietnam, Indonesia, the Philippines.

All six of these countries, Pan points out, do have some form of ESG disclosure required and the governments have guidelines to help companies in their ESG disclosures; all the nations have stock exchanges that are members of the Sustainable Stock Exchange Initiative to encourage ESG reporting by listed companies.

He points out the nature of the ESG disclosure regimes of the six nations in another Top Story selection this week.

Sustainability Reporting:  The Global Reporting Initiative (GRI) is the world leader in number of corporate reports published following the organization’s standards; while some ESG standards are designed to inform the investment community, GRI’s were developed over 30-plus years with stakeholders in mind, including providers of capital (today’s standards were preceded by GRI’s reporting frameworks, “G1 through G4”).

GRI in our third Top Story this week reports growing momentum for sustainability reporting in South Asia and especially for three target countries (India, Bangladesh, Sri Lanka).

GRI’s research examined 1,100 companies in the region; of these, 503 are in India, 320 in Bangladesh, and 284 in Sri Lanka.

The “2020 Sustainable Reporting Trends in South Asia” research found that GRI’s Standards are the most widely-used for ESG reporting across all the countries; 64% of listed companies in Sri Lanka use the standards; the number of reports published in Bangladesh increase by more than a third from 2018 to 2019; in India, 99% of organizations analyzed by GRI have integrated sustainability reporting into their management practices.

While the usual flow of content that we monitor and share in the newsletter each week at times has a focus on Asia and the Pacific Basin region and subregions, we are bringing you much more detail in these stories – where you will find more information about the above research efforts and respective organizations’ reports in the Top Stories.

TOP STORIES

The Private Equity World: Broadening Focus on Sustainability – The Blackstone Group is All In

May 17 2021

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

The P/E world:  Private equity firms often have a pool of companies wholly owned or invested in and managed and advised by them in portfolio …this is the ambitious domain of the private equity (P/E) universe.

The leading publicly-traded P/E leaders are familiar names to institutional investors:

  • Blackstone (NYSE:BX),
  • The Carlyle Group (NASDAQ:CG),
  • Apollo Global Management (NYSE:APO),
  • Kohlberg, Kravis Roberts (NYSE:KKR).

There also well-known P/E companies not publicly-traded such as TPG Capital and Bain Capital (which owns, invests in and advises portfolio entities).

Focusing on one major P/E firm today – Blackstone Group – we see how sustainability is now being driven across the alternative investment of P/E enterprises.

Blackstone owns and manages key asset categories such real estate (owning the huge Stuyvesant Town complex in NYC), hedge funds, credit & insurance, financial advice, investment (partnering for example with Pfizer and SFJ Pharmaceuticals for therapies), and managing private equity funds and funds of funds for its investment clients.

In the Blackstone investment portfolio are companies with familiar names:  SERVPRO, Ancestry, Refinitiv, Bumble, EPL, Aypa Power.

Blackstone Group Inc has asked the top executives running portfolio companies “controlled by its private equity arm” to regularly report on ESG matters to their boards of directors, according to a news story by Reuters corporate governance reporter Jessica Dinapoli (she covers boards of directors and C-suite trends).

She writes that Reuters obtained a letter from Blackstone’s CEO (“the world’s largest manager of alternative assets such as P/E”) to portfolio companies’ CEOs that is basis of her report.

Her takeaway:  The Blackstone firm’s sustainability credibility would be boosted by portfolio companies disclosing more about their climate risk, environmental certifications, diversity & inclusion, and commitments to protection of human rights.

According to the Reuters report, the letter to portfolio companies’ CEOs advised: “ESG factors are attracting greater focus globally and demand careful attention on your part.”

The latest move by Blackstone could help to “standardize” ESG reporting across the firm’s massive global portfolio.

An accompanying story by Reuters tells us that Blackstone recently hired five managers to beef up its internal ESG team as the firm moves to drive sustainability and diversity across its broad portfolio of holdings.

Adding our perspective why this is a very important development: The company is a member of the American Investment Council (formerly, Private Equity Growth Council).

What about P/E and sustainability? 

That organization says in 2020 the P/E industry invested $24 billion-plus just in renewable and sustainability projects… “playing a critical role in the energy transition and moving our economy in a more sustainable direction.”  P/E has invested $100 billion in renewable energy since 2010 says the AIC.

The Blackstone moves to have portfolio companies “be all in” on sustainability should help to bring about much more ESG disclosure by firms not necessarily doing much reporting today (as they are tucked away in P/E portfolios)l

From experience we know at G&A Institute that when firms move out of P/E portfolio (via IPO, SPAC, acquisition by larger firm, management buyout, other means) the proactive burnishing of corporate ESG reputations can be a big plus in the divestment of today’s P/E entity.

We have the link to the Blackstone report in the Top Story this issue.

TOP STORIES

 

Special Mention – IR Magazine Focus – Our Partners, DFIN

Earth Day – Climate Week – The World Celebrates Promises and Actions to Meet Climate Change Challenges

April 21 2021

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

In brief – yes, this is Climate Week, being observed just about everywhere on this precious Blue Orb floating in space. 

The varied observations are “surrounding” the now-50-plus-one years of celebrating Earth Day going back to April 1970, United States Senator Gaylord Nelson of Wisconsin was the moving force behind the very first Earth Day in the United States of America.

Good news for 2021: The U.S.A. is fully “back” in climate change matters with the nation rejoining the Paris Agreement and embracing and promising to surpass the COP temperature-limiting goals. As we write this,

President Joseph Biden and VP Kamala Harris are leading a global leader virtual summit on climate change issues.

Senator Gaylord’s words in Denver, Colorado that first Earth Day continue to speak to us across the decades: “Our goal is not just an environment of clean air and water and scenic beauty. The objective is an environment of decency, quality and mutual respect for all other human being and all living creatures.”

Here we are in 2021 in the USA witnessing the dramatic expansion of the decades of Earth Day celebrations with current and future promises, pledges, and action on many fronts – in many nations as well – and among global institutions (like the arms of the United Nations and many more),

And by tens of millions of people, individuals who care about the state of humanity and state of our planet.

While considerable focus is on the Biden-Harris Administration policy declarations and actions at the Federal level (“the climate administration”), there are many more actions at the state, city – municipality and tribal levels as well in the United States.

And, across the spectrum of firms in “Corporate America” and at many asset management firms there is the rapidly-widening embrace of ESG policies and actions.

‘No doubt the digital climate summit of this week will spur internal debate in corporate suites along the lines of: What are industry and investing peers doing – what else should we be doing! What are our risks and opportunities as the world engages to move toward Net Neutrality!

In this brief post we are sharing timely updates in each of our subject/topic silos that readers find each week in the G&A Sustainability Highlights newsletter.

Reminder – there is much more related current and archived climate change content beyond the silos for you on the G&A’s SustainabilityHQ platform.  And more related content to share on G&A’s Sustainability Update blog.

TOP STORIES

Celebrating Climate Week & Earth Day 2021 – Global Leaders Gather in “Climate Summit” Hosted by the U.S. – Kumbaya for Paris Agreement Goals Refresh

April 30 2021

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

A highlight of the numerous celebrations of the 2021 Climate Week / Earth Day around the world was the hosting of a “global summit” of leaders from 40 nations and sub-governments, the investment community, the corporate community, NGOs, and advocates, the E.U., multilateral organizations, indigenous communities, and others – hosted this year by the United States of America.

We could describe the enthusiastic presentations and panel discussions over the two days by global participants a kumbaya gathering to refresh and update the 2015 Paris Agreement (or Accord) moments as the world leaders then set out ambitious goals to limit global warming.

The big news – the USA is back in the global effort to address climate change challenges.

President Joseph Biden and Vice President Kamala Harris were the primary hosts over the two days of digital meetings, along with former Secretary of State John Kerry (now the White House climate envoy), present Secretary of State Antony Blinken, cabinet officers, and others in the administration making presentations and leading discussions.

Sovereign leaders joined the two days of discussions to present the strategies and actions (current and planned) for their respective nations (including China, UK, Russia, France, Canada, Australia, India, Japan, Germany, South Korea, Indonesia, Mexico, South Africa, Marshall Islands, and others).

The measures sovereign governments (large and small!) are taking to address climate change challenges – with the foundation of the Paris Agreement of 2015 as guide – are sweeping; some initiatives are now in partnership with other nations (the USA and India, or EU nations and African nations, as examples).

We have included for you the Fact Sheet issued by the White House in our Top Stories for this week. “

The USA is Back” on climate issues is the general messaging of the Biden-Harris Administration, with many specifics set out during the two-day conference.

Some examples of the “whole of government” climate approaches in the United States — and an ambitious agenda for helping developing nations around the world:

  • The United States will double the nation’s target for overall reduction of carbon emissions (NDC) by 50 percent by 2030 compared to 2005 levels. This “underscores the commitment to lead a clean energy revolution”.
  • To assist other nations, a Global Climate Ambition Initiative was launched to support developing nations in establishing net-zero strategies, to be led by the US Department of State and USAID (the US Agency for International Development).
  • These efforts will need funding; the US International Development Finance Corporation (DFC) commits to achieving a net zero investment portfolio by 2040 with one-third or more of the new investments made having a “climate nexus” by FY 2023. The DFC will work with the Rockefeller Foundation to support distributed energy and other innovations offshore.
  • The USA and Canada are chairing “The Greening Government Initiative” to lead by example in helping developing nations implement their respective climate change plans to “increase resilience and mitigate emissions from their government operations and collaborating on common goals”.
  • The North American partners will seek to develop net zero economies, using 100 “clean electricity” and zero emissions vehicle fleets (as examples of climate leadership in action).
  • President Biden announced an international climate finance plan, making use of his country’s multilateral and bilateral channels and institutions to help developing countries; this will include directing the flow of capital toward climate-aligned investments and away from high-carbon investments.

There is much more for you to digest in the sweeping range of current and planned initiatives in the White House Fact Sheet in the Top Stores.

Considering the announcements from Washington DC in the context of the actions of other nations and organizations that we are sharing in the newsletter. We have news from the European Union, the Global Reporting Initiative, United Nations Global Compact, CDP (formerly the Carbon Disclosure Project), and the International Integrated Reporting Council (IIRC).

Important: We can all give a nod of thanks to the media who today are covering the many aspects of climate change challenges (and solutions) – including Forbes, Associated Press, CNN, The Guardian, and many others whose coverage of CC topics & issues we share with you each week.

Bravo, editors and journalists, for keeping us informed of the progress made as well as the societal challenges we still face.

TOP STORIES

Climate Summit

EU Regulations: Corporate Sustainability Reporting Directive

Investors & Climate Change – Leading Institutions and their Growing Networks are Urging Expanded Corporate Disclosure

June 28 2021

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

What about the steadily-rising investor expectations for the corporate sectors’ climate change actions and expanded ESG disclosures?

We are able to more closely examine the rising expectations of leading asset owners/key fiduciaries and their asset managers to understand the investors’ views on the ESG / sustainability disclosure practices of issuers they provide capital to.

This includes keeping close watch on individual institutions and especially the collaborations of investment organizations they participate in.

For example, this news out of London: Some 168 investors hailing from 28 countries are now collaborating to urge companies with “high environmental impact” to use CDP’s system to disclose their environmental data.

And note:  The companies being targeted by investors represent US$28 trillion in market cap and emit an estimated 4,700 megatonnes (Mt) of carbon dioxide equivalent…every year.

The investor collaboration is part of CDP’s 2021 Non-Disclosure Campaign, created to put pressure on companies that have not disclosed their carbon emissions through CDP or have discontinued the practice. Beyond carbon concerns,

CDP and its collaborating investors and investor groups are also zeroing in on companies with forest or water security concerns. (Note that some firms disclose to CDP on one theme of concern to the investor but not others – some companies report on climate change but not on water or forestry issues.)

Targeted companies for investor action in the U.S. included at the “top of the As” are such firms as Apple, Amazon, Aramark, Abbott Laboratories, Activision Blizzard, Albemarle Corp, and Alliant Energy. In Switzerland, Alcon; in Sweden, Alfa Laval Corporate AB; in Canada, Allied Properties REIT; in Brazil, Ambev S.A.; in the U.K., Arrow Global Group. The complete list is available here for your searching.

The bold name asset management firms joining the CDP campaign for greater corporate disclosure this year include HSBC Global Asset Management, Legal and General Investment Management, Nuveen, and Schroders.

Investors supporting the campaign include asset managers and separate activist investor collaborations that are part of The Investor Agenda, which has produced a comprehensive framework recently for these investors (HSBC Global Asset Management, Legal and General Investment Management, Nuveen.)

This effort was founded by seven partners including Ceres, CDP, UN PRI, and UNEP Finance Initiative. In the United States, National Association of Plan Advisors, The Forum for Sustainable and Responsible Investing  (U.S. SIF) and Interfaith Center on Corporate Responsibility (ICCR) have joined the effort.

The approach is to set out “expectations” in four areas:

  • corporate engagement,
  • investment (managing climate risk in portfolio),
  • enhancing investor disclosure, and
  • policy advocacy (urging actions to drive to the 1.5C pathway). Part of this is an urging of governments to take action to address climate change, moving toward this year’s COP 26 gathering in Glasgow.

The CDP Non-Disclosure campaign is now in its fifth year, enjoying a 39% year-on-year growth in investor participation since the start in 2017, with investor participation up more than 50% since 2020.

This effort is part of a broad movement of investor participants and investor alliances aiming to drive change in the companies they provide capital to, as governments, investors and corporations adopt goals to be part of the societal move to achieve “Net Zero” by the year 2050.

These alliances include the Glasgow Financial Alliance for Net Zero (GFANZ), gathering signatories to set science-based targets (SBTs).

Members of GFANZ include 43 banks participating in the Net Zero Banking Alliance (NZBA). The United Nations convened the NZBA to aim for a carbon-neutral investment portfolio by mid-century and will leverage the CDP campaign to target specific companies not disclosing their environmental data.

The opportunity for corporate managements to respond to the CDP disclosure campaign and be eligible for scoring and inclusion in CDP reports is at hand; the CDP disclosure system is open until July 28, 2021.

Here at G&A Institute, our team is assisting our corporate clients in responding to this year’s disclosure request from CDP.

For corporate managers: If your firm received the CDP request for disclosure for 2021 and you have questions about responding, or about your responses in development, the G&A Institute team is available to discuss. Contact us at info@ga-institute.com.

The details of the CDP campaign and the broad investor network focused on climate change actions and disclosure is our Top Story selection for you here.

TOP STORIES

A record 168 investors with US$17 trillion of assets urge 1300+ firms to disclose environmental data (Source: CDP

And more on the ESG disclosure front:

House-Approved Legislation Would Mandate ESG Disclosures (Source: National Association of Plan Advisors)

What’s the plan? Corporate polluters lag on setting climate goals (Source: Reuters)