The State of Sustainable / ESG Investment in 2018: The State of Corporate Sustainability Reporting & How We Got Here




The State of Sustainable / ESG Investment in 2018:
The State of Corporate Sustainability Reporting & How We Got Here

This issue we bring you two important Top Stories that capture the state of sustainable investing from varying points-of-view.  We selected these for their value to both corporate managers and investment professionals.  Corporate staff can use the findings to “make the case” upward to C-suite and boardroom using both documents.  Investors not yet on board with Sustainable / ESG investing can gain valuable insights from both reports.

First is the report by Guido Giese and Zoltan Nagy at MSCI – “How Markets Price ESG” – addressing the question “have changes in ESG scores affected market prices?”  MSCI examines the changes in companies ESG scores, “ESG momentum”, either strong or negative for the companies being rated. Using the firm’s model, the research showed that markets reacted “most sensitively” to improvements in a public company’s characteristics rather than to declines in ESG performance, among many other takeaways in the full report.

The takeaway is that changes in ESG profiles of companies certainly affect company valuations.  The change in ESG characteristics showed the strongest move in equity pricing over a one-year horizon compared to shorter or longer time frames.  The report contains a well designed, thorough methodology which clearly demonstrates the importance of a public company’s ESG profile.

The MSCI score, the authors point out, is a proxy for the ESG-related information that the market is processing. (All MSCI ESG scores are updated at least once a year.)  There’s good information for both corporate managers and investment professionals in the 25-page report.

The second report is a snapshot of the “State of Integrated and Sustainability Reporting 2018” issued by the Investor Responsibility Research Institute (IRRCI) – Sol Kwon of the Sustainable Investments Institute (Si2) is the author and colleague Heidi Welsh is editor.  (IRRCI and Si2 regularly publish research reports together.)

The report charts the evolvement of corporate sustainability reporting, which got off to a modest start in the 1980s - on to the 1990s when corporate sustainability reports as we know them today as investors and companies adopted ESG or Triple Bottom Line approaches.  Another transition is underway, writes author Kwon, the “value creation” (shared value) which should lead to more holistic reporting of inputs and outputs…the emergence of the integrated report.

In 2013, IRRCI had Si2 look at the state of integrated reporting among the S&P 500® companies and examined practices again for this year’s report.  (The earlier work focused on what companies were reporting without regard to status as “mandated” or “voluntary” disclosure.)  Much progress has been made – for one thing, investor attention on ESG matters is much higher today…making corporate sustainability reporting ripe for the next phase.

The details are set out for you in the IRRCI report including trends and examples in use of reporting frameworks (GRI, SASB, IIRC), Quality, Alignment with SDGs, Inclusion of Sustainability in Financial Reports, Investor Engagement / Awareness, Board Oversight, Incentives, and many other important trends – this an important comprehensive read for both corporate managers and investment professionals, with a sweep of developments presented in an easy-to-read format (ex.  What drives ESG integration into investment strategy?  The drivers are identified and presented in a graphic for you.).

Important note for you regarding IRRCI:  in 2019 the organization’s intellectual properties will be assumed by the Weinberg Center at the University of Delaware.  The center conducts research and holds conferences on corporate governance and related issues and is headed by Charles Elson, one of the most highly-regarded thought leaders on corporate governance in the U.S.

This Week's Top Stories

Important Study on ESG Momentum by MSCI:
https://www.msci.com/www/research-paper/how-markets-price-esg-have/01159646451

State of Integrated and Sustainability Reporting 2018:
https://irrcinstitute.org/wp-content/uploads/2018/11/2018-SP-500-Integrated-Reporting-FINAL-November-2018.pdf

 

Sustainability: Continuing Forward Momentum!
For Your Attention: Items From the The Editors' -- There is Much Good News to Share�

Sustainability, something farmers can promote
(Monday - November 05, 2018) Source: Delta Farm Press - Sustainability, a decade or so back, put farmers in a watchful mood, wondering what new regulation was about to create more paperwork, more stress and less efficiency for their operations.  

New Technologies Contribute to Livestock Sustainability
(Thursday - November 08, 2018) Source: AgWeb - The greatest potential for improving sustainability of livestock production depends on scientific innovation to boost productivity while reducing environmental impacts. These advancements include genetic technologies for... 

The Pitch: Sustainability warriors Reground are serving up change
(Monday - November 05, 2018) Associated Profiles : Ceres Source: heraldsun.com.au - “I wheeled it to Ceres, the environmental garden ... When she met Ms Reid two years ago they clicked, sharing an interest in sustainability and reducing waste. Shortly after, they won a Start-up Victoria pitch competition... 

Arguing the case for certified sustainability zones
(Tuesday - November 06, 2018) Source: GreenBiz - Imagine a world in which municipalities and other political states were actively managed to be socially, economically and environmentally sustainable. 

The Power Of Purpose: Abundance Is The New Sustainability
(Tuesday - November 06, 2018) Source: Forbes - But to me, sustainability as a goal seems like such a low bar to set ourselves: 'the avoidance of the depletion of natural resources in order to maintain an ecological balance.' It seems especially unambitious given the scale of...  

Have we reached the sustainability ‘tipping point’ for data centers?
(Tuesday - November 06, 2018) Source: Data Center Dynamics - In a highly-connected and informed age, movements for change emerge from all angles: from a growing consciousness about waste from single-use consumer plastics, or workshop conditions for factories and logistics companies, the... 

Interpreting the Morningstar Sustainability Rating Changes
(Friday - November 09, 2018) Source: Morningstar - In 2016, Morningstar released the Morningstar Sustainability Rating to help investors use environmental, social, and governance, or ESG, information to evaluate investments. Using company-level ESG ratings from Sustainalytics...

Class explores ethos of sustainability on Princeton’s campus
(Wednesday - November 07, 2018) Source: Princeton - Students in the class “Investigating an Ethos of Sustainability at Princeton” use the University as their model and the campus as their lab. Taught by Director of Sustainability Shana Weber, the course examines global... 

All financial institutions must disclose sustainability risks and impacts, MEPs agreed
(Wednesday - November 07, 2018) Source: EurActiv - The European Parliament’s Committee of Economic and Monetary Affairs endorsed on Monday (5 November) a decision that makes it mandatory for all financial market participants, including banks, to disclose sustainability risks and...

Sustainability Understandings of Arctic Shipping
(Wednesday - November 07, 2018) Source: The Arctic Institute - The book sets out a theoretical framework for understanding and analysing sustainability as a political concept, and provides a comprehensive empirical investigation of Arctic sustainability discourses. 

Large hydropower dams 'not sustainable' in the developing world  
(Wednesday - November 07, 2018) Source: BBC - A new study says that many large-scale hydropower projects in Europe and the US have been disastrous for the environment. Dozens of these dams are being removed every year, with many considered dangerous and uneconomic. 

The Path To Long-Term Sustainability
(Friday - November 09, 2018) Source: Open Minds - Sustainability is a word on the mind of most executives and board members of specialty provider organizations. By definition, sustainability is “the ability of an organization to secure and manage sufficient resources to enable... 

US, others make commitments for sustainability at Our Ocean  
(Friday - November 09, 2018) Source: Seafood Source - At the Our Ocean 2018 conference held last week in Indonesia, the United States pledged its support for 15 initiatives that would affect fishing communities across the globe. 

Our Focus This Week on A Range of ESG Topics & Issues � More For You to Think About � What Will Be the Future Impact of These Developments? 

Commentary: Climate change is scary. 'Rat explosion' is way scarier.
(Tuesday - November 06, 2018) Source: Chicago Tribune - As the climate warms, rats in New York, Philadelphia and Boston are breeding faster — and experts warn of a population explosion. Like rats, humans are hardy animals, and we’ve adapted to all kinds of climates. So it can be... 

The inventor of the web says the internet is broken — but he has a plan to fix it
 (Tuesday - November 06, 2018) Source: CNBC - The London-born computer scientist said the web is no longer the open, constructive platform he envisioned when he invented it 29 years ago. He rattled off a long list of concerns, such as user frustration with ads and privacy... 

Middle Market CEOs and CFOs See Jump in Pay
(Tuesday - November 06, 2018) Source: Odessa American - Middle-market company CEOs and CFOs received moderate pay increases during fiscal year 2017, according to the . CEO and CFO pay increased 4.4 percent and 4.5 percent, respectively, in 2017... 

Turbines Kill So Many Birds They're Effectively an Apex Predator
(Wednesday - November 07, 2018) Source: Popular Mechanics - Wind turbines are vital for sustainable power, providing cheap electricity without producing any sort of pollution. But they can be deadly for birds, and new research shows just how deadly: Wind turbines kill so many birds that...

NACD Releases Proxy Season Preparation Toolkit
(Friday - November 09, 2018) Source: Globe News Wire - The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 19,000 board members, recently released a toolkit to equip companies and boards as they prepare for...

 

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Headlines From the Corporate Sector - Both Positive & Negative

Inside Home Depot’s Sustainability and Energy Strategy
(Wednesday - November 07, 2018) 
Source: Green Tech Media - The Home Depot plans to reduce its emissions over 50 percent by 2035, a goal the home improvement retailer said will help it cement its environmental leadership among corporations. 

Sustainability is no longer a ‘nice-to-have’ for global players
(Monday - November 05, 2018) Source: Politico - AB InBev is the world’s leading brewer and the company behind some of the best-loved beers such as Stella Artois, Budweiser, Corona, Hoegaarden and Jupiler. For a business with both a large global footprint and reliance on... 

And the Headlines of interest…

US groups sign up to sustainability standard
(Thursday - November 08, 2018) Source: FT - Up to a dozen large US companies have adopted a new standard to give greater clarity on sustainability, a topic of increasing concern to investors. 

Amazon’s HQ2? Make That Q for Queens
(Tuesday - November 06, 2018) Source: NY Times

Toyota lifts full-year profit forecast
(Tuesday - November 6, 2018) Source: Fox Business

Amazon surprised America with its HQ2 decision: But how will the new offices look?
(Wednesday - November 07, 2018) Source: NBC

Wells Fargo says internal error caused more home foreclosures than expected
(Wednesday - November 07, 2018) Source: Reuters 

Foxconn says it won't staff Wisconsin plant with workers from China
(Wednesday - November 07, 2018) Source: Engadet -

Third Point Sends Letter to Shareholders Detailing Campbell’s Unacceptable Executive Compensation Policies and Record of Rewarding Failure
(Thursday - November 08, 2018) Source: AP News

'Corporate Social Responsibility Should Be Embedded Into Core Business Practices': Ernst and Young On Creating An Industry Standard Post-Legalization  
(Thursday - November 08, 2018) Source: Civilized Life

Google changes harassment, assault policies after mass employee protest
(Friday - November 09, 2018) Source: CNN

 

News & Opinion: Asset Managers, Sovereign Wealth Funds, Pension Funds 

Politicization of CalSTRS hurts returns, harms retirees
(Wednesday - November 07, 2018) Associated Profiles : California State Teachers’ Retirement System Source: SFChronicle - The Golden State’s retired teachers have worked for years to enjoy a healthy and secure retirement. Like education, retirement is the long game. Maintaining economic security for current and future retirees requires that... 

Two Royals in Their 30s Have Been Given the Keys to a $320 Billion Fund
(Wednesday - November 07, 2018) Associated Profiles : Qatar Investment Authority  Source: Bloomberg L.P. - Qatar’s ruler on Sunday named his younger brother deputy chairman of the Qatar Investment Authority, and another relative and foreign minister as chairman. The moves come less than a month after the QIA appointed Mansoor...

Opinions & Commentary

Sustainability and election 2018: Connecting the dots  
(Thursday - November 08, 2018) Source: GreenBiz - We’re beginning to see the connections among social, economic and environmental issues — the proverbial triple bottom line. It’s what my friend and co-author Patrick Doherty has dubbed "full-spectrum sustainability," a term I... 

What Wall Street insiders are saying about the mid-term election outcomes
(Wednesday - November 07, 2018) Source: Yahoo Finance - Yahoo Finance checked in with several Wall Street pros Tuesday night to get their thoughts on what a divided government would mean for investors.

A Congress divided: Analysts explain what it means for Wall Street
(Thursday - November 08, 2018) Source: FT - Analysts are wrestling with the split result in US congressional elections, which hands control of the House of Representatives to Democrats but gives Republicans an increased majority in the Senate. 

What Do the Election Results Mean for Climate and the Environment?
(Thursday - November 08, 2018) Source: Sierra Club - Progressives’ much-hoped-for blue tsunami ended up being more like a splash. The midterm elections delivered mixed messages, with Democrats reclaiming the House of Representatives in a rebuke to President Trump even as... 

G&A Institute Sustainability Update
Informative, insightful, thought provoking
Governance & Accountability Institute's blog focusing on the sustainable world evolving daily before our eyes. Read it, absorb it, question it and challenge.

The Survey Results Are Here: $12 Trillion in Professionally Managed Assets Are Guided by Sustainable Investing / ESG Approaches in the USA – That’s $1-in-$4 of All Capital Market Assets Under Professional Management At End of 2017

Is the Movement to Achieve Greater Societal Sustainability Reaching the Consumer? One Consumer Marketers’ Story…

Breaking News: $12 Trillion in Professionally Managed Sustainable Investment Assets — $1-in-$4 of Total U.S. Assets

 



https://ga-institute.com/to-the-point/a-big-year-2018-for-developments-in-corporate-sustainability-sustainable-investingthe-two-halves-of-the-great-whole-of-the-new-norms-of-capitalism/ The G&A team develops timely insights and perspectives on Corporate Sustainability, Responsibility and Citizenship and we share with you on G&A's To The Point! platform – access is complementary with your registration.  Recent briefs include:

Tech Leaders – Are They Good Corporate Citizens? Microsoft and Other Firms Address the Needs of Their Employee New Parents – And One Positive Signal is Sent

The Needle Continues to Move Forward – Developments in Corporate Sustainability / Responsibility and Sustainable Investing Continue to Shape an Important Year

California Leads the Way (Again) – State’s Giant Pension Funds Must Now Consider Portfolio Climate Risks & Report on Results – It’s the Law

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Using The GRI Sustainability Reporting Framework Improves The Quality of ESG Disclosures - Joint Research From G&A Institute and Baruch College Shows

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