That was followed early on
Tuesday with Moving the Market: SASB’s 2019 Symposium.
I am an FSA Credential II Candidate for SASB certification and was excited to
join with others to discuss the standards and hear from companies, investors
and other stakeholders who are using them. Below are a few nuggets from the various
panels and keynotes.
Thank the heavens, is all I have
to say. “We think that over time there will be fewer and fewer [ESG] surveys because
there will be more disclosure [by companies] in financial statements. … and, the
information that makes up [remaining] ratings is going to be more transparent
so you can understand what factors are behind each specific rating. … analysts will
be able to look at the granular details and dig into the details…. At the end
of the day, the change [toward disclosure] will be driven by asset owners
– those people who are Millennials and very interested in how their investments
are being used. They are starting to put pressure on asset managers already,
saying ‘I want my savings to be used in such a way that will be positive to
climate change.’” – Doug Peterson, President & CEO, S&P Global
SASB continues to move forward on
a project to develop a framework around human capital management (HCM), Jeff
Hales, SASB Chair, reported. He said this was the No. #1 issue when SASB’s
Investor Advisory Group was polled. SASB will track HCM issues that are reasonably
likely to affect a company’s financial performance and work over the next 18
months to map them to industries before developing meaningful metrics.
Rakhi Kumar, Senior Managing
Director and Head of ESG Investments and Asset Stewardship at State Street
Global Advisors, gave a great TED-style talk on
her vision for the future of sustainable capital markets. After getting frustrated
with variation in how ranking agencies score companies, State Street created
their own ranking, which they call the R-factor (as in Responsibility).
It looks at corporate performance and governance as it relates to ESG issues by
industry, based on SASB standards. Companies can ask State Street for their
score – as well as scores of their peers. State Street will send companies a roadmap
with suggestions for what more they can disclose to improve. R-Factor scores
are shared with State Street’s investment teams and also power the Bloomberg SASB ESG Indices.
Hungarian
Oil & Gas Company MOL Group recently whittled down their ESG
report from 80 pages, which they suspected very few analysts were reading, to a
mere 10 pages. “We tried something bold,” Mikkel Skougaard, Sustainable
Development Senior Expert at MOL, said. In 10 pages, they were able to tell
what happened in the past fiscal year in terms of risks and developments. They
included one page with major indictors and the rest for context. Static information
– policies, approaches, programs – lives on their website. The result: MOL’s scores
went up by MSCI, DJSI, Bloomberg, showing that less really is more!
Caroline Flammer from Boston
University’s Questrom School of Business
shared research on the rise in integrating
CSR into executive compensation. This is something I am constantly on the search
of to share with clients. Examples she included in her study were Valero
Energy, which ties 33 percent of executive comp to health, safety &
environment; Intel, which links compensation to reductions in GHG emissions and
energy use; and Excel, which also links to reductions in carbon emissions. She found
that linkage was most prevalent in the mining industry at 57 percent, followed
by agriculture, forestry & fishing at 53 percent. Her theory was that linking
executive compensation to ESG will improve
a firm’s overall performance. She found that, indeed, companies that did saw an
increase in firm value of 4.1 percent.
For anyone responsible for ESG
reporting who has ever been frustrated by their legal department, this one’s
for you. Robert Jackson, a Commissioner with the U.S. Securities and Exchange
Commission: “The idea that doing nothing [not disclosing] is safer than
doing something, is such a mistake. If the last few years have taught us anything
it is that not disclosing material risks gets you in trouble -- especially when
it comes to climate-related issues. We need to back up and ask what is the role
of lawyers?” And this is from a Harvard-educated former corporate lawyer! Maureen Jensen, Chair and CEO of the Ontario
Securities Commission, agreed. “By not disclosing you are disclosing
that the issue is not important to you, and people will notice. You have to be
prepared for this discussion.”
Look out next year for a report
from IASCO on sustainable finance.
Canada has mandated that
companies must report the number of women on their board and if a company
doesn’t disclose they need to disclose why. The mandate has moved the needle, with
the number of companies with at least one woman on their boards jumping from 49
percent to 70 percent.
And perhaps my favorite: “Increasingly
the interests of stakeholders are the interests of investors,” coming
again from SEC Commissioner Rob Jackson.
All in all, a good day spent with
former colleagues and meeting new ones. From there, it was a quick subway ride downtown
to the UNICEF Snowflake Ball to bid goodbye to the formidable Caryl Stern, who is
leaving at the end of the month to take the reigns at the Little Rock-based Walton Family Foundation. As in past years,
the event was spectacular, with actress Priyanka Chopra receiving
this year’s Danny Kaye Humanitarian Award for her philanthropic work with UNICEF
in India.
One fifth-grade holiday band
concert later, Friday found me, my husband and friends volunteering our time at
Deirdre’s House, where I am privileged to serve on the board. Deirdre’s House is the center in the New Jersey
county where I live for child victims of abuse and/or neglect and for children who have witnessed violence. It does yeoman’s work.
With that, I am
ready for a weekend!
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