Friday, December 6, 2019

What do Danone, ESG Investing, Priyanka Chopra and Child Advocacy have in Common? One Busy Week!

This week has been a busy one after getting back from the Thanksgiving holidays. I had the good fortune to cover the launch of the Danone Institute North America’s inaugural One Planet. One Health. grant program Monday night at a special dinner event hosted by Danone North America and Top Chef Host Tom Colicchio. I had a chance to meet the winning recipients who represented transdisciplinary teams from across the United States and Canada charged with designing, implementing and evaluating actionable, community-based projects for sustainable food systems. I have to say I was equally impressed by the amazing meal served up by Colicchio’s team and by each recipient’s project. Read more in my post this week on TriplePundit.

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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