Double issue! The G of ESG, the story of Ben & Jerry’s (+ an infographic)
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Issue #89: A weekly update on responsible investment.
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\\ Weekly Insights \\
Last week’s newsletter got skipped as over the weekend I got married! I apologise for the one-week gap in ESG news but will try my best to make it up to my subscribers / celebrate ~1 week of marriage by making this week a double issue!
First of all, it wouldn’t be a double issue without having found a FANTASTIC infographic about ESG reporting. This one was created by Boston College Center for Corporate Citizenship. What I really like about it is that it takes a look at 6 of the top standards: GRI, CDP, TCFD, IR, SASB and SDGs and compares them against similar attributes: Purpose, what is best for, what gets disclosed. If you are trying to decide with a colleague what standards make the most sense for your organisation, this is a good place to look!
Ben and Jerry’s: The G of ESG
For my second featured topic, I want to highlight the story of Ben & Jerry’s Governance. Ben & Jerry’s has been known for years as a brand that is a leader on environmental and social topics. This week, I found a very interesting article by Forbes discussing the brands struggles with governance. (Please read the whole article but here are a few of the highlights that stand out to me).
- Ben and Jerry’s parent company is Unilever but it’s board has operated independently since 2000. Recently, the board voted to cancel its license with Israel stating: “We believe it is inconsistent with our values for Ben & Jerry’s ice cream to be sold in the Occupied Palestinian Territory (OPT).” This is a particularly tricky situation for Unilever as a parent company because: “In the U.S., 33 states have passed laws that restrict government investment or contracting in companies that boycott Israel; if Unilever does not act to reverse the board’s decision, it could face divestment and losses.” Ben and Jerry’s independent board had put Unilever in a touch spot when it comes to fiduciary responsibility to their shareholders.
- Governance has always been tricky for Ben and Jerry’s. Before getting acquired by Unilever, Ben and Jerry’s traded at a P/E ratio of 9.8, much lower than competitors such as Dreyer’s Grand which traded at a P/E ratio of 47.2. This was primarily due to poor financial and overall management. There were also concerns that the board was insider led.
- Ben and Jerry is a poster child of good E and S but those elements need to come with a G. Strong governance comes first and then a company can double down on the E and S.
\\ Nossa News \\
Venturing into the world of ESG: A new VC community and its engagement with value-aligned funding
Hannah Leach is the co-founder of VentureESG, a community around ESG in venture. The group helps venture capital (VC) firms integrate ESG practices into their end-to-end processes. This is a new initiative within the venture landscape and has been gaining traction in the recent months. We interviewed her about the initiative and what is happening with ESG in venture.
Read the full feature.
A discussion with our Senior Software Engineer: Anosh Malik
When I was looking for places where I could make use of my skills, I wanted to be somewhere where I could actually make a difference. When I looked into Nossa Data and consequently met the founders, it seemed like the perfect opportunity to dedicate the skills I learned over the years to help solve problems within the ESG reporting ecosystem. Honestly, ESG topics have all interested me separately. I have always been really interested in climate activism, as well as topics around workplace fairness. Fairness is particularly dear to my heart, having had friends who have encountered relevant challenges. Additionally, having seen ESG scandals in the media, I have realised that if I were in a position to enable companies to easily gather data, report, and measure themselves, I would be pleased to know I helped create the outcome of better transparency and efficiency. It is a way to apply my technical skills to a good and worthy cause that can make a positive difference in the world we live in.
Read the full feature with Anosh.
\\ Top Stories \\
What does an ESG Score Really Say about a Company?
A recent study shows that the more information a company discloses about its ESG practices, the more rating agencies disagree on how well that company is performing along these dimensions. According to the research, a 10 percent increase in corporate disclosure is associated with a 1.3 to 2 percent increase in ESG score variation among major ratings providers, which all interpret and process disclosures differently. Rating agencies rely heavily on corporate reporting — a company indicating that it has an anti-discrimination policy on the books, for example — in calculating ESG scores. When companies are more specific about the impact of their ESG policies, such as by reporting how many discrimination complaints they faced during the year, these disclosures tend to stir disagreement among the raters says the study.
Harvard Business School.
Mentions of ‘ESG’ and sustainability are being made on thousands of corporate earnings calls
Environmental, social and governance issues have been discussed on about a fifth of calls across the world, highlighting the importance of sustainability. Pimco, which oversees $2.2 trillion in assets, analyzed earnings call transcripts of about 10,000 global companies between May 2005 and May 2021. From May 2005 to May 2018, environmental, social and governance (ESG) mentions hovered between 0% to 1% of calls. By 2019, mentions rose to 5%, and by May 2021, it was 19%.
Market Watch.
Authorised ESG & Sustainable Investment Funds: Improving Quality and Clarity
The UK Financial Conduct Authority (FCA) has published a “Dear Chair” letter setting out its “Guiding principles on design, delivery and disclosure of ESG [environmental, social and governance features] and sustainable investment funds” (the “Guiding Principles”). The Guiding Principles are especially important in expressing the FCA’s view of what constitutes “greenwashing” and how to avoid it.
Financial Conduct Authority.
10 Top ESG Stocks on the S&P 500
I love to share lists of top ESG stocks. This list is great as it shares why each company stands out. This list published by Nasdaq lists the following:
- Nvidia (NVDA)
- Salesforce (CRM)
- Microsoft (MSFT)
- Cisco (CSCO)
- Texas Instruments (TXN)
- BestBuy (BBY)
- Home Depot (HD)
- Teladoc Health (TDOC)
- Applied Materials (AMAT)
- Lam Research (LRCX)
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\\ Report Highlight \\
Chasing the ESG Factor
In the time-series (ordinal ESG) or the cross-section (cardinal ESG)? This paper shows analytically that, when proper adjustment to guarantee identical ESG ratings is implemented, the return spread of the factors produced by the two methods is merely noise. The researchers provide a protocol to construct a cross-sectional ESG factor with a targeted ESG rating without screening stocks. The cross-sectional ESG factor neutralizes the exposure to other firm characteristics. Using ratings from several ESG data vendors, they document strong variations in the ESG factor’s alpha in the time series and across data vendors. The alpha filtered from realized returns is negatively related to the level of an ESG sentiment variable based on media attention, while it is positively related to unexpected variations of the sentiment. Read the paper.
Rethinking Risk for the Future
ACCA (the Association of Chartered Certified Accountants)
COVID-19 has triggered the biggest crisis in a generation having caused not only a global pandemic, but also unprecedented disruption to businesses and economies worldwide. While we have seen how the awareness of risk management and its scope evolve with previous crises, the COVID-19 pandemic is unique.
The opening section of this report discusses how failing to address sustainability is the biggest risk of all, and what needs to be done to better measure and manage the associated existential risks. The report focuses on 5 key areas for accountancy to improve when it comes to sustainability and ESG:
- A new dawn for accountancy
- ERM’s Evolving Doors
- Governance in the Risk Galaxy
- Operational Resiliency and Emerging Risks
- One Size does not fit all
It also shares this (slightly old but still highly relevant) infographic made by the WEF assessing external risks.
\\ Leading Across ESG \\
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Julianne Sloane
Co-founder of Nossa Data
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