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Issue #96: A weekly update on responsible investment.
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\\ Weekly Insights \\
Over one of our recent, expert interviews, the Nossa Data team learned the term ‘Watermelon Organisation.’ It is meant to refer to a company that appears to be strong at ESG on the outside, but upon further scrutiny, stakeholders find that the organisation’s promises are not as they seem. We like this term that has a similar feel to greenwashing but demonstrates what specifically a greenwashing organisation may be doing.
Check out our visualisation shared on LinkedIn this week.
Top findings from HSBC’s report on sustainable finance and investing.
- 51% of issuers and investors say they care about environmental and social issues because paying attention to these issues can improve returns or lower risks.
- A genuine shift is underway in how capital markets participants view their responsibilities.
- An astonishing 94% of companies expect to move away from environmentally- and socially-challenged business models in the next five years.
- Half of issuers say that climate change is already affecting their business or activities.
- 41% of issuers say they need a lot of financial help and investment to meet their sustainability goals.
Read the rest in the report.
\\ Nossa News \\
“Pretty much all managers these days integrate ESG, but it’s still very difficult to identify which ones are doing it at a very sophisticated level and which ones are doing it at a more initiated level.”
Read our interview with Tamara Close: Founder and Managing Director of Close Group Consulting
\\ Top Stories \\
Telling your ESG story beyond the sustainability report: ESG on the earnings call
What have investor relations teams done to promote their company’s ESG:
- Hosted an ESG investor day
- Launched an ESG statbook
- Discussed ESG on the earnings call
- Released a thematic report on a single sustainability topic.
Starting in February 2019: CEO Mark Schneider flagged that the global food firm would increase its focus on sustainability issues and creating shared value during earnings calls. ‘We will now make this a more regular feature of our investor calls because I think it is an element that’s deeply embedded in our company and sets us apart,’ he said.
Since then: Nestlé has included regular updates on calls. For example, in April 2019 the company included a section on why capsules are actually an environmentally friendly way to consume coffee. The following quarter, Nestlé provided details on how its medical nutrition business is supporting cancer patients.
Specific ESG topics and the broader approach: During the full-year results for 2020, Schneider included several hundred words on why sustainability is key to value creation.
The Risk of US — EU Divergence on Sustainability Disclosure
The U.S. and the EU are pursuing different trajectories in regulating ESG investing and sustainability disclosures. The U.S. is following a laissez-faire approach with sustainable investing and disclosure being guided by voluntary, private-sector-led processes, protocols, and guidelines. Compliance is driven by peer pressure and the competitive drive to build an image as a sustainable, accountable business. In the absence of regulatory intervention, institutional investors that manage index funds — in particular BlackRock, Vanguard, and Mainstreet — have stepped in to take state-like roles by putting pressure on corporations to address systematic risks like climate change. The EU, on the other hand, is following a systematic and centralized approach toward climate transition and sustainability disclosure. Its regulatory regime is underpinned by the European Climate Law that legally endorses the EU’s commitment to meet the Paris agreement.
The ESG Reporting Landscape: Steps for effective reporting
First: put your target audience and the way your business works at the centre. Then
- Decide what perspective you want to report from
- Understand the internal perspective
- Understand the external perspective
- Map your content to top frameworks on the market
- Look to frameworks to guide you
- Structure your annual report around the mandatory requirements
PRI Launches Venture Capital Collaboration to strengthen ESG take-up
To capture current trends around ESG adoption in the industry, the PRI and VentureESG undertook a survey of VC firms in our respective communities. We wanted to understand who is driving the desire to incorporate ESG? What are funds already doing, and how are they developing further? What is holding them back, and where is support most needed? Detailed below are some findings from the survey that indicate the state of the industry:
- DEI is a focus area, but ESG overall is not well integrated with investment teams.
- High adoption of pre-investment screening,
- Asset Owners (LPs) are not a driving force behind ESG adoption
ESG: The New Must-Have in the Due Diligence Process
An assessment of environmental, social, and governance (ESG) factors has become an integral part of the due diligence review of companies. Such assessment may provide a potential acquirer with a detailed analysis of a company’s ability to operate successfully in a corporate world with growing environmental awareness. This is especially important for companies looking at merger and acquisition targets and seeking new investments. It is also important for any company for its future planning.
- Want to make your ESG processes digital?
** Schedule a call to speak with Nossa Data
*** Email Team@nossadata.com
\\ Report Highlight \\
Race Inclusion Reports: Encouraging Ethnicity Data Disclosure
Employers need to collect ethnicity data on their workforce:
- To tailor and monitor their diversity strategy
- To prepare for the likely introduction of compulsory ethnicity pay gap reporting
- To support an effective, evidence-based HR strategy that will promote organisational performance.
What positive outcomes has ethnicity disclosure done to date?
Focusing on gender pay gap data disclosure has:
- Resulted in greater prominence and clarity on the current experience of employees
- Prompted organisations to produce action plans to tackle their gaps
- Enabled tracking of the impact of these action plans because reporting is an annual requirement (although paused for COVID-19).
What has happened so far with ethnicity disclosures?
- Nearly half (47%) of employees have been asked to disclose their ethnicity, with significant differences between sectors.
- 69% of public sector employees are most likely to have been asked to provide their ethnicity, followed by 55% in the third/voluntary sector and only 36% in the private sector.
Employees are most likely to be asked to disclose their ethnicity during the application process (44%) or on joining the organisation (21%).
While 46% have been asked to disclose their ethnicity, only 33% say they have talked about race at work, only 26% say there are employer-supported conversations about diversity in their organisation, and only 18% say their employer has been externally recognised for their work on inclusion and diversity.
How have employee attitudes and beliefs about disclosure changed?
- A substantial majority of employees (84%) are comfortable disclosing their ethnicity to their employer, with only 10% saying they are uncomfortable with it.
- 18% said that their employer could not be trusted to retain their anonymity and confidentiality when collecting ethnicity data.
- 32% agreed that their employer would use the data to make positive changes in their organisation.
- 31% agreed that their employer would use the data to identify any inequalities in promotions and employee progression.
- 30% said their employer would say they’re acting on inequalities but with no change evident (34% of BAME group respondents and 21% of white British).
- 30% said that their employer wouldn’t do anything with the data.
\\ Leading Across ESG \\
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