This is our weekly newsletter we deliver to educate our readers on ESG. We aim to curate content on responsible investment to educate and surface relevant news articles, academic papers, best practice reporting guides and latest industry developments. We have a strong ESG community and if you have feedback to share reply to this email to let us know what’s on your mind!
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Issue #86: A weekly update on responsible investment.
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\\ Weekly Insights \\
Ever wondered how other companies are prioritising their sustainability reporting and disclosures? This week I found an excellent report by Chicago Booth where they dig into exactly what companies are disclosing. The report specifically digs into the 2017 reporting of S&P 500 companies. The aim — shed light on the following four questions:
- What are the most commonly disclosed metrics across S&P 500 firms?
- Which industries disclose more metrics?
- How does a firm’s disclosure in annual CSR reports compare with commonly used ESG (environmental, social, and corporate governance) scores?
1. What are the most commonly disclosed metrics across S&P 500 firms?
Here are two great graphs showing 1. Most commonly disclosed social metrics and 2. Most commonly disclosed environmental metrics.
2. Which industries disclose more metrics?
They found a general trend that industries with a larger negative environmental impact tend to have higher disclosure rates in the environmental CSR category. This seems to be consistent with the idea that industries disclose more on the metrics that are more material to them. The top industries in terms of % of companies reporting on CSR / Sustainability:
- Tobacco Products
- Steel Works
- Shipping Containers
- Rubber and Plastic Products
- Precious Metals
- Automobiles and Trucks
3. How does a firm’s disclosure in annual CSR reports compare with commonly used ESG (environmental, social, and corporate governance) scores?
ESG scores are positively associated with the number of metrics disclosed, but not associated with the performance ranking of the metrics within industry. Read the full score analysis here.
\\ Nossa News \\
We have been featured by The City of London!
Championing sustainable finance: the UK’s global offer. CASE STUDY 4: Nossa Data — how the UK’s sustainable finance ecosystem provides the growth environment for supporting services.
What we are writing:
A guide to getting started with Sustainable Debt: With ESG gaining traction comes the need to understand the different investment vehicles within it. One of the key topics in its growth is Sustainable Debt. To help you get up to speed on the Sustainable Debt space we have created an introductory guide.
Sustainable Debt is the issuance of bonds and loans that fund projects serving environmental, social, and sustainability purposes. The Sustainable Debt market is composed of Green, Social, and Sustainability Bonds (GSS Bonds) and Green, Social, and Sustainability-linked Loans, which raise capital for projects with positive GSS benefits, such as climate mitigation and public health initiatives. The GSS acronym is also seen expanded to GSSS to include Sustainability-linked debt types.
\\ People to watch in ESG \\
- Devin Glenn was recently appointed Global Head of Diversity, Equity and Inclusion at Blackstone. Her focus will be on expanding policies and initiatives that create a diverse and inclusive workplace at Blackstone and its portfolio companies.
- Dickon Pinner is a Senior Partner and Global Leader of McKinsey & Company’s Sustainability Practice where his comprehensive focuses include energy transitions and carbon economics. He leads the firm’s global work in clean technologies and advises clients in various sectors such as clean energy.
- Claire Bergkamp is COO at Textile Exchange and Co-chair for the Raw Materials Working Group at UNFCCC’s Fashion Industry Charter for Climate Action. In her previous position as Worldwide Sustainability and Innovation Director at Stella McCartney, she expanded their sustainability department and goals through eco-conscious initiatives.
- Rebecca Mikula-Wright was recently appointed Chief Executive Officer at The Investor Group on Climate Change (IGCC). She has extensive experience in climate change, sustainability and investment banking through her work in Hong Kong, Europe, and Australia.
- Peter Epping is the new Global Head of ESG at Hines. He is in charge of coordinating the firm’s global sustainability efforts and sustainability strategy. He will work alongside the company’s newly established global ESG team to decarbonize the built environment.
\\ ESG jobs \\
With so many ESG jobs popping up, we want to help you find the right role!
- ESG Climate Research Strat — GSAM Multi-Asset Solutions (MAS) — Goldman Sachs. Read the job posting.
- Manager, ESG and Climate Change Risk Management. BNY Mellon. Read the job posting.
- Director of International Sustainability (ESG), DiDi’s International Sustainability (ESG) team. Read the job posting.
\\ Top Stories \\
Why Green Assets May Not Continue to Outperform
Many investors are attracted to ESG securities on promises of high returns, but they are “misguided,” Wharton finance professor Luke Taylor said. The past performance of ESG securities is not a reliable indicator of returns in the future, especially when past returns were largely driven by “shocks” such as bad news about climate change, he noted. “Absent more unexpected shocks in the future, we don’t see those green stocks outperforming [‘brown’ or environmentally unfriendly stocks] in the future.”
How emerging ESG standards put pressure on PE to adapt
Last month, the ESG alphabet soup got a little less crowded when the Sustainability Accounting Standards Board and the International Integrated Reporting Council completed a merger, forming the Value Reporting Foundation. The merger speaks to a larger trend, where the means of measuring ESG outcomes are becoming increasingly consolidated. For private equity, that means investors are becoming better equipped to ensure firms are putting ESG into practice. Some are saying, that sophisticated LPs are now asking tougher questions about a firm’s ESG efforts. With this change it is no longer enough for GPs to just say, ‘Oh, we have an ESG policy.’
Shareholder Activism Takes Hold as Proxy Season Gives Rise to ESG Issues
The broader trend in the rise of shareholder activism related to ESG issues and how investors are increasingly using proxy votes to express their views on company behavior, rather than relying on company disclosure. This past year, climate change, human capital metrics, and diversity, equity, and inclusion (DEI) were especially relevant to shareholders. Increased demand for transparency, targets, reporting metrics, and business impact assessments have all rapidly gained momentum, as seen below.
We need to talk about net zero bullsh*t
In matters of sustainability Greenwash is a form of bullsh*t. At its most sinister, it is trying to persuade with green tokenism from a fundamentally unsustainable core, but mostly it is less conscious with elements of truth intertwined. As the greenwasher is less interested in truth than persuasion, it is bullsh*t either way. This brings us to the explosion of net zero carbon commitments by countries, companies and financial institutions. How much of this is bullsh*t? And even if it is, does it mark a positive signalling exercise which will drive real change, or is it a delusion that will collapse when greenhouse gas emissions continue to rise?
**Note: Altiorem is a fantastic site for those who want to learn about sustainable finance. I recommend checking out their entire site.
* Want to make your ESG processes digital?
** Schedule a call to speak with Nossa Data
*** Email Team@nossadata.com
\\ Stock Exchange Guidance \\
Best Practices for Sustainability Reporting
New York Stock Exchange
How to get started?
- Identify the right approach for your company
- Identify stakeholders and evaluate engagement
- Assess materiality
- Establish governance
- Integrate ESG into business strategy
- Tell your story
- Assess reporting frameworks and standards
- Look into ESG research and ratings
Who are some of the top ESG research and ratings firms?
MSCI ESG Research is based entirely on publicly-available information collated from assorted academic and NGO datasets, company disclosures and media/news sources. Companies that are selected for assessment are typically those companies that are included in the MSCI indices. Companies are not required to verify the information that is collected but are notified at various stages of the ratings update process, giving them an opportunity to engage, and request corrections, if they wish to do so.
Like MSCI, Sustainalytics relies on publicly-available information for its company ESG assessments. Companies are sent a draft of their ESG report covering all assessed indicators for review and feedback before it is published. Sustainalytics is owned by the investment research firm Morningstar.
S&P ESG / Corporate Sustainability Assessment
The data collected in the S&P Corporate Sustainability Assessment are used as inputs for assorted S&P ESG and Dow Jones Sustainability Indices, compiling the SAM Sustainability Yearbook and calculating S&P Global ESG scores (among other uses). Participation is by invitation and requires the completion of a questionnaire. In addition to possible index inclusion, companies can also see how they perform relative others in their industry. Companies that don’t complete the questionnaire may be nonetheless be rated regardless based on publicly-available information.
Moody’s / Vigeo Eiris
Vigeo Eiris offers a wide range of ESG products to the investment community, including assessments of a company’s ESG practices as well as a view of alignment with the UN Sustainable Development Goals and UN Global Compact, a measure of sustainable goods and services, as well as controversies data. Information is gathered from public-domain sources, but companies can engage with the organization to make sure their publicly-sourced information is accurately captured. Moody’s owns a controlling stake in Vigeo Eiris.
\\ Leading Across ESG \\
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