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ESG News Update: September 4, 2020

Updated: Sep 14



General ESG News:

The Wise Marketer: The Importance of Socially Responsible Marketing Campaigns

  • Various industries have realized the importance of socially responsible marketing campaigns as they impact both business growth and wider socio-political world. Socially driven, responsible campaigns mean real change and in turn, businesses can earn respect, loyalty, and even revenue.

Financial Advisor: The 'S' Is Gaining Importance In ESG Investing

  • Social concerns are overtaking environmental ones for investors who value ESG investing, said Sarah Bratton, head of sustainability in North America for Schroders.

  • The pandemic—and companies’ reactions to it—has shifted the emphasis for investors to such things as homelessness, treatment of workers, job losses and community impact.

  • “People are looking at companies’ performance during the pandemic. They want to know how companies treated their employees and their communities,” Bratton said. “For instance, companies that shifted to producing and distributing personal protective equipment received a boost in goodwill from investors that will last over the long term.”

Financial Advisor: The Materiality Of The ‘S’ In ESG

  • Social investment risks—especially risks related to racism and racial injustice—have often taken a back seat. Social matters seem abstract, and they are often broadly intertwined with our societal fabric, which makes it very difficult to develop a quantitative model for understanding how these matters impact corporate performance. Additionally, there is an undeniable disconnect between the demographics of typical institutional investors and the people harmed by the externalities of some investments.

  • But we believe that a company’s social attributes are material investment factors. They offer risks and opportunities on their own, and they are often inextricable from environmental and governance matters. We have seen this intersectionality play out very clearly in 2020.

ESG Disclosures, Standards and Rankings:

Green Biz: The New Era of Reporting: How to Engage Investors on ESG

  • Corporate sustainability reporting stands at an impasse. A lack of standardization creates a frustrating disconnect between what investors are looking for and what companies are communicating on environmental, social, and governance (ESG). And as the world experiences a pandemic-fueled recession, companies will need to be more deliberate than ever with how, where, and why they invest scarce corporate sustainability resources.

  • To address the challenge of providing increased quantity and quality of ESG data in a resource-constricted environment, companies must rethink their traditional reporting strategies to better engage investors. This means streamlining reporting to include ESG data that investors care about in a more easily accessible and interpretable way, while leveraging new digital communication tools when possible.

JD Supra: Getting into the ESG Disclosure, Rating and Ranking Game

  • According to the Investor Responsibility Research Institute, in 2018, 78% of the S&P 500 companies issued a sustainability report covering various environmental and social metrics. Companies take a variety of approaches for shaping their ESG disclosure from broad frameworks that drive global commonality in reporting to specialized disclosures that target specific stakeholders.

  • The ESG reporting space is incredibly fast-moving as the definition becomes more inclusive, raising a challenge for companies to sift and organize the macro frameworks and adapt to the tension of varying disclosure guides that may not reflect what is material for the company or its sector. Companies also experience fatigue and a resource drain as they respond to questionnaires that may have the effect of companies focusing on non-material factors to their business.

Euro Money: What’s wrong with ESG ratings?

  • These days, it can seem as though no one has a good word to say for environmental, social and governance (ESG) ratings. Are they really so unfit for purpose? And if so, why are investors still using them?

  • With ESG ratings, there is no consensus even on what questions should be asked – but that is hardly the fault of the ratings providers. Politicians, regulators and investors across the globe are still struggling to agree on a definition of sustainability, let alone set standards for the industry. Why should rating agencies be any different?

  • Many investors, indeed, say they value the diversity of ESG ratings, in so far as they reflect the methodologies of providers with different backgrounds and specialisms – provided, of course, that these are fully disclosed.

Investment Trends:

CNBC: ESG index funds hit $250 billion as pandemic accelerates impact investing boom

  • Index funds investing in companies that rate highly on environmental, social and governance (ESG) factors have received a boost during Covid-19, with increased interest in stakeholder capitalism.

  • Sustainability funds were experiencing big growth before coronavirus: assets doubled over the past three years, according to a new Morningstar report.

  • Impact investing index funds have topped $250 billion, and the U.S. market is now 20% of the total.

Benefits Canada: Majority of global public investors focused on ESG policies: report

  • More than 90 per cent of global public investors have specific environmental, social and governance investment policies in place or are in the process of developing them, according to a new report by BNY Mellon and the Official Monetary and Financial Institutions Forum.

  • Motivations for implementing ESG policies included the expectation of superior risk-adjusted returns and the need to align investment strategies with organizational values or minimize reputational risks. However, respondents said they struggle to formally measure the impact and non-financial performance of investment decisions, even though many said they aim to do so in future.

Forbes: There’s A New Source Of Funding For Society’s Most Pressing Challenges

  • What the world desperately needs now is a new source of funding that’s sustainable and doesn’t run the risk of depletion. As it turns out, businesses can play an essential role in funding the world’s most pressing challenges by leveraging one of the most fundamental activities: business-to-business transactions.

  • Social value economics is a mechanism for companies to underwrite environmental and social impacts in business-to-business transactions. Sales teams can offer to fund social impact initiatives as part of their proposals or renewals, whereas procurement teams can embed social impact directly into their sourcing process to fund nonprofits, social enterprises or NGOs.

National Review: Let a Thousand ESG Certifiers Bloom

  • Some ESG advocates have conceded that their goals can’t be achieved solely with government regulation, but it’s worth asking why government should be involved at all. There are already private certification bodies that offer ESG ratings and endorsements for the companies that choose to seek them.

  • If any change is necessary, it will be in the creation of additional, competing certification bodies. Firms such as Inspire Investing, which offers the Inspire International ESG ETF (ticker symbol: WWJD), are already putting a biblically responsible investing spin on the ESG construct, influencing large, public companies to adopt policies that are more closely aligned with the values of their investors. Inspire also declines to invest in companies that are “involved in immoral activities like abortion, pornography and human trafficking.”

Government Policy:

Responsible Investing: Due diligence in supply chains: A watershed moment on corporate accountability?

  • Following the publication of the European Commission study on due diligence requirements through the supply chain earlier this year, in April, European Commissioner for Justice Didier Reynders announced to the European Parliament Responsible Business Conduct Working Group that he will introduce EU rules on corporate accountability and corporate due diligence in early 2021.

  • Civil society united in their calls for the EU to introduce legislation on corporate due diligence. We have consistently pointed to the fact that voluntary measures have proved to be vastly insufficient and new legislation is urgently needed to establish clear, robust and enforceable cross-sectoral requirements on all business enterprises, including financial institutions, to respect human rights and the environment.

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