The great merge of ESG standards
Issue #59: A weekly update on responsible investment. Forwarded by a friend? Subscribe here.
Multiple times this year I have written about collaboration efforts between the ESG standard setters. This week we saw the International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) announce their intent to merge into a new organization: the Value Reporting Foundation. The two firms state that by combining forces they aim to provide “investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance.”
The merger is meant to advance the work made earlier in the year as a Statement of Intent to Work Together Towards an alignment discussion made between CDP, CDSB, GRI, IIRC and SASB in September 2020.
This is the first big major merger announcement of two ESG standards and GRI, another influential ESG player, has already issued a statement announcing their support of the merger as well.
Charles Tilley, CEO, IIRC says:.
“This merger is a significant advancement towards building a comprehensive system of corporate reporting, as we work to ensure integrated reporting and sustainability disclosure have the same level of rigor as financial accounting and disclosure.”
Is Value Reporting Foundation going to be the organization which becomes the ESG equivalent of GAAP (Generally Accepted Accounting Principles.)
Subscriber Feature:
How a decade of ESG in venture is ahead of us
How come VCs have not yet caught onto environmental, social and governance principles, a massive trend in other asset classes from buyout funds to public equities? Researcher and author Johannes Lenhard writes that there are a significant number of recent developments showing that ESG is arriving to venture land. Worldwide funds are announcing their intent to assess early stage companies across ESG.
Venture Capital Journal.
5 people to look out for in ESG:
This newsletter is only possible thanks to all the excellent work others are doing in the field of ESG. To help highlight more of these voices each week we highlight 5 people in ESG. You can also follow along from our LinkedIn page.
Anne is managing investment director for Board Governance & Sustainability at CalPERS. Each year from 2010–2020 she has been listed as one of the year’s 100 most influential people in the boardroom by the National Association of Corporate Directors.
Aaron is an assistant professor at the Northwestern University — Kellogg School of Management . He researches ESG issues and finance, presenting to academics, practitioners, and intergovernmental organisations worldwide.
Andrew is the CEO of The Ellen MacArthur Foundation, which aims to accelerate the transition to circular economy. He is passionate about harnessing innovation and design to help transition to a more regenerative model for economic growth.
Rhiana is the Director of Climate Policy at the Roosevelt Institute. She is co-author of the paper ‘The Green New Deal: Mobilizing for a Just, Prosperous, and Sustainable Economy’
Anna is the Head of Due Diligence, CIO Office at Merill Lynch. She has actively pushed for sustainable options for the bank’s clients and is committed to taking deep dives into diversity and inclusion.
Top Stories
How to best manage ESG disclosures
Public company CFOs are increasingly grappling with how to measure and report their company’s performance against ESG standards because of the importance investors and other stakeholders are placing on performance beyond profitability. CFOs are finding the most reporting success by creating an internal team to handle ESG inquiries. Ideally, it should be led by investor relations in collaboration with operations, finance and human resources.
Utility Dive.
[Hint: Nossa Data’s technology software can help make this process much more efficient, reply to this email to schedule a demo]
Green gold: how sustainability became big business for consumer brands
The huge range of green and eco-friendly goods has worried regulators and prompted questions about whether sustainability claims are always truthful or clear to consumers. There are a very large number of brands that are scrabbling to try and leverage the sustainability opportunity however when you poke at it some of it is very superficial and some of the product or packaging claims are actively misleading.
Are any consumer-packaged goods firms fit for an ESG fund?
How can we judge the ESG credentials of food and beverage companies? An increasingly important question as consumer preferences have shifted towards healthier products, with 95% of Americans reporting that they always or sometimes look for healthy options when food shopping. Despite the labelling and food reformulation efforts underway by packaged foods manufacturers, consumers still have difficulty credibly identifying products that meet their health preferences with only 28% saying it’s easy to find healthy foods.
George Serafeim with Amanda Rischbieth and Katie Trinh on LinkedIn.
As more countries pledge zero emissions, coal finance evaporates
Financing for coal projects is drying up at ever increasing rates as more countries target zero carbon emissions amid an energy transition sweeping the world. The exit from coal by big international banks and government-backed agencies, which has accelerated this year, is likely to push coal companies to use offsets to get funding and listed ones to go private to avoid shareholder pressure as the dirtiest fossil fuel is increasingly shunned.
Reuters.
Canadian ESG Assets Surge to $3.2 Trillion
Key report highlights:
- $3.2 trillion in RI assets under management (AUM).
- 48% growth in RI AUM over a two-year period.
- RI represents 61.8% of Canada’s investment industry, up from 50.6% two years ago.
- Retail RI mutual fund assets increased from $11.1 billion to $15.1 billion, up 36% over two years. RI ETF assets more than doubled from $240.6 million to $654.9 million during the same period.
- The two most prominent RI strategies by AUM are: (1) ESG integration and (2) shareholder engagement.
Paper Highlight
Sense and Nonsense in ESG Ratings
Ingo Walter, New York University Stern School of Business.
Concerns about the future of the natural environment, prevailing social conditions, and governance of private and public institutions inspire today’s ESG movement. This paper assesses the ESG scoring issue. It analyses efforts to create metrics that can reflect normative improvements in ESG outcomes and performance scoring against them.
E-Scoring:
Creating sustainability metrics and estimating remediation costs involving the natural environment remains a daunting task despite the ability to draw on natural science. Environmental resources involve costs and benefits that are usually hard to measure, unevenly distributed, and often cross political borders. Nevertheless, E-scoring is in vogue, notably focusing on climate change.
S-Scoring:
Creating social impact metrics needed for S-scoring is even tougher than that of E. Credibility requires that highly granular (even interpersonal) welfare comparisons have to be drawn, and they have to be defended as legitimate. People and communities are different, so welfare comparisons among them are conceptually challenged.
G-Scoring:
G scores are the most advanced as it has been under debate for decades. G has a much firmer foundation than its partner-ESG components. However, it remains a work in progress, judging from the frequency of governance eruptions and the diversity of governance systems around the world.
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Kind regards,
The Nossa Data Team
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