Our bi-weekly spotlight explores key ESG-related market developments and their implications for corporates and investors.
ESG in the News
A global alliance of financial institutions, investors, and businesses launched ESG Book, a data platform that creates a central source of sustainability data more widely available, comparable, and transparent for stakeholders. Developed by sustainability investment firm Arabesque, ESG Book incorporates hundreds of ESG data points from nearly 10,000 companies that are available to the public. The alliance includes the International Finance Corporation, HSBC, Deutsche Bank, Glass Lewis, and the Climate Policy Initiative.
- Teneo Takeaway: ESG Book could be a game changer for the ESG data ecosystem, with the potential to disrupt how ESG data products and ratings are used by investors, companies, and other stakeholders. Legacy ESG data providers have faced criticism for their opaque methodologies, lack of standardization, inaccessibility, and exorbitant cost structures.
The International Organization of Securities Commissions (IOSCO) published recommendations to improve clarity and alignment between ESG ratings and data providers. The report suggests that the ESG ratings bestowed on companies should be more transparent in their data and methodologies. IOSCO outlines broad recommendations, but domestic regulators will decide the details.
- Teneo Takeaway: IOSCO’s recommendations highlight that ESG ratings and data providers are having an expanding role within global securities markets that may merit greater regulatory scrutiny.
Sustainalytics launched its Corporate Supply Chain ESG Solutions service, which includes online access to company-level ESG ratings and data within Sustainalytics' research. The service aims to help measure suppliers’ ESG issues to understand exposure to material ESG risks as well as to help companies review potential vendors and partners before entering new agreements.
- Teneo Takeaway: It’s unclear whether the Sustainalytics tool will provide companies with actionable insights to help identify ESG weaknesses in their supply chain. The product brochure suggests the tool will allow a company to get an overview of ESG risks in its supply chain, gain an understanding of its own ESG risks and impact, and receive a comprehensive assessment of a company’s material ESG risks.
A recent poll by the nonprofit research firm JUST Capital found that 63% of Americans surveyed believe CEOs "have a responsibility to take a stand" on societal issues. The poll also found that 61% of those surveyed think that companies are making progress on advancing diversity, equity & inclusion; however, only 36% said companies have a positive financial impact on their lowest-paid workers.
- Teneo Takeaway: The JUST poll differs from a recent Brunswick Group study that found only 36% of voters think corporate executives should speak out on social issues. The two studies highlight messaging challenges for CEOs on political issues. Brunswick found that Americans are skeptical of corporate statements on social issues – and that concrete and tangible actions are more effective than reflexive statements.
Microsoft shareholders earlier this week voted with 78% support for the company to publish an annual report on sexual harassment and the effectiveness of workplace policies to curb inappropriate or offensive behavior. The report will include information on sexual harassment cases investigated and their resolution, as well as a separate independent investigation into the company’s executives. The vote follows revelations of Microsoft’s former CEO and Chair Bill Gates’ relationship with an employee.
- Teneo Takeaway: This rare win for activist investors demonstrates how shareholders are increasingly both engaged on workplace culture issues and are unwilling to abide C-suite lapses in judgment.
S&P Dow Jones Indices launched the S&P Net Zero 2050 Climate Transition Select Index Series and the S&P Net Zero 2050 Paris-Aligned Select Index Series. The indices will track the performance of their parent indices while also being compatible with a 1.5ºC global warming climate scenario. The indices will exclude companies involved in controversial weapons, tobacco, ESG controversies and those that are non-compliant with the United Nations Global Compact principles.
- Teneo Takeaway: S&P’s latest launch adds to the ever-growing set of carbon transition-focused indices, signaling investor demand for index funds focused on lower emissions as well as goals set out in the Paris Agreement. While the connection between access to capital and a company’s net zero goals is unclear, broader ESG themes are likely to continue to impact markets. According to BlackRock’s head of iShares Americas, assets held in passive ESG ETFs are on track to hit $1 trillion by 2030.
They Said It: ESG Influencers Speak Out
In an article by Business Insider about how CEOs are taking charge on diversity, equity and inclusion initiatives, diversity consultant Tiffany Jana said, "The energy around DEI is there now because business leaders can't get away from the conversation anymore ... We're starting to see a focus on diversity from the systemic level. These changes have the power to create ripple effects in society."
Looking Ahead: Upcoming ESG Events
- ESG Integration Forum, IR Magazine (Virtual) – 1-2 December
- Urban Transformation Summit , World Economic Forum (Detroit, Michigan) – 6-8 December
- 2021 Growth & ESG Conference, BMO Capital Markets (Virtual) – 7-8 December
- Sustainable Business Summit, Bloomberg (Virtual) – 8-9 December
- AICPA & CIMA ESG Online Conference, AICPA (Virtual) – 13 December
- World Economic Forum Annual Meeting, World Economic Forum (Davos, Switzerland) – 17-21 January