I think this depends on the industry that you operate in as there are several standards and guidelines for project financing and which largely are based on the Environmental and Social Standards and related guidance of the World Bank Group Policies and Standards (ifc.org). These standards are also relevant to the Equator Principles initiative and which captures 85% of project financing. Home Page - Equator Principles Association (equator-principles.com)
Promoting and ensuring the relevance of ESG rating and approaches- Currently, ESG reporting and rating approaches generally do not sufficiently clarify either financial materiality or non-financial materiality (e.g. social impact), so investors lack a clear picture of the issues that are likely to directly impact the financial condition of a company. Countries and entities should consider engaging in ESG investing through various avenues, including reviewing ESG disclosures and naming of funds with ESG (or similar) investment mandates. In addition, attention should be paid to ESG development and recognition of companies reporting on ESG performance; these efforts improve corporate disclosures and the long-term investing landscape. ESG rating and reporting further increases the competitive advantage of firms
Values are critical, because Values drives us and when we share values, we create shared value ā¦ However, we have always advocated Value Co-creation rather than Creating Shared Value that looked at economic value only as an outcome for Corporates ā¦ Value Co-creation looks at 3 other types of capital - Human, Social and Natural ā¦ Incidentally we think its time to move from CSV to VSC - Value Systems Creation ā¦ Do check the RISE Value Co-Creation Framework shared earlier based on the 4 Universal RISE Values - Responsible, Inclusive, Sustainable and Eco-system-friendly ā¦ Its not just an acronym, there is a whole playbook on the RISE Values, principles, framework and toolkits
As for sticks, it really centers on investor pressure: Financial Times,
UK pension funds threaten to vote against BP and Shell directors over climate targets
Chris Flood, Attracta Mooney and Tom Wilson in London
Read the full article at:
Amber how do we better communicate these long term benefits - why has this been failing do date - or has a good job been done of this? any examples or personal experiences?
Would be interested to hear what people think about efforts to redefine fiduciary duty to strengthen the understanding that fiduciary duty absolutely means mitigating risk factors (such as climate impacts, exposure to stranded asset risk etc) and that in fact ignoring such risk factors in a way that the anti-ESG stakeholders are currently pushing for is in violation of fiduciary duty
Thanks Katie and apologies to be tardy!
Mariko from Margin Innovation.
In order to articulate the benefits to companies, we need to speak their language and use their frameworks for evaluating/decision-making.
In the shorter term, companies (at least in the consumer products space) track and measure the success of their strategies and tactics through measurements such as product/brand attribute rankings, market share movements, consumer perceptions, etc. Decisions around new products, marketing strategies, etc are informed by many of these measures, and corporate managers are held to account in this way. If we hope to build a compelling argument that can be understood in the short-term, we need to first link the ESG goals (I would argue the SDGs) back to metrics that matter for corporate decision-making. Then we can begin to speak the right ālanguageā and craft arguments that are no-brainers for companies.
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Another add on this Shell piece: Adam Matthews on LinkedIn: Why the Church of England is taking on Shell | 73 comments
Strengthen ESG practices so that they are transparent, efficient, and fair - Although policy development has made progress across several markets, with policy initiatives witnessed at different stages of development, efforts should be made towards strengthening ESG practices
Our third question today 
:
Q3. How can we better work together to ensure joined-up narratives?
Totally agree Mariko ā¦ the simpler we make it, the easier to adopt !
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Somewhat related is the framework of universal ownership - pension funds, insurers, large asset managers etc - have an interest in the long-term health of the financial system as a whole. This means they have a duty to manage climate risk and other systemic issues: Universal Ownership in Practice: A Practical Investment Framework for Asset Owners by Ellen Quigley :: SSRN
Document more successful case studies ā¦ and discuss failures more openly
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Some thoughts on better collaborating from our community member JoĆ£o Maria Botelho - who cannot be here today :
- Engage in multi-stakeholder dialogues and collaborations to align on shared goals, expectations, and solutions.
- Use common standards and frameworks for reporting and disclosure to improve comparability and transparency of ESG performance.
- Invest in capacity-building and education to enhance ESG literacy and understanding among stakeholders.
- Foster a culture of accountability and transparency within the organization, and encourage feedback and input from stakeholders to inform decision-making.
- Work with policymakers and other actors to create an enabling environment for ESG management and innovation, such as through incentives, regulations, and public-private partnerships."
Agree that systemic risk framework is critical, Jacey
https://www.sec.gov/Archives/edgar/data/1234350/000121465923005846/p422231px14a6g.htm
The President of C3D (Collective of Sustainability Directors in France), Fabrice Bonnifet discussed in the 2021 AGM, the 5 fallacies that Sustainability Directors needed to be attentive to. I found it brilliant. Below translation in English, original French version is here: Fabrice Bonnifet on LinkedIn: Les fausses croyances de la RSE | 79 comments
False belief nĀ°1.
CSR allows companies to reconcile sustainability with making more money.
This is not true, even though CSOs would like to believe this. It was a way of getting board attention, to be taken seriously, to get decisions made.
However, the more a company greenwashes, in order to continue to pollute, the more it relocates production to countries that have less human rights and environmental law requirements, the more it ālegally evadesā tax due to ambiguities and lack of harmonization of financial and tax rules, the more money it will make, the more efficient it will be and the more effective its lobbying will be in blocking any desire for progress.
Negative externalities of companies cost next to nothing, with fines that are so insignificant that the risk of doing badly, despite the effects on reputation, will always be more profitable than doing what is right.
Even Green bonds and impact investors, will not have an impact, as long as shareholders and institutional investors demand the same returns as those provided by traditional finance.
Implementing a Sustainability strategy is above all a life insurance policy, not a guarantee of excess profitability. Integrating natural and human capital into oneās business model will not be without consequences for profitability. A marketing ācoupā is still possible for virtuous and avant-garde companies, but in the medium term, the advantage will be, at best, to take market share from less virtuous companies, and at least to keep oneās ālicense to operateā.
False belief nĀ°2.
CSR promotes the emergence of green growth.
This is the main reason for many fundraising campaigns and, for current āgreenā recovery policies. Increasing indefinitely the GDP by polluting less and less, which is the definition of green growth, is just impossible. The concept is based on the famous decoupling that can indeed occur during a short period when a very polluting energy resource (e.g. coal) essential to sustain the economy is replaced by another one that is less polluting (e.g. gas or even renewable energy). But on a planet with finite resources, infinite growth is impossible. The no-limit logic must be challenged.
We need a planned and democratic reduction of production and consumption in rich countries, in order to reduce environmental pressures and social inequalities, while improving the quality of life of the greatest number.
False belief #3.
CSR is a driver of technological innovation.
Technological innovation is the argument of those who rationally defend sustainable development issues in the name of progress. And it is true that many technologies allow to save time, energy, resources, moneyā¦ compatible with the improvement of well-being, but the well-being of whom exactly? Of those who already have too much or of those who are still emerging? What real value can a technology have when it is not inclusive or useful to the common good?
What is the use of technology that does not take into account the rebound effect? Any technological improvement improves its efficiency and therefore the basis of its availability, which undoubtedly leads to an increase in absolute consumption of resources and energy compared to the previous technology. Machines, cars, airplanes, buildingsā¦
No, techno-solutionism in the service of CSR will not allow us to maintain the consumerist and resource-consuming erring ways of our lifestyles, which are completely disconnected from the essential: the preservation of the living. We need a planned economy of scarcity and sobriety which uses less and less resources and energy in absolute, while looking benefit the greatest number of people.
False belief nĀ°4.
CSR allows for better management of the companyās sustainability.
Extra-financial reporting is the most inefficient way of producing bureaucracy. The green taxonomy, is the ultimate in useless technocracy. In the best of cases, there are improvement targets in relation to the associated indicators and sometimes even the remuneration of managers depends on the achievement of some of these targets. This way of accounting for negative externalities, is a step in the right direction. However, most of these indicators are only used to feed databases and CSR reports that have so far done nothing to put companies on the road to sustainability.
Extra-financial reporting is far from bringing about change useful to the economy and to the preservation of the common good. The environment and social issues are still the adjustment variables of the economy. The illusion that sustainable development is based on a balance between the economy, the social and the environment, is simply that. As soon as economic criteria are at stake, shareholder considerations come first. It is urgent to deploy multi-capital accounting in companies with a view to strong and uncompromising sustainability.
False belief nĀ°5.
CSR promotes carbon neutrality.
Announcing carbon neutrality in 10, 20 or 30 yearsā time has become a widespread fashion, but what is the value of this type of commitment? A company announcing that it wants to be carbon neutral is nonsense and shows a lack of understanding of the issue. There is only one possible neutrality, that of the planet, which must balance global CO2 emissions with natural carbon sinks. A company cannot therefore be carbon neutral, but rather contribute modestly to planetary carbon neutrality. And for that, its carbon budget must be roughly equal to 0. 0, because the planet does not have the means to digest the CO2 emissions from the combustion of fossil fuels in addition to the other emissions related to the functioning of ecosystems.
When we know the perfect correlation between CO2 emissions that always precede GDP growth, we should find it hard to believe that in the next 30 years, humanity will manage to divide its GHG emissions by 3, while continuing to increase GDP by even 1 point per year. Pretending to believe this lie is either elementary incompetence or absolute cynicism. Note that the companies that make this type of announcement are all very optimistic about their growth in their markets, without having reviewed their models or even drastically reduced their emissions, which does not prevent them from using offsets. One borders on fraud when one takes the time to understand that the indirect emissions of these companies represent, in the vast majority of cases, the bulk of their pollution.
What CSR must do to move towards net zero emissions is to work on transforming economic models towards a perma-circular approach by gradually abandoning the linear approach. In short, truly sincere business leaders who are aware of the planetās limits must resolutely build their cash flow generation on the sale of the uses of their solutions by eco-designing their products with a view to maximum sustainability, based on reuse. It is the economy of functionality pushed to its paroxysm that will allow to reduce CO2 emissions.
We need to be aware of the facts to not lose credibility. Many enchanting narratives have been created in this space, and we need to do our homework to distinguish fact from fiction. (sorry - this was in answer to Question 2 - in France, they still refer to Sustainability/ESG as CSR)
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the point about ESG literacy is key here. Demystifying ESG for the policy-makers and nonprofit partners should be a priority,
Do we need a journalist ESG / communications professionals training programme?
Agree Fareeda and the point Katie shared on Stakeholder dialogues