All Things Sustainable

Climate change took "a bit of a backseat" during the first several weeks of the coronavirus pandemic as "governments and businesses frankly were really just focused on survival," JPMorgan Chase Head of Sustainability Marisa Buchanan said in an exclusive interview in the latest episode of "ESG Insider," an S&P Global podcast. "As economies begin to rebuild [and] businesses have greater ability to focus on these issues, we're going to see budget and bandwidth come back hopefully," Buchanan said. The episode is part of a series in which we talk to some of the world's biggest lenders about how they are adapting their environmental, social and governance strategies amid COVID-19 and widespread protests against racism following George Floyd's death in the custody of Minneapolis police. Listen to the episode to hear to the full interview, and subscribe to ESG Insider to catch future episodes.  (Photo: AP)

More than 370 credit rating actions taken by S&P Global Ratings since March have been driven by environmental, social and governance factors as a result of the COVID-19 pandemic, S&P Global Ratings' Americas Team Leader for Sustainable Finance Michael Ferguson said in an exclusive interview for the latest episode of "ESG Insider," an S&P Global podcast. Companies in nearly every sector have been hard hit by the economic impacts of the pandemic and many have seen their credit rating downgraded as a result. The majority of ESG-related actions S&P Global Ratings took in recent months were tied to social factors, such as how businesses are being impacted by social distancing and workforce challenges, Ferguson said. "Managing ESG risk is critical ... because it is a central piece of understanding credit quality," he explained. Many ESG risks such as climate change play out over the long term, giving companies time to plan and adapt. But the pandemic is forcing companies to pivot and act quickly in relation to things like supply chain management, Ferguson explained. Some ESG-related deterioration in credit quality resulting from COVID-19 is inevitable given the pandemic circumstances. "Certainly the idea that people are going to social distance means that they're not going to go to casinos, they're not going to go to restaurants, they're not going to get on planes for a little while. That's going to impair credit quality," Ferguson said. But management teams do have control over their response to the virus, such as mitigating risks related to workforce and safety — and that is something ratings analysts will be watching closely as companies emerge from the crisis. "Companies that are not particularly cautious about how they reopen and do so hastily and without taking the proper precautions," face significantly heightened social risks, Ferguson cautioned. Listen to the episode to hear the full interview, and subscribe to ESG Insider to catch future episodes!  (Photo: AP) 

Investors are moving to hold companies such as Amazon more accountable on workforce management during the COVID-19 crisis, Fiona Reynolds, the CEO of PRI, or the Principles for Responsible Investment, said in an exclusive interview for the latest episode of ESG Insider, an S&P Global podcast. To prevent the spread of the coronavirus, many governments have ordered social distancing and for people to stay home, with exception to essential workers. But this has meant that many companies that relied on people traveling, shopping, going out to eat for their revenues have experienced significant financial problems and many have furloughed or have been forced to lay off employees. PRI's hundreds of signatory investors that collectively manage about $90 trillion in assets are "extremely concerned about what's happening within the workforces within the corporations that they're invested in," said Reynolds. PRI has organized focus groups aimed at helping investors engage with companies on coronavirus issues, including by asking questions of the companies at their annual shareholder meetings. "We need to be stronger on social issues and human rights and make sure that the companies that we invest in understand that we care about the workforce," Reynolds said. "Because we know from all of the evidence, the academic evidence that is out there, (that) when you have a company that has happy employees, you're a better company and you perform better." Reynolds also outlined how she envisions investor and government expectations might change on workforce issues coming out of the coronavirus crisis. PRI is a project the United Nations launched in 2006 that has evolved into an international network of investors who have agreed to apply six sustainability principles to their investment decisions and practices. Also in the episode, Reynolds and S&P Global Market Intelligence e-commerce reporter Katie Arcieri outline the pressure Amazon has come under for worker safety issues both from employees and investors and how the company says it is working to address those concerns. (Photo: AP) 

Wall Street's top regulator is moving to fundamentally reshape the proxy process, one of the key avenues shareholders use to engage with companies on environmental, social and governance issues. In the latest episode of ESG Insider, a podcast hosted by S&P Global, we talk to stakeholders about what the proxy rule changes the U.S. Securities and Exchange Commission is weighing could mean for companies and investors. Some investors worry that proposed rule changes could make it harder for shareholders to engage with companies through the proxy process. "When you cut off the opportunities for new ideas to emerge ... you are denying the marketplace the opportunity to vet those ideas and the marketplace will be poorer for it," says Jonas Kron, director of shareholder advocacy at Trillium Asset Management, a firm that uses ESG factors to manage about $3 billion in assets and has submitted shareholder resolutions at major companies. Advocates for change say proxy rule updates will bring needed sanity to a process that has morphed into a political tool. " The shareholder proposal process in our viewpoint has been subverted over the last several years from being one of a communications device between shareholders and companies ... and instead is being used by certain special interest activists to push agendas or issues that they can't make progress on in Washington," says Tom Quaadman, executive vice president at the U.S. Chamber of Commerce's Center for Capital Markets Competitiveness, discussing why the chamber has lobbied for these changes. Regulators are actively considering proxy rule modifications, but some say the private sector — not government — will provide the biggest catalyst for change. In early 2020, BlackRock Inc. CEO Larry Fink wrote a game-changing annual letter urging chief executives around the world to make more robust ESG disclosures using existing frameworks from the Sustainability Accounting Standards Board, or SASB, and the Task Force on Climate-related Financial Disclosures, or TCFD. BlackRock is the world's largest asset manager and its CEO has considerable clout, explains Robert Jackson, who recently finished his term as an SEC commissioner. "Companies across America right now I can assure you are talking seriously about what they have to do to come in compliance with those standards because if they don't, they're going to face a skeptical BlackRock come proxy season next year," Jackson says in an interview with ESG Insider. "Almost no board in America wants to face that." Listen to the episode, and subscribe to ESG Insider on Soundcloud, Spotify, Apple Podcasts, or wherever you get your podcasts.  (Photo: AP) 

"Baby steps are equivalent to nothing in this day and age.” This is what Mindy Lubber told ESG Insider, an S&P Global podcast about the environmental, social and governance issues shaping company strategies and investor decisions. Lubber is CEO of sustainability nonprofit Ceres, and she was talking about how slowly many companies are reacting to climate change and disclosing their environmental risks. In this first episode of 2020, ESG Insider talked to Lubber and other key stakeholders across the ESG world about the issues they are focused on in the new decade. The sluggish response to rapidly worsening climate risks was a recurring theme. "Given the immediacy of climate change, I am constantly surprised at the slow reaction of the markets of institutional investors," said Christopher Ailman, chief investment officer of the California State Teachers' Retirement System. CalSTRS is the 2nd-largest U.S. pension fund with a $248 billion investment portfolio. Even companies that recognize the threat of climate change continue struggling with how to measure and disclose it. The lack of relevant, quality and comparable ESG data was another recurring theme among attendees of Sustainable Finance Week, a series of events in New York City where policymakers, asset owners and managers and corporations from around the globe convened in December. "CEOs are thinking about it. Insurance companies, frankly, are already pricing it in. Investors need to wake up and recognize this is a factor they've got to think about in their portfolio," Ailman told ESG Insider. The lack of standards continues to create survey fatigue. Corporations are devoting a lot of time and money to filling out surveys from all different stakeholders about their ESG data — a common refrain at ESG conferences. The Sustainability Accounting Standards Board is working to address this problem. SASB is a U.S. nonprofit organization developing disclosure standards for material ESG factors, and ESG Insider spoke to Jeff Hales, chair of SASB's Standards Board, during the group's annual symposium. There is a potential upside to survey fatigue, however, as we hear from the head of U.S. stewardship and sustainable investing for Legal & General Investment Management America in the episode. Listen to the episode, and subscribe to ESG Insider on Soundcloud to catch future episodes. (Photo: AP)

In this episode of ESG Insider, S&P Global Market Intelligence reporter Gautam Naik takes listeners inside the campaign to end forced labor in Uzbekistan's cotton fields. He visited Uzbek cotton fields during the 2019 harvest, sat down with human rights activists and interviewed government ministers trying to change the system. A decade ago, Uzbekistan forced more than one million doctors, teachers, nurses and even schoolchildren to head out into the fields each autumn and bring in the cotton crop. Back then, a good chunk of Uzbek cotton – produced under harsh conditions of forced labor -- ended up in thousands of shirts, jeans and shoes sold by western fashion brands. But as more and more companies stopped using Uzbek cotton, something unexpected happened: the government backed down and decided to aggressively roll back its state-sponsored forced-labor regime. For investors and asset managers who worry about the risks of labor exploitation in consumer supply chains, the Uzbekistan cotton story is a rare thing -- a vivid example of how corporate pressure can lead to enduring change in the global fight against forced labor. Listen to the episode to learn more, and read the story on spglobal.com: https://bit.ly/2sCX1Wq Subscribe to ESG Insider to catch future episodes. (Photo: AP)

Private equity investors are paying increasing attention to environmental, social and governance factors and in response many firms are implementing strategies to ensure portfolio companies are screened against ESG factors. This focus is likely to intensify and could even become a requirement for a fund over time, representatives from some of the world’s most prominent private equity firms say in the latest episode of ESG Insider, an S&P Global podcast. At The Blackstone Group Inc., the world’s largest alternative investment firm, the ESG strategy is focused on making low-cost and no-cost operational improvements in its portfolio companies — in particular looking for ways to reduce energy and water consumption, and improve efficiency and reduce costs through the operation and maintenance of equipment. "An example of this work [is] we can look at our investment in the Cosmopolitan hotel in Las Vegas, where we really went in there and helped with energy and water consumption reduction programs, implementing LED lighting throughout the hotel, increasing their recycling rates and improving waste separation efforts just to boost that," Blackstone Global Head of ESG Alison Fenton-Willock tells ESG Insider. ESG considerations are nothing new for many private equity firms, but the industry’s approach is evolving. KKR & Co. Inc., another big alternative asset manager, launched a program over a decade ago focused on supply chain through the lens of issues like worker wellness, transparency and anti-corruption. Over the next 10 years, ESG methodology will be an "absolute requirement" for every general partner, or GP, according to Hamilton Lane Inc. managing director Ana Lei Ortiz. The alternative investment management firm, which invests in private equity funds on behalf of its limited partners, or LPs, performs ESG due diligence on the firms it backs and monitors for adherence with ESG standards across a fund's lifecycle. "[In 10 years GPs] will have to have very clear policies, they'll have to disclose a whole lot of information," Lei Ortiz says. “They won't be able to raise a fund if they're not able to address these basic questions." Subscribe to the ESG Insider podcast to catch future episodes. (Photo: AP)

Social audits are used by consumer goods companies to identify potential human rights abuses, labor violations, and other ESG risks in their supply chains. But critics argue that social audits fall short of their stated objectives. In this episode of ESG Insider, we explore the social audit process and talk to experts about flaws in the system. (Photo: AP)

Child labor has been a longstanding scourge in the $100-billion cocoa industry for more than two decades. Despite efforts by U.S. Congressmen, African governments, the world’s biggest chocolate companies and various non-profit groups, it has been a tough nut to crack. In this episode, we look at program that actually seems to be having an effect. It uses a network of smartphones to identify child laborers on thousands of remote farms in Ghana and the Ivory Coast. It then tries to persuade farmers to stop using their children on farms and to send them to school instead. You will hear from cocoa farmers in Ghana, from Nestle, maker of KitKat, and a Swiss non-profit group called the International Cocoa Initiative, or ICI, which co-founded the program. (Photo: AP)

A proposed new European Union green classification system would help investors and companies identify and make environmentally friendly decisions and may evolve over time to include rules for social and governance-related investments, experts explain on the latest episode of ESG Insider, an S&P Global podcast. The taxonomy, which the European Commission released for comment in June, "sits at the heart of the EU's action plan on sustainable finance and it's really the essential definition by which we can all judge whether something is green and sustainable or not," said Richard Mattison, CEO of Trucost, which is part of S&P Global Market Intelligence. Mattison, who worked with the EU to craft the recommendations for the taxonomy, also outlined ways companies and investors are likely to apply the rules. And he indicated the policy may be refined and expanded over time to cover a more comprehensive list of social and governance issues such as gender diversity and forced labor. Also in the episode, we talked to Sean Kidney, CEO of the Climate Bonds Initiative, which has its own taxonomy for green bonds. Kidney said the EU's classification system could open up the green bond market to a whole new set of issuers. The EU taxonomy has broader implications too, according to June Choi, a research analyst at the Climate Policy Initiative. "The fact that the EU is taking such a high-level action on climate change sends a very important policy signal, not just for sustainable investors, but to the society in general, because it shows ... a certain level of political resolve to tackle climate change," Choi said. To catch future episodes of ESG Insider, subscribe on Soundcloud, Spotify or iTunes. (Photo: AP)