In this episode of the ESG Insider podcast, we talk to Jessica Alsford, Head of Global Sustainability Research at Morgan Stanley. In the run-up to COP26, the big United Nations climate conference taking place in Glasgow in November 2021, there has been a lot of discussion in the sustainability world about the path to net zero and the role the financial industry will play in reaching the goals of the Paris agreement. In the interview, Jessica talks about what needs to happen at COP26 to move companies beyond their headline net zero commitments into specific and transparent action plans. “We can't just wait 30 years and see what happens,” Jessica says. “So now, what comes next is [companies providing] that granularity, that visibility, about what are the specific actions” they are taking to achieve their end goal. "Investors are looking for annual disclosure and reporting on progress so that you can very clearly see which companies are decarbonizing and at what rate,” she adds. Jessica also says the lack of standardization in sustainability disclosure frameworks poses challenges for the ESG world. Still, she says, the direction of travel is clear: “You need more data in order to be able to make the ESG investment decisions.” Photo credit: Morgan Stanley

ESG Insider: A podcast from S&P Global

Morgan Stanley exec on net zero: 'We can't just wait 30 years and see what happens’

The coronavirus pandemic and a growing awareness of social risks have thrust the ‘S’ in ESG into sharper focus for many sustainability-minded companies and investors. Issuance of social bonds — debt instruments that raise money for things like affordable housing, health and education — surged nine-fold to $165 billion dollars in 2020 from the previous year, according to data from Environmental Finance, a global sustainable finance news and analysis provider. And as that market expands, investors are seeking clear guidance on social investment definitions. The European Union has already developed a green taxonomy, or a classification system of sustainable businesses and sectors. In this episode of ESG Insider, we look at the potential social taxonomy the EU has proposed to help define the ‘S.’ “We've got a good understanding of the E,” says Victor van Hoorn, executive director at Eurosif, a European forum that promotes sustainable investment. “We're more or less starting with a blank sheet of paper when we're talking about the ‘S.’” Check out our episode on the green taxonomy here: https://podcasts.apple.com/us/podcast/defining-green-what-investors-need-to-know-about-the/id1475521006?i=1000531954636 Photo credit: Getty Images 

How an EU social taxonomy could bring clarity to "S" in ESG

Over the past year and a half, we’ve seen companies, investors and regulators put a growing emphasis on the ‘S’ in ESG. But there is still a common refrain in the ESG world that social issues are nebulous or difficult to measure. In this episode of ESG Insider, we hear how one of the largest financial institutions in the U.S. is tackling the ‘S’ and making it measurable. "The 'S' does get less focus,” says Asahi Pompey, Global Head of Corporate Engagement at Goldman Sachs. “People still think it's kind of amorphous. What exactly is the ‘S’? Is it in hiring? Is it in retention? Is it recruiting? Is it investments in communities? Here's the answer: It's all of those." Asahi talks about how Goldman Sachs is adapting its internal policies, its investment approach and its business models with the ‘S’ in mind. For example, earlier this year, the company launched its One Million Black Women initiative, committing more than $10 billion to advance racial equity and economic opportunity by investing in Black women. And in 2020, Goldman Sachs announced that it would stop underwriting IPOs for companies in the U.S. and Europe that don’t have diverse boards. In the interview, Asahi also talks about corporate America’s changing approach to social issues broadly and racial equity in particular. But she cautions that those changes could be short-lived if society does not keep the issue on the front burner. “Corporate America has a long way to go in order to drive sustained progress on the 'S,'” Asahi says. “Now, we've seen commitments across the industry and various sectors. That being said … it can't be episodic, and it has to be sustained, and it has to be measurable. We all know things get done when they're measured.” Photo credit: Goldman Sachs

Goldman Sachs executive on demystifying, measuring the ‘S’ in ESG

In this special New York Climate Week episode of the ESG Insider podcast, we explore how the built environment – new building construction plus existing offices, apartment blocks, airports and other structures – is responsible for nearly 40% of all global carbon dioxide emissions, and what it will take to decarbonize this vast sector. In the episode, we interview three experts on the subject: Mark Reynolds, CEO of Mace Group, a large construction company focused on making buildings more sustainable; John Mandyck, CEO of a non-profit in New York City called Urban Green Council; and Dana Schneider, director of energy and sustainability at the Empire State Realty Trust, which owns the Empire State Building in New York, an iconic structure that has made significant headway in lowering its carbon footprint. Lowering the carbon footprint of the built environment is a massive task. Although building emissions reached their highest level in 2019, many cities have not yet embarked on sizable decarbonization plans. Some landlords could have to spend millions to retrofit buildings. Construction companies are under pressure to use less carbon-intensive materials. Homeowners are being prodded to spend money to make homes energy efficient. And investors with face the challenge of assessing the transition risk.  That helps to explain why at least three panel discussions at this week’s NY Climate Week were devoted to carbon emissions from the built environment, and why the big UN COP26 climate conference this fall will similarly dedicate an entire day to the subject. Photo credit: Getty Images

How The Big Apple is taking on the carbon footprint from buildings

When we talk about the technologies the world will need to tackle climate change, low-carbon hydrogen is increasingly part of the discussion. Two recent studies raise some big questions about whether some of these hydrogen technologies are as climate-friendly as proponents claim. In this episode of ESG Insider, we look at the research and development of blue hydrogen, which is derived from natural gas and paired with carbon-capturing technology to reduce the resulting emissions. And we also examine what role green hydrogen, which is created using renewable generation to separate water molecules, could play. We talk with the authors of those two recent studies and we hear from a hydrogen expert at a European research institute about the current state of the industry and what role the government is playing in promoting these technologies. Photo credit: Getty Images

Pulling back the curtain on the promise of low-carbon hydrogen

There’s a massive gap between the amount of investment needed to make the climate transition happen and what is occurring today. In this episode of ESG Insider, we explore the role that green banks can play in plugging that funding gap. Green banks can differ in scope and approach but are generally created to leverage government funds to mobilize private investment in clean and resilient infrastructure on the local scale. They exist in many parts of the world, including Australia, Japan, Malaysia, Switzerland, the U.S. and the U.K. In the episode, we’ll hear from Reed Hundt, co-founder, chairman and CEO of the Coalition for Green Capital, which has helped organize a number of green banks and is pressing the U.S. Congress to create a federal green bank. And we’ll look at how the first state-level green bank in the U.S. — the Connecticut Green Bank — has evolved since forming in 2011. We talk with Connecticut Green Bank President and CEO Bryan Garcia, who tells us: “Our goal is to demonstrate to the ... capital markets that this is a safe area of investment, and we're willing to put our capital at risk in front of you to do that.” Photo credit: Getty Images

How green banks can accelerate climate finance

In early August, the U.S. Securities and Exchange Commission approved a proposal by Nasdaq to require companies listed on the New York-based exchange to disclose certain board diversity information. In this episode of ESG Insider, we explore what the rule means in practice for companies and investors. We hear from Matt Patsky, the CEO of Trillium Asset Management, about why investors view board diversity as a material factor — and what the SEC approval indicates about the direction of disclosure in the U.S. “The SEC's willingness to approve this Nasdaq board diversity rule sends a strong signal that they believe there's materiality to diversity,” Matt says. “And with that belief, I think it means we're moving closer to the SEC mandating disclosure of diversity information from companies broadly.” For the corporate and regulatory perspective, we talk with Cam Hoang, a corporate securities and SEC compliance lawyer and partner at the law firm Dorsey & Whitney. We also hear the recruiter’s perspective on the new rule from WSS Executive Search CEO & Founder Becky Heidesch, who has been helping companies find candidates with diverse profiles for decades. In the episode, you’ll hear us refer to an S&P Global Market Intelligence analysis of gender diversity on U.S. company boards and executive teams. You can read that research here: https://platform.mi.spglobal.com/web/client?auth=inherit#news/article?id=65743394&cdid=A-65743394-9776 To learn more about human capital management disclosures in the U.S., listen to this earlier episode of ESG Insider: https://traffic.libsyn.com/secure/esginsider/ESG_Insider_US_Diversity_Regulations_-_v3.mp3 Photo credit: Getty Images

What Nasdaq’s diversity rule tells us about the direction of disclosure in the US

 A sobering new report from the U.N.’s Intergovernmental Panel on Climate Change tells corporations and governments in no uncertain terms: Act with urgency to lower emissions and adapt to the impacts of climate change at a more rapid pace and bigger scale. In this episode of ESG Insider, we look at the implications of the IPCC report for investors and companies, and we talk to two scientists who helped write the nearly 4,000-page document to better understand its key findings. Claudia Tebaldi, a scientist with the Joint Global Change Research Institute at the Pacific Northwest National Laboratory and one of the report’s authors, says incremental changes can make a big difference — for better or for worse. “Every little bit matters,” says Claudia. "This is in the bad sense that every little bit of warming is making the situation worse, but also that every little thing that we can make to slow down and stop [global warming] is going to matter.” We also talk to Kirsten Spalding, senior director for the investor network at Ceres, on how the lPCC’s latest findings will shape future investor engagement with companies on climate change. The report shows that “the need for action is even on a shorter timeline than we knew before,” Kirsten says. Photo credit: Getty Images 

In fighting climate change, major IPCC report finds every little bit matters

Several countries will soon make it mandatory for large companies and asset managers to calculate and publicly report their climate-related risks. It’s a complex accounting challenge and many businesses aren't fully prepared. The governments of the U.K., New Zealand, Hong Kong and Switzerland, as well as the G7 group of nations, are among those backing mandatory reporting under the Taskforce on Climate-related Financial Disclosures, or TCFD, framework. The push towards compulsory TCFD reporting will put pressure on banks, businesses and asset managers that have yet to embrace such disclosure. A big reason why many companies struggle with TCFD implementation is because it's hard to collect, collate and analyze detailed emissions-related data in all areas of their operations. Companies also need to train their employees on technical aspects of reporting under the framework. Above all, TCFD implementation must be roundly embraced and instilled — all the way from the C-suite to product and client-teams — and that takes time. In this episode, we speak to Thora Frost, senior manager of green finance at the Carbon Trust, a London-based consulting firm that works on climate change and sustainability issues. And we interview Matthew Townsend, partner at U.K. law firm Allen & Overy. "You have a blizzard of regulation and policy coming down the line, certainly over the next five years, and I don't see it letting up in many jurisdictions," Townsend says. Photo credit: Getty Images

TCFD gains momentum as climate reporting shifts from voluntary to mandatory

If you’ve been following sustainability headlines over the past few years, chances are you’ve heard about the EU’s green taxonomy — essentially, a dictionary that defines how sustainable a business or sector is. It assesses more than 100 economic activities and is designed to steer companies as they adapt their business strategies to climate change, as well as help investment funds judge sectors based on their environmental performance. Investors will also have to disclose what percentage of their investments are in line with the taxonomy. The new regulation is expected to radically change how investors and companies report on their environmental performance. It will be enforced from 2022, which does not leave investors a lot of time to get up to speed. And the taxonomy is not quite finalized, with further regulation expected in 2023 — creating some big challenges for investors trying to navigate the changing sustainability landscape. To talk us through what investors can expect from the taxonomy, we spoke to Helena Viñes Fiestas, commissioner at Spain’s Financial Markets Authority. She’s also rapporteur of the EU Platform on Sustainable Finance, a body of experts from industry, finance and civil society who advise the EU’s executive arm on the future of sustainable finance policy in Europe. “I like to compare it a little bit with food products,” Helena says of the taxonomy. “If you market your product as low fat, it's only fair to ask how much fat it has and whether or not it's too much. This is exactly the same, where the taxonomy becomes the recommended daily intake.” Photo credit: Getty Images

Defining green: What investors need to know about the EU taxonomy

 Wall Street’s top regulator, the U.S. Securities and Exchange Commission, is in the early stages of creating a number of new ESG-related disclosure rules, including on the issue of human capital management.   Human capital management refers to the way that companies manage their workforce. It includes things like a company’s approach to hiring, recruitment, pay and benefits, and the working conditions a company provides. Right now, public corporate disclosures on these topics are voluntary in the U.S. But many investors say that leads to insufficient and inconsistent data.  “I think it’s unfathomable that, in this day and age, the only metric that companies are currently required to disclose is the number of people that they employ — especially when we talk to every company and they tell us that their human capital is their most important asset,” says Aeisha Mastagni, a portfolio manager in the sustainable investment and strategies group at the California State Teachers' Retirement System, one of the largest public pension funds in the U.S. “And yet we as investors have no way to measure that, benchmark that, compare it to other companies in our portfolio.”  In this episode, we explore the changing state of human capital data disclosure in the U.S., why some investors want disclosures to become mandatory, and what to expect from the SEC.   We also talk to securities and governance lawyers at the Philadelphia-based law firm Dechert and with Bryan McGannon, director of policy and programs at US SIF: the forum for responsible and sustainable investment. 

‘Unfathomable’: Why US investors, regulators are rethinking human capital management disclosures

 In mid-July 2021, the heaviest rainfall in a century triggered intense flash floods and inundated several towns in Germany, the Netherlands and Belgium, causing at least 188 deaths. The floods in Europe are a reminder that although emerging markets are likely to be hit hardest by a temperature rise, richer countries in the northern hemisphere are far from immune from the effects of severe weather.   In this episode, we talk with experts to understand the biggest climate risks facing Europe's biggest economies, analyzing physical risk data from S&P Global Trucost.   Guests on the episode include Irene Lauro, an economist with asset manager Schroders; and Swenja Surminski who leads adaptation research at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics. And we talk to Berenberg Bank analyst Michael Huttner about how the floods could impact insurance companies. 

Record floods highlight climate risks to business in Europe's richest nations

The EU is working to reform its Non-Financial Reporting Directive, regulation introduced in 2014 requiring large companies to report on environmental and social issues, such as the impact of climate change on their business and the diversity of its board. The proposed new rules, called the Corporate Sustainability Reporting Directive (CSRD), would expand the reporting requirements and drastically increase the number of companies disclosing this information. CSRD would also make auditing of companies’ sustainability reports obligatory.   Corporations, regulators and investors increasingly recognize that environmental, social and governance risks need to be accounted for alongside financial risks when valuing a company. Investors are seeking consistent data and standards to guide them in their investment decisions around ESG factors. In this episode, we speak to Saskia Slomp, CEO of European Financial Reporting Advisory Group, or EFRAG, which advises the EU on the use of accounting standards within the bloc and which was asked by the European Commission, the EU’s executive arm, to develop proposals for the new directive. “The development of mandatory common sustainability reporting standards is necessary to progress to a situation in which sustainability information has a status comparable to that of financial information,” she tells us. “So many companies receive additional information requests for sustainability information from stakeholders."   Photo credit: Getty Images   Related past podcast episodes:    Banks’ big green EU taxonomy challenge https://podcasts.apple.com/us/podcast/banks-big-green-eu-taxonomy-challenge/id1475521006?i=1000511776202   EU revolutionizes sustainability regulation with SFDR https://podcasts.apple.com/us/podcast/eu-revolutionizes-sustainability-regulation-with-sfdr/id1475521006?i=1000514008934    

CSRD: EU's latest proposed addition to alphabet soup of sustainability regulation

The EU has proposed a European Green Bond Standard as part of its strategy to drive investment into sustainable finance and achieve net zero carbon emissions by 2050. The new rules will also aim to protect investors from greenwashing, which is when an investment is made to sound greener than it is. Although they represent a tiny fraction of the overall debt market, green bonds — debt that finances environmentally friendly projects such as wind farms or solar power — have grown rapidly over the last eight years, from virtually nothing in 2012 to nearly $300 billion in 2020. The EU is counting on further growth in the market to meet the targets in its European Green Deal, designed to mobilize at least €1 trillion of sustainable investment over the next 10 years. The rules will be tougher than other existing green bond guidelines because issuers will have to prove their green bonds are financing projects in line with the EU's "green taxonomy," a dictionary of sustainable activities. In this episode, we speak to Climate Bonds Initiative CEO Sean Kidney, who was part of an advisory group that helped shape the new rules. Regulation has “been right from the beginning, a feature of the development of the market. Issuers have followed the regulations, and it's grown to be a very large successful market,” he tells us.   Listen to our episode on the EU's green taxonomy: https://open.spotify.com/episode/5b3qx805nauyVGvcJo9Wsr   Photo credit: Getty Images 

What EU's proposed green bond standards could mean for market

 The world’s biodiversity is in peril and its loss poses big financial risks to businesses and the global economy. More than half of the world's economic output — or about $44 trillion — is moderately or highly dependent on nature, according to the World Economic Forum. Moreover, the collapse of biodiverse ecosystems could hurt global GDP by $2.7 trillion annually by 2030, the World Bank warns in a new report. Until recently, biodiversity loss was rarely viewed as a substantial risk to corporations. But that is changing and a new task force has been formed to help companies and financial institutions better understand the scope of the risk. The Task Force on Nature-related Financial Disclosures, or TNFD, aims to create a voluntary framework that companies can use to assess their nature-related risks and opportunities. In this episode, we talk with Elizabeth Mrema, who is co-chair of the TNFD, about the goals of the task force, how she envisions them being implemented and how biodiversity is inherently linked to climate change. 

The new task force in town: TNFD co-chair talks biodiversity goals

ESG Insider is a new podcast from S&P Global that takes you inside the environmental, social & governance issues shaping the business world today. Each episode, co-hosts Lindsey White and Esther Whieldon will speak with experts and leverage S&P Global data to shine a light on the ESG opportunities and risks that business leaders and investors need to know about. Lindsey White is a financial news editor with S&P Global Market Intelligence. Esther Whieldon is a sustainability and climate news reporter, also with Market Intelligence.

hubhopper

ESG Insider: A podcast from S&P Global

hubhopper