An unexpected breakout year for the social side of ESG

July 13, 2020 by  
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An unexpected breakout year for the social side of ESG Mike Hower Mon, 07/13/2020 – 01:30 About six months ago, I wrote that 2020 would be a pivotal year for environmental, social and governance (ESG), and that what happens this year and over the next decade could determine the next century. While it would be the world’s biggest understatement to say 2020 isn’t turning out the way we all thought or hoped it would, I stand by my conclusion. This is a critical time for corporate sustainability. What we do or don’t do will change the world, but for reasons nobody could have predicted in December. The mass climate protests of 2019 and subsequent outpouring of major corporate climate commitments from the likes of Amazon, IKEA and Kering, among others, seemed to indicate that 2020 would be the year of the E in ESG — when corporate climate action hit critical mass. In January, the momentum built as Microsoft committed to becoming carbon-negative and BlackRock Chairman Larry Fink’s now-fabled letter to CEOs called the climate crisis a “defining factor in companies’ long-term prospects.” The climate crisis even topped the discussion list at the World Economic Forum Annual Summit in Davos. And then along came a global pandemic, and everything changed. As the world went into lockdown, ESG conversations shifted from the E to the S, or social — how companies were responding to COVID-19 in terms of employee health and welfare. The emphasis on the S intensified even further after the murder of George Floyd sparked a movement for racial justice and employees, customers and investors demanded companies take a stand.  As social issues move to the forefront of ESG discussions, 2020 is turning out to be the breakout year for the S. To better understand what this means for the future of corporate sustainability, thinkPARALLAX recently gathered investors and corporate sustainability practitioners from TPG, JUST Capital, Workday, The Estée Lauder Companies and KKS Advisors for a digital Perspectives discussion .  The S moves to the front seat In the long road trip of corporate sustainability, the S mostly has ridden in the backseat — with the E and G commandeering the wheel and Spotify playlist. That’s because social issues are tough to quantify.  While calculating a carbon footprint is comparatively easy, how does one create science-based targets for worker welfare or racial injustice? Sure, an organization can make efforts to diversify its board and workforce, or create programs to improve worker welfare, but this is only a start.  Addressing deeply rooted systemic inequalities requires a much greater commitment and means of measuring success. Until now, companies have gotten by with doing nothing or just the bare minimum. No longer, thanks to the events of 2020. “We’re at a turning point in ESG,” said Martin Whittaker, CEO of JUST Capital . “What’s happened in the past three months has done 20 years of S work.”  [node:field-gbz-pull-quote:0] Moving forward, corporate board members, investors and executives will be expected to consider worker welfare and complex social issues such as racial inequality. “Companies are scrambling to address these issues, and everyone needs to throw out the manual and completely rethink how they approach equity in the workplace, because something is not working,” Whittaker said.  But as the S takes over the wheel, are environmental issues, the E, getting pushed into the backseat? No, said Alison Humphrey, director of ESG at TPG . “It’s just joined climate in the front seat.” E and S: better together The great thing about ESG is that it isn’t a zero-sum game. A renewed focus on the S actually might help companies do a better job of addressing environmental challenges because the two are linked. People of color or low-income socioeconomic status, for example, are suffering and will continue to suffer first and worst from the negative effects of the climate crisis, says Union of Concerned Scientists .  “There’s so much interesting intersectionality with social justice and climate — they are both so connected,” Humphrey said. “Climate work is hard and exhausting, and many people don’t feel the urgency or balk at the initial cost of the transition or fail to grasp how dependent humanity is on our ecosystems. In many ways, it mirrors many of the challenges with social justice — and you can’t address one without the other.” While measuring social impact remains difficult, this no longer will be an excuse for companies not to try.  “With this sharp focus on how integral social issues are to our ability to achieve an equitable society and make environmental progress, we will collectively need to get a lot better at measuring and communicating the S, just as we have with environmental topics,” said Aleksandra Dobkowski-Joy, executive director of ESG at The Estée Lauder Companies. Even before the events of 2020, Workday factored social impact into its environmental sustainability strategy, said Erik Hansen, director of sustainability at Workday. “The events of the past months have illustrated how valuable systems thinking is, and showing that we are a connected, global community. That connection between climate, the environment, people and health.” When Workday installed EV chargers at its headquarters, for example, this was not just so software engineers could come to work in a Tesla, Hansen said. It was also so that the company could minimize environmental impacts such as air pollution, which disproportionately hurt disadvantaged communities. Likewise, as Workday works toward its 100 percent renewable energy goal, the company is advocating for a just transition to clean energy that accounts for those who might be affected economically — such as workers in the fossil fuel industry — and ensure that nobody is left behind. One of the most effective ways to honor the E and the S might be focusing on the G, according to Anuj Shah, managing director at KKS Advisors : “One of the things we’ve looked at is how the G — the governance part — supersedes the E and the S. If you can get the G right, the E and S will follow.”  What racial justice means for business As mass protests erupted across the globe after the murder of Floyd, a chorus of companies voiced support for addressing racial inequality, and some even committed to doing something about it. But what comes next? “We’re at a point where we need to take substantive action, as individuals and as corporations, to deliver on social justice. I’m incredibly proud of the commitment made by The Estée Lauder Companies to promote racial equity, as a starting point for real progress and lasting change,” Dobkowski-Joy said. According to Humphrey, TPG came out with a statement and commitment to take action by first taking a step back to reflect on its role and how it can best address system inequalities as a private equity firm. “The question is, what is your company’s role in rectifying injustice in our system? This needs to come uniquely from each department, a top-down and bottom-up approach.” A hopeful future for ESG Despite the setbacks of 2020, there remains reason for hope. The ongoing global pandemic is shattering the longstanding myth that companies must sacrifice return to be a good corporate citizen — ESG funds are outperforming the wider market during this economic downturn.  And we are learning through much trial and error — emphasis on the “error” — how to address an intractable problem that harms everyone yet that no single government, organization or individual can solve alone. Relentless competition may be giving way to constructive collaboration. And these lessons might still be applied to address the ultimately more existential crisis of the climate.  [node:field-gbz-pull-quote:1] “In the midst of this tremendous upheaval, we’re all pulling together in ways which were unfathomable just months ago — and showing that collective action is actually possible,” Dobkowski-Joy said. Climate may begin to take on a new importance as a long-term threat to society as climate risk exposes inequities just as COVID-19 has, Whittaker said. “COVID-19 has taught us the importance of resilience, interdependence and systemic risk and how to address that — and how we can be more effective working together. I’ve seen a lot of collaboration over the last three months, which I wouldn’t have expected to see. I think it has brought out a lot of humanity in business which has all been about profit making.”  Shah of KKS was more cautiously optimistic. “I’m concerned that a lot of companies are going to feel pressure to maximize profits coming out of the pandemic into a new normal. ESG and short termism don’t necessarily go together. Long termism is a prerequisite for ESG.” However, Shah added that he has been inspired by the mass movement for racial justice being driven by the younger generation. As Millennials and Generation Z continue to take over the workforce and enter leadership roles, this activist mindset could change the future of ESG.  Humphrey suggested companies should take a look at business model resilience and how it is intertwined with ESG issues. “Perhaps we can focus less on the rolling back of budgets, which has happened for many companies across the board, and instead on how the pandemic has compelled us to look beyond one-off CSR and sustainability initiatives toward a more strategic, integrated and business-aligned approach to managing these 21st-century risks,” she said.  As we continue to push forward toward an uncertain future, the only certainty is that things will change. And it’s up to all of us to make sure that it’s for the better. Pull Quote What’s happened in the past three months has done 20 years of S work. We will collectively need to get a lot better at measuring and communicating the S, just as we have with environmental topics. Topics Corporate Strategy ESG Environmental Justice Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off

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An unexpected breakout year for the social side of ESG

A CFO’s take on climate and risk management

July 13, 2020 by  
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A CFO’s take on climate and risk management Vincent Manier Mon, 07/13/2020 – 01:00 Just a couple of months into 2020, the world was amid significant discussion about the core purpose of businesses, led by BlackRock CEO Larry Fink calling for corporate America to take control of its carbon footprint and major companies, including Microsoft and Delta , making ambitious zero-carbon pledges. When COVID-19 arrived, we saw the impact that global crises have overnight, teaching the corporate sphere valuable lessons about risk mitigation. Economic estimates predict that the pandemic will decrease global GDP by 3 percent in 2020, and at our current pace, climate change is estimated to decrease the global GDP by anywhere from 2.5 percent to 7.5 percent by 2050 . While climate risk remains an often overlooked or undervalued factor in risk management programs, there is an urgent need to integrate resiliency into core business strategy if businesses want to continue to thrive — or even remain operational. There is an urgent need to integrate resiliency into core business strategy if businesses want to continue to thrive — or even remain operational. The current COVID-19 pandemic has emphasized the importance of prioritizing resilience by exposing the fragility of global supply chains and dysfunctional systems across businesses and forcing them to change the way they plan and operate to factor in large-scale crises. Hospitals, for example, felt the disastrous impact of vulnerable supply chains, and needed to plan for alternative sources of personal protective equipment to keep their medical workers and staff safe. These learnings must be applied to similar risk brought about by climate change — businesses need to prepare for the impact of devastating weather events on supply chains and infrastructure they rely on to remain safe and operational. As key members of the financial team, risk managers need to grasp the implications of sustainability across the organization, from strategic risks posed by new regulations to operational risks posed by extreme weather and financial risks with regards to taxes and insurance. As we continue to fight climate change, understanding the strategic, operational and financial risks — and the tools available to assess and plan for them — will help finance teams take a more forward-facing approach to risk management and avoid repeating past mistakes. Strategic risk factors Four key risk factors are associated with strategic risk and sustainability: economic changes; corporate responsibility; regulatory risk; and reputational risk. From an economic standpoint, there have been major shifts brought about by decarbonization and diversifying portfolios — consider the rapid decline of the coal industry, for example. In addition, companies are being held more accountable for their impact on the environment, with pressure coming from all sides, including customers, investors, competitors and regulators. Increased regulation and legal requirements around resource management and carbon reduction, as well as required carbon reporting, can result in major fines if not complied with. Finally, reputational risk, while hard to quantify, can be enormous, particularly in today’s political climate and as both internal and external stakeholders become more educated on the action against climate change. Operational risk factors Sustainability also can affect how businesses approach operations, such as supply-chain optimization, procurement strategies, data privacy and security. For instance, the finance team can make more informed decisions around power purchase agreements, onsite and offsite renewable energy, decentralization and microgrids, energy independence and cost savings opportunities when factoring climate risk into the overall procurement strategy. There are also more direct operational risks to consider as a result of climate change in the form of extreme weather events, which continue to increase in both frequency and intensity. Businesses must account for the possibility of outages, damages and closures, all of which can threaten the ability to protect employees, assets and data centers (which can pose new risks in terms of data privacy and leaks) and, ultimately, to keep the business operational. Financial risk factors Climate change poses significant financial risks to an organization as sustainability policies and corporate initiatives can affect taxes, insurance, resource management, energy sourcing, investor support and even intangible assets such as goodwill — for instance, the impalpable value that customers and investors place on a company’s ability to reduce its footprint. From changes in insurance premiums and coverage to identifying financial benefits of electrification, there are almost countless financial risks and opportunities for the financial team to assess. Sustainability planning also opens the door to integrating new technologies to save money, such as alternative energy vehicles, which bring financial benefits all their own. Integrating climate risk strategy Integrating climate risk into new or existing risk management programs can seem daunting, but the financial team can leverage strategic assessments to make the process simpler. For instance, vulnerability assessments allow businesses to understand where climate change is most likely to affect them. Scenario assessments can provide a forward-looking view of the potential impact, so finance teams can plan ahead to mitigate future developments. The world’s current state is illuminating the need for resilience to global events we may not be able to foresee or control. With climate change being the next undeniable threat, it’s on the shoulders of the financial team to ensure that companies are adequately prepared for different climate events to improve their resilience and mitigate the associated risks. The strategic planning used now to prepare for these issues may encourage innovation and new methods of operating that not only benefit the bottom line but also prepare a business for when unexpected events do occur. This also offers opportunity to strategically prepare and recover from events in a way that helps reduce climate change and improve the environment on a global scale. Pull Quote There is an urgent need to integrate resiliency into core business strategy if businesses want to continue to thrive — or even remain operational. Topics Risk & Resilience Climate Change Finance & Investing Featured in featured block (1 article with image touted on the front page or elsewhere) Off Duration 0 Sponsored Article Off Shutterstock

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A CFO’s take on climate and risk management

Kengo Kuma, K2LD win bid to design Founders Memorial in Singapore

April 10, 2020 by  
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Kengo Kuma & Associates and K2LD Architects have won an international competition for the Founders’ Memorial in Singapore, a national landmark that will honor not only Singapore’s first Prime Minister, Lee Kuan Yew, but the multi-racial team of which he was a part of in developing the island country as well. Proposed for the 32-hectare Bay East Garden that forms part of Singapore’s famous Gardens by the Bay, the Founders’ Memorial will complement its surroundings and the nation’s “garden city” reputation with its lush, nature-focused design. The approximately 13,700-square-meter development is slated to break ground in 2022 and is expected to be completed by 2027. Unanimously selected from five shortlisted designs, Kengo Kuma & Associates and K2LD Architects’ submission was praised by the jury for its creativity, distinctive place-making characteristics, feasibility and sustainability both in terms of financial longevity and maintenance. The site-specific design is inspired by the idea of a meandering path that traces the legacy of Singapore’s founding leaders to connect the past with the future. Related: Tropical greenery surrounds a sustainable, solar-powered home in Singapore Set close to the water, the national landmark will be a “living memorial” comprising undulating green slopes that rise up to become green roofs for various buildings, such as the museum and visitor center. Multiple pathways will be carved out of the architecture and landscape to represent Singapore’s multiculturalism. At the heart of the memorial is the “Founders’ Path,” the central spine that joins together the various elements and traverses the garden-like environment. “Our design concept for the Founders’ Memorial originates from the idea of a path — a journey tracing the legacy of Singapore’s founding leaders,” architect Kengo Kuma explained. “It simultaneously honors the past and inspires the present and future. The design aims to be a ‘living memorial’, to be owned by each new generation of Singaporeans. There will be ample spaces for the celebration of milestone events, all set against the changing skyline of Singapore.” + Kengo Kuma & Associates + K2LD Architects Images via Kengo Kuma & Associates

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Kengo Kuma, K2LD win bid to design Founders Memorial in Singapore

Los Angeles air quality improves amid pandemic

April 10, 2020 by  
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There is one positive impact of the tragic coronavirus pandemic — Los Angeles is experiencing its longest stretch of good air quality since 1995. On April 7, Swiss air quality technology company IQAir cited LA as one of the cities with the cleanest air in the world. While the notoriously smoggy city is on lockdown, highway traffic has dropped 80% throughout the entire state of California, which probably accounts for much of the improvement. “With less cars on the road and less emissions coming from those tailpipes, it’s not surprising to see improvements in the air quality overall,” Yifang Zhu, professor of environmental health science at UCLA, told CNN. Zhu and her team of scientists measured a 20% overall improvement in southern California’s air quality between March 16 and April 6. They also recorded a 40% drop in PM 2.5 levels. This microscopic air pollutant is linked to both respiratory and cardiovascular problems, especially in the very young and very old. A recently released Harvard study linked PM 2.5 exposure to an increased likelihood of dying from COVID-19 . Related: Coronavirus and its impact on carbon emissions All over the world, scientists are noting that cleaner air is a side effect of the pandemic . Satellite images have revealed much lower concentrations of nitrogen dioxide over industrial areas of Europe and Asia in the past six weeks. The drops in nitrogen dioxide levels over Wuhan — a city of 11 million — and the factory-filled Po Valley of northern Italy are especially striking. “It’s quite unprecedented,” Vincent-Henri Peuch, director of the Copernicus Atmosphere Service, told the Guardian. “In the past, we have seen big variations for a day or so because of weather. But no signal on emissions that has lasted so long.” Alas, when lockdowns lift and Angelenos return to the highways, the pollution will likely return. Zhu hopes that this glimpse of clear, blue skies will inspire people to work for better air quality post-pandemic. “From the society level, I think we need to think really hard about how to bring about a more sustainable world, where technologies and policies come together to bring us cleaner energy ,” she said. “So that the air that we’re breathing will stay as clean as what we’re breathing today.” Via CNN and The Guardian Image by Joseph Ngabo

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Los Angeles air quality improves amid pandemic

Trend: The bots are coming (to ratings and reporting)

March 23, 2020 by  
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Corporate reporting on sustainability has grown more than fivefold in the past 10 years. Roughly 20 percent of S&P 500 companies published a sustainability report in 2011. In 2018, that number rose to 86 percent.

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Trend: The bots are coming (to ratings and reporting)

How to make ending factory farming irresistible, delicious and lucrative

February 15, 2020 by  
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Animal activists have made huge strides over the past two decades. But it hasn’t been enough to tip the scales of justice.

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How to make ending factory farming irresistible, delicious and lucrative

Closing the loop on 2019

December 26, 2019 by  
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Bringing you the five biggest stories of the circular economy from this past year, and some predictions for the next.

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Closing the loop on 2019

Wells Fargo’s Mary Wenzel on accelerating agriculture-tech solutions

November 11, 2019 by  
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In collaboration with the National Renewable Energy Lab (NREL), the Wells Fargo Innovation Incubator (IN2) has been supporting entrepreneurs working towards clean technology solutions in the built environment for the past four year

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Wells Fargo’s Mary Wenzel on accelerating agriculture-tech solutions

What’s your sustainability moonshot?

July 16, 2019 by  
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Despite all the mindboggling technological advances of the past half-century, there’s still no better term to describe extraordinary efforts to achieve audacious goals.

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What’s your sustainability moonshot?

10 questions for Cummins’ head of electrification

July 16, 2019 by  
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The Indiana diesel enginemaker is looking towards electrifying as part of its vision for the future — and business strategy.

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10 questions for Cummins’ head of electrification

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