NYSE ESG Top 5: CPA-Zicklin political index released, and COP16 surfaces nature commitments

Week ending Nov 1, 2024

Too much important content building up - we’ll need to turn this intro into a bit of a linkdrop:

-Highlight reel from the ICE Climate & Capital Conference during NY Climate Week, here

-Interviews with sustainability leaders from PG&E, Crown Castle, and International Paper from NY Climate Week

-Map of Halloween candy preferences, for those sifting through their bowls today (h/t Flowing Data)

The ESG Top 5 is, of course, the second-best two minutes you can spend in the next week, coming in a close second to the voting booth.

-Brian Matt, CFA, Head of ESG Advisory, NYSE

brian.matt@nyse.com

1 - COP16 surfaces corporate commitments on nature

Plenty of information out there on international agreements being assembled at the event (here), but we typically look for developments in the corporate world. TNFD’s headline announcement was that over 500 companies have now committed to TNFD-aligned reporting, covering $6.5t in market cap. You’ll find a full roster of TNFD adopters here, split out by their intent to begin reporting on 2024 or 2025 financial years. Separately, SBTN (Science-Based Targets Network) noted the first three companies to publicly adopt targets around nature following its framework after a year-long pilot period - in this case all three with a focus on water impacts. SBTN noted that 60% of its pilot companies achieved target validation, and it expects to build out a validation service in 2025 (more detail here). We recommend sharing the TNFD list with your procurement/sourcing teams at minimum to help match with your top suppliers / customers - many of the commitments made by companies involve the entire value chain.

2 - NZAOA progress report shows spread of engagement targets into fixed income

We’d recommend a similar exercise in matching up your ownership base with Table A in this wrap of Net Zero Asset Owners’ Alliance progress in 2024 - but with a twist. First off, we think you’ll need a good view of your asset managers’ relationships with asset owners like CalPERS, AXA, and Zurich Insurance (sometimes investment / voting decisions are outsourced to asset managers), and you also may want to review your debt security ownership roster as well. The report notes that climate targets now covered 94% of the corporate debt ownership of these investors, alongside 95% of equity ownership (PDF Page 24). You’ll see a range of average levels of decarbonization seen by specific sectors (PDF Page 26), as well as the range of these owners that are meeting mandatory 2025 and 2030 engagement targets with their portfolio holdings (Page 31).

3 - 2024 CPA-Zicklin Index on political disclosures shows expansion of board oversight

The release of this widely-cited index of transparency on corporate political spending is timed for prior to Election Day, but also doubles as a potential input for investors to review around offseason engagements. As with our coverage in ESG Top 5 #113, we’re always interested in the questions investors ask around disclosure and board oversight - for 2024, 394 companies in the S&P 500 at least partially disclosed political spending or prohibited at least one type of spending, up from 387 previously. 261 companies have board committee review of spending through third-party groups, up from 199 in 2020. Page 36 notes engagement programs from investors alongside improving political disclosures - 235 of the S&P 500 have been “formally engaged by shareholders with a resolution” since the 2004 proxy season, with six new companies reaching agreements with investors on the topic in 2024.

4 - WK: Future Ready Lawyer survey highlights preparation gaps

This Wolters Kluwer study (highlights here, free reg req’d) captures a lot of what we’ve heard from both in-house and external counsel recently - ESG demands on both are growing a lot faster than their confidence in preparedness. Survey Page 12 dives into the work each side is doing to keep up; 56% of legal departments and 45% of law firms are providing ESG training to existing staff, and 42% of law firms / 41% of corporates have established dedicated specialized ESG departments. We’ve also heard an increasing number of mentions of the term “serviced emissions” coming from law firms - with a few firms starting to put together their own net zero approaches. (See this report from the UN Race to Zero’s Professional Service Providers Working Group for a view of how law firms as well as consultants, advertisers, and PR firms are looking at net zero).

5 - EY Global Corporate Reporting Survey - nonfinancial reporting maturity advancing

Filling in our thinkpiece slot is a unique sample of both issuer preparers as well as investor consumers of corporate disclosures, as collected by EY. Headlines are on Page 4 - 69% of finance leaders say investors are asking more questions about non-financial value drivers than two years ago. In particular, a comparison of the charts on Page 9 - issuers response to “How likely… [is it] that your company will deliver its major sustainability priorities and meet your stated targets” by sector, and Page 13’s investor response to “to what extent do you feel sustainability reporting faces the risk of being perceived as including elements of greenwashing” is worth a review by any company. For those looking to add or create an ESG controller role, you’ll find considerations from CFOs on how to structure it on Pages 19-20. Recommended share for your finance organization, especially if like most companies you’re still early in the process of making all of your non-financial data flow like financial data.

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