Non-financial performance... A missed opportunity? ES&G Forum 2014 Pre-Forum Brief
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The document is a pre-forum brief for the 2014 Environmental, Social, and Governance (ESG) Forum hosted by CBSR, reviewing insights from the previous forums in 2012 and 2013 and outlining expected topics and speakers for this year. It discusses the evolution of ESG practices, trends in reporting by companies, and the pressure on businesses to disclose their ESG impacts, while also previewing panels featuring industry leaders and addressing pertinent questions for dialogue. The overall aim is to discuss the implications of ESG on Canadian businesses and investor relations.
Non-financial performance... A missed opportunity? ES&G Forum 2014 Pre-Forum Brief
- 1. ES&G Forum 2014 Pre-Forum Brief PRESENTED BY:
- 2. This document offers a brief review of the content from the 2012 and 2013 Environmental, Social and Governance (ES&G) Forums that informed the topics and speakers for CBSR’s September 23, 2014 ES&G Forum. Last year, a post-forum report was prepared to provide a summary of the discussions and to suggest opportunities for further research. The report is available on CBSR’s website (see footnote). CONTENTS Introduction 1 Evolution of ES&G 2 Voluntary vs. Legislated ES&G Reporting Trends 2 Learnings from Past ES&G Forums (2012, 2013) 3 What to Expect at This Year’s Forum 3 The 2014 Forum Topics 4 1 Direct Link to 2013 Forum Report: http://www.cbsr.ca/sites/default/files/file/CBSR%20ES&G%20Post-Forum%20Document.pdf 1
- 3. 2 CCGG website: http://www.ccgg.ca/ 3 ESG Issues in Institutional Investor Decision Making, The Canadian Performance Reporting Board (CPRB) of the Canadian Institute of Chartered Accountants (CICA) (2010): http://www.cica.ca/publications/list-of-publications/manual/item41881.pdf 4 United Nations Principles for Responsible Investment: http://www.unpri.org/ EVOLUTION OF ES&G Responsible investment guidelines began in Canada with the formation of the Canadian Coalition for Good Governance (CCGG) in 20082 with a mandate to promote good governance practices in Canadian companies. Institutional investors were early adopters of integrating ES&G considerations into their investment decision-making3. Around the same time, initiatives such as the Carbon Disclosure Project (CDP) headquartered in the United Kingdom began to publish corporations’ annual carbon emission amounts. The evolution gained momentum when the United Nations penned the Principles for Responsible Investment in 2010. Jane Ambachtsheer, Global Head of Responsible Investment at Mercer Investments in Toronto, spoke in Calgary at CBSR’s first ES&G Forum in 2012. She shared her knowledge and experience of working on the development of the United Nations Principles for Responsible Investment4 – which now have more than 1,200 signatories globally. The six principles are voluntary, aspirational and are intended to positively affect investment portfolio performance and align investors with the “broader objectives of society”. Companies that are signing to abide by the PRI are investment managers, asset owners (e.g., investment funds), and professional service partners. Most recently, stock exchanges are increasingly requiring their listed companies to publish reports on their business operations according to environmental, social and governance matters. Led by the intellectually stimulating and pointed ES&G expert Dr. Matthew Kiernan, the 2013 Forum engaged stakeholders who are using ES&G, people who understand ES&G, and people who wanted to understand more about the topic and consider what it means for their own work. Investment managers, business representatives from a range of industries, particularly the energy sector, evaluation organizations, and academics attended the Forum. To encourage investor relations professionals’ participation this year (2014), CBSR is partnering with the Canadian Investor Relations Institute (CIRI) to invite its members to join us in sharing new knowledge, thoughts, and suggestions on managing and leveraging non-financial performance results. VOLUNTARY VS. LEGISLATED ES&G REPORTING TRENDS Government legislated disclosure efforts have been established in approximately 30 countries worldwide. In Canada, CSA helps companies manage and measure their GHG emissions. The Canadian Environmental Protection Act requires companies to report specific pollutant emissions. The Bank Act requires financial institutions to publish annual statements describing their contributions to the Canadian economy and society. A significant number of European countries have led the way, as have Asian countries, including China, India, Japan, and Malaysia. The USA has also implemented acts and rules such as the Greenhouse Gas Reporting Program under the EPA, Sarbanes Oxley Act, Emergency Planning and Community Right to Know Act). Each country’s rules and regulations differ – for example, in India and the UK, CSR and ES&G must be included in companies’ annual Management Discussion & Analysis (MD&A) sections in annual reports. Stock exchanges in at least 19 countries have established policies, reporting criteria, and/or specific indices to monitor the ES&G-relevant practices of companies listed on their exchanges. In addition, there are independent bodies such as the Sustainability Accounting Standards Board (SASB) in the USA that have been established to develop and disseminate sustainability accounting standards in publicly traded companies. The impact of such efforts is still in question; however, they do indicate a trend toward legislation and mandates. 2
- 4. LEARNINGS FROM PAST ES&G FORUMS (2012, 2013) The pressure is mounting for Canadian investor relations managers to disclose the impact of their management and operations on the environment, society, and their business governance practices. In response, CBSR’s 2012 and 2013 ES&G Forums in Calgary covered a lot of ground. We heard from investors, financial analysts, ranking agencies, investment funds, and companies about the benefits and challenges of implementing ES&G protocols and review processes. The Forum’s invited panelists were specifically targeted to speak as they held diverse points of view regarding the benefits of ES&G. The result was informative presentations, interactive (speakers/audience) dialogues and a 2013 post-forum document surmising that: • Sustainability reporting is here to stay. • There is considerable evidence of a positive relationship among CSR reporting, business strategy, and value creation. • Engaged stakeholders help to identify companies’ material issues. • Companies can’t please all stakeholders all of the time; it is best to prioritize stakeholder relations/actions. • Companies need to be transparent about all types of risk and how to manage them. • Companies should regard the perceived “burden of CSR” as a real opportunity for continual improvement. • ES&G education is needed, particularly for investors as well as all stakeholders and company personnel. • University-level students should learn the importance and value of integrating ES&G with business strategy. • Companies’ investor relations departments need to be well informed of ES&G to effectively respond to their stakeholders; particularly their investors and evaluation/ ranking agencies. WHAT TO EXPECT AT THIS YEAR’S FORUM Every question that was answered at the last Forum seemed to stimulate yet more questions. The University of Calgary’s graduate students who volunteered as note takers during the Forum documented the following questions during the afternoon’s interactive dialogue session. These were shared in the post-event report and are repeated here to help springboard this year’s discussions. 1 How will ES&G reporting continue to evolve to meet the demands of the current and emerging markets? 2 Is standardization of disclosure and analysis a good thing? Is it possible to standardize ES&G disclosures along with other information deemed relevant to decision makers? 3 Would standards to assess CSR performance enable straightforward company benchmarking? 4 If companies incorporate the listed recommendations, how will investment firms know that companies have made the data and reports more credible if they do not read the reports? 5 Who audits the evaluation agencies and how do we ensure that the ratings are credible? 6 How can companies gain the most value from an assurance engagement? 7 How can multi-national companies track information for their reporting more efficiently? 8 Is integrated reporting the next step? How can companies make the transition with as much benefit and as little pain as possible? 9 Would government regulations for implementing corporate management systems help reduce companies’ risks, increase accountability and environmental performance, and consequently increase credibility? 10 How can investment firms recognize the positive connection between ES&G and financial performance? 11 What do investment firms consider quality management? 12 Does external assurance increase the credibility of sustainability reports in the eyes of investors? This year (2014), the Forum’s speakers have been asked to consider some of these questions and to help us understand how ES&G trends and practices affect/influence Canadian businesses and investors. 3
- 5. THE 2014 FORUM TOPICS Below is a brief overview of the Panels. For a full list of Speakers and Panelists at the Forum, please refer to the event profile on CBSR’s website (http://bit.ly/esgforum-2014). To build from our past learnings, this year’s speakers include representatives from organizations that have successfully implemented ES&G systems for their customers, clients, and/ or members. Here’s a taste of who and what to expect at this year’s Forum: Case Study Presentation McKinsey and the Canada Pension Plan Investment Board (CPPIB) recently collaborated on an initiative that investigated the value of long-term capital investment and the implications of short-term investment. Jonathan Bailey, Engagement Manager at McKinsey, will share the results. ES&G Practitioners, Analysts & Raters Panel You will hear from a panel of ES&G experts who research and use ES&G guidelines for investment, evaluation, and rating purposes. They will explain what they do, how they do it, and share insights on the value (or not) of using ES&G guidelines, including how using these guidelines has changed the way businesses are managing their operations and the way they report results. The ES&G Panel will be asked questions such as – how and why are you using ES&G as a guideline and/or assessment framework when reviewing potential and current investments? Investor Panel This panel is being asked to explain how the trend of including ES&G considerations and guidelines has changed the way their organization operates and the tangible (fiscal) difference (or lack thereof) this has had on their investment strategies and organizational effectiveness. The Investor Panel will be asked questions such as – what do investors want/need to know about my business for them to invest? Investor Relations Panel The panel of Investor Relations experts (representing the oil and gas, waste management, and engineering sectors in Canada) will discuss their experiences of including (or not including) the provision of information on their company’s financial and non-financial tracking and reporting methods using ES&G guidelines, i.e., tracking and reporting results to their key investment analysts. This Panel provides valuable insight as to whether or not ES&G is impacting how large businesses manage their investor relations. The Investor Relations Panel will be asked questions such as – how do you (Investor Relations professionals) report non-financial performance impacts in financial terms so that it is useful to your investors? To get the most out of attending this Forum, we encourage you to bring your own questions to pose directly to the speakers or panelists or to discuss during the audience dialogue session. Tweet your views #ESGForum2014. 4
- 6. 2014 PRESENTING SPONSOR & EVENT HOST 2014 LEADING SPONSOR 2014 SUPPORTING SPONSORS 2014 MEDIA SPONSORS & DESIGN CONTRIBUTORS 5