Overview of Yearbook articles

Each year we publish a series of articles to accompany the industry results contained in the Yearbook. This year’s edition of The Sustainability Yearbook focuses on social capital issues — the “S” in ESG. Sandwiched between Environmental and Governance — “S”, which measures sustainability’s social dimension, is sometimes overshadowed by the attention afforded to its sustainability siblings. This is perhaps understandable given the devastating impact of environmental pollution and the climate crisis on a global scale (measured by E), combined with a preference of the investment community for metrics that focus on company leadership, board oversight and executive compensation (measured by G). But the significance of the social dimension in sustainability investing is rapidly escalating. This past year especially, social sustainability issues have grabbed their fair share of headlines.

Impact Valuation – holding sustainability to account

January 2020

Environmental issues like increasing climate change and decreasing biodiversity, together with social issues like pernicious inequalities in labor markets, bring into stark relief the fact that companies’ impacts are not limited to financial markets. Business behavior produces positive and negative externalities that affect society, ecosystems, and the planet. 

Impact valuation is a way for companies to gain a more comprehensive, concrete understanding of the value (or cost) of their impacts on society. Impact valuation is a tool companies can use to help identify, measure, and value their impact beyond products and profits. This means looking beyond customers and suppliers toward their impact on a broader group of stakeholders that includes people and planet. Impacts are measured, quantified, and reported in hard figures that can be positive or negative, depending on whether value is being created or destroyed. It is only by measuring these externalities that a true picture of a company’s value can be painted. 

Impact valuation goes beyond sustainability reporting and toward a more systematic prioritization, collection, and evaluation of data via quantification and monetization techniques. It is still a nascent movement, but it is gaining momentum as more experts across accounting, finance and sustainability advocate for it as a means to elevate sustainability standards in business, equip companies with tools for the task, and hold them accountable for their performance.

Manjit Jus

Global Head of ESG Research and Data,
S&P Global

Marie Froehlicher

ESG Specialist,
S&P Global

Bethany Busher

ESG Specialist,
S&P Global

Distant threats, present dangers, and current controversies – exploring the connection between early risk perceptions, risk management, and risk avoidance

January 2020

In September 2018, Facebook admitted that an attack on its computer network had exposed the personal data of more than 50 million users – one of the largest data security breaches in history. Just one year earlier, Facebook had been embroiled in another landmark data privacy scandal involving unauthorized access to user data and an attempt to influence voters in the 2016 US presidential election. Facebook has paid billions in connection with both cases and continues to suffer reputational damages from reduced stakeholder trust.

Meanwhile, 3M Co., a U.S.-based industrial conglomerate, faces an increasing number of legal suits related to its use of PFAS,1 toxic chemical substances widely considered harmful to human health. In February 2018, 3M settled with the state of Minnesota for US $850 million over PFAS-related pollution, and expected liabilities could reach over US $5 billion. 

The severity of the financial and reputational damage suffered by Facebook and 3M casts a spotlight on weaknesses in the links of many companies’ risk management processes. The magnitude of the damages (not only to companies but also to society and the environment) led us to ponder how cases like these can arise and, more important, how they can be avoided.

Annelies Poolman

Lead ESG Benchmarking Specialist,
S&P Global

Isabelle Stauffer

Senior Manager ESG Research,
S&P Global

Interview with CDP “Climate disclosure – a first step to step change”

January 2020

The 2020 edition of the Sustainability Yearbook focuses on corporate perceptions of risk and what steps companies are taking to identify, measure, and internalize those risks via tools like impact evaluation.

The climate emergency provides a powerful example of the critical need for companies to uncover and evaluate the risks (both seen and unseen) embedded in their operations and products. These risks can have serious negative consequences (impact) for the environment and society. The debate over climate change has radically shifted in the past decade, moving from a potential scenario in strategic planning to an existential threat for not just individual companies but entire industries.

Like RobecoSAM, over the past two decades, CDP has been a champion and pioneer in pushing companies, investors, municipalities, and governments to measure and understand their environmental impact. In the process, it has developed an impressive array of protocols, tools, and methods to help these stakeholders in collecting, measuring, benchmarking, and disclosing carbon emissions and other environmental indicators. As a result, CDP has built an influential reputation and network that strengthen its ability to drive change.

Foteini Arpatzoglou of S&P Global ESG Research recently sat down with CDP’s Faye Bennett-Hart, Associate Director, Reporting, to discuss CDP’s founding mission, current strategy, and future vision for reducing environmental damage and achieving net-zero carbon emissions.

Faye Bennett-Hart

Associate Director

1 PFAS, short for per- and polyfluoroalkyl substances, a group of chemicals that the US Environmental Protection Agency has ruled adverse to human health.

Articles – Yearbook 2019

Fair Wages – a key to effective social capital management

February 2019

Sustainability is more than climate change and protecting fragile environmental ecosystems, it’s also about protecting the social fabric of which society is composed and supported. This means going further than meeting the bare minimum in wage levels required by law and embracing the concept of fair wages. Fair wages are those that cover the real cost of an employee’s basic needs while also respecting the economic constraints of employers. Moreover, for many industries this involves not only evaluating their own wage practices but also being a “fair-wage” champion and resource for the companies within their supply chains as well.

Professor Daniel Vaughan-Whitehead

No Firm is an Island: using the SDGs to bridge modern portfolio management to the future

February 2019

Companies don’t operate in seclusion; they are part of a larger inter-related system made up of variables that interact in unpredictable ways. Yet, traditional models used in portfolio construction do not sufficiently account for companies’ interaction with, and impact on, other firms, actors and variables within the system. 

These impacts can have serious and far-reaching consequences for both the business ecosystem and society. When viewed in the long-term, many un-sustainable companies are, at present, over-valued and many sustainable companies under-valued. 

The SDGs provide a useful framework to help companies and investment managers implement a systems-thinking approach that considers the impact of decisions on future resources. Company performance assessed holistically in this way safeguards portfolio returns by better synchronizing the short-term assets with the long-term liabilities of universal asset owners. 

Michael van der Meer

CFA, Senior SI Analyst, 
Emerging Markets, 

Slowly but surely: gradual progress towards gender equality

February 2019

Gender diversity enhances corporate governance, talent attraction and human capital development which fosters superior value creation not only within companies, but also for stakeholders and society. Corporate policies promoting gender diversity are a reflection of a well-managed company that realizes the value of multiple perspectives in minimizing risk and driving long-term competitiveness. Token female appointments are not the goal, but rather effective leadership. 

Gender diversity can only be achieved by promoting gender equality, not in terms of quotas or inaccurate measures of outcomes, but by addressing the social and cultural stereotypes that have limited women’s ability to maximize professional opportunities.

Jacob Messina

CFA, Head of SI Research

Markéta Pokornà

SI Research Associate

Five Years of Pushing for Change: Assessing Corporate Tax Strategies

February 2019

Though it lacks the magnitude of climate change, the excitement of technological innovation, and the visibility of gender equality, a company’s approach to its tax obligations is nevertheless a critical element to consider when evaluating a company’s sustainability profile.  

Sustainability in business can be defined as the policies and practices which companies implement not only to adapt, grow and thrive in the future but also to avoid diminishing the resources available for present and future generations.1 Taxes are the means with which communities and countries build the physical, social, and educational infrastructure needed to support present and future growth and development.

Eleanor Willi

Sustainability Specialist,
ESG Ratings

1 World Commission on Environment and Development, 1987, General Assembly of the United Nations, http://www.un.org/en/ga/president/65/issues/sustdev.shtml

Articles – Yearbook 2018

The Good, the Bad, and the Ugly: Corporate Policy Influence under scrutiny in the age of SDGs

January 2018

The ability to petition political leadership is a key component of modern democracy. Corporations are essential contributors to political discourse as they provide policy makers with important industry-specific perspectives and information, and can be strong voices supporting policy that improves economic and social welfare. However, corporate policy influence can also lead to economic inefficiency, environmental degradation, and the loss of human health and life. Moreover, public awareness of the misuse of influence and distrust of corporations is on the rise. The popularity of the UN’s 17 Sustainable Development Goals (SDGs)as a tool by governments and shareholders will increase the importance of public-private sector discourse as a vehicle for information sharing and idea generation. A bounty of benefits awaits companies that use their channels of influence for positive impact for communities and society. The opposite awaits companies that use policy influence for deliberate self-interest.

Jacob Messina, CFA

Head of SI Research

Eleanor Willi

Sustainability Specialist

Capitalism coming of age: using the SDGs to bridge business strategy and social responsibility

January 2018

Corporate Social Responsibility (CSR) has evolved from an ad-hoc feature to a strategic imperative for corporations. A well-defined and aligned CSR program can help companies articulate an overarching purpose that motivates employees, inspires customers, gratifies shareholders and advances society. The UNs Sustainable Development Goals (SDGs) provides a useful framework to help companies target and align their CSR programs with the economic, social and environmental needs society and investors value most. Our analyses of corporate philanthropy and citizenship practices shows that companies already recognize the need to address SDGs and are using  their CSR programs to apply, advance and report efforts. However, stronger metrics are still needed, especially for companies and stakeholders to fully maximize impact.

Roland Hengerer, PhD

Senior SI Analyst

Putting commitment into practice in financial services

January 2018

Through their ability to deploy capital to support sustainable initiatives that support short-mid- and long-term economic development, financial institutions are critical players in making the world more sustainable. In addition, they provide institutional and retail clients with access and education on sustainable financial products so they too can contribute to the causes they value while earning a financial return.
We spoke with BNP Paribas’ Laurence Pessez and BNP Paribas Fortis’ Guy Janssens to get a closer look at how one major bank and asset manager is using its global presence and local expertise to advance the cause of sustainability with customers in home markets in the Eurozone and within financial circles around the world.

Guy Janssens

Head of Sustainable and Responsible Investments  BNP Paribas Fortis

Laurence Pessez

Global Head of Corporate Social Responsibility BNP Paribas Group

2 Information on UN Sustainability Goals is available at http://www.un.org/sustainabledevelopment/development-agenda/ 

2019 Annual

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