One year on from our first ESG Conference there is a noticeable shift in the dialogue. No longer are industry leaders talking about why Environmental, Social and Governance (ESG) factors are important, they are now focused on what they are doing to advance ESG within their organization. Over two days, we convened global industry leaders, government officials and management teams across a variety of sectors to share how they are driving the sustainability agenda to create value for all stakeholders. Here are the top five takeaways from the conference:
1.Leveraging ESG to Drive Innovation
Several industry leaders shared with us that embracing sustainability factors, whether it be empowering a diverse workforce, partnering with clients on their decarbonization pathways or creating ESG investment options, enabled the creation of new solutions for clients and also deeper connections with them. Integrating ESG perspectives at the core of the product development process or as an additional lens to a procurement strategy enabled business leaders to think differently and bring new insights to their operations.
2.Evolving Management & Board Responsibilities
ESG leaders have moved on from discussing why sustainable business practices are important to being much more focused on what elements are core to their business strategy and how to execute on ESG priorities. Board responsibilities have evolved too – for many, ESG discussions are standing agenda items and as such, need to be accompanied by robust plans and performance metrics. Last, there was much discussion around the role of the financial sector in addressing ESG outcomes and the views shared indicated that investors and lenders should be setting expectations for the corporate sector but steering clear of dictating strategy, which is viewed to be the responsibility of management teams.
3.Employees as a Driver of ESG Value
Many of our speakers noted the important role their teams are playing in guiding ESG strategy and that the combination of top down direction with bottom up or grassroots engagement was required to get an organization truly mobilized on ESG. Our own CEO, Dave McKay, noted that “your employee base can be your most creative problem solver and can come up with great ideas to help clients make this journey”. Others noted that ESG activities started at a divisional or business unit level and then led the broader organization to embrace sustainability as an agent of change. Companies that empower teams to deliver ESG solutions will create a competitive advantage.
4.The Importance of Public-Private Partnerships
Both government officials and corporate management teams called for more collaboration and partnership across public and private markets to mobilize capital for climate solutions. There is a view that with the right incentive structure, capital markets can, and should, play an important role in funding both climate adaptation and mitigation solutions. The recent inflows into ESG focused venture capital solutions are encouraging. Equally, governments need to be involved to ensure that the transition to a low carbon economy is an equitable and inclusive process, particularly given that disadvantaged communities have been disproportionally affected by climate related externalities as well as the COVID-19 pandemic.
5.Get Ahead of Mandatory ESG Disclosures
With nine jurisdictions globally having announced plans for mandatory TCFD-based reporting and a growing interest in ESG from regulators, it is very clear that ESG disclosures are heading in the same direction as financial disclosures. There are significant efforts underway to unify ESG reporting frameworks and the creation of the International Sustainability Standards Board (ISSB) will serve to improve consistency, reliability and comparability of ESG data across companies and countries. Advice from the experts is to “just get started” whether it be qualitatively through the articulation of governance and strategy or more quantitatively with metrics and targets, including the disclosure Scope 1, 2 and 3 greenhouse gas (GHG) emissions.
