Talking ESG at the London Stock Exchange
16 December 2019 - By Alex Voskou
It’s long been said that breakfast is the most important meal of the day. For our breakfast event at the London Stock Exchange on Wednesday 4th December, “Integrating ESG into business strategy,” the old saying certainly held true.
Hosted in partnership with Santander and ERM, the event brought together investor relations professionals, general counsel, CFOs and sustainability leaders. Together, we discussed the latest trends in non-financial disclosure, best practices for strategically measuring and disclosing credible ESG information, and tips for integrating ESG into strategy and risk management.Elisa Moscolin (Head of Sustainability and CSR at Santander), Marjella Lecourt-Alma (CEO and Co-founder at Datamaran), Alexander Cox (Partner, EMEA Head of Corporate Sustainability Services at ERM) and Maeva Charles (Technical and Partnership Director at Datamaran) each shared their experiences of working in the ESG field and how businesses can make these issues a seamless part of their everyday operations. A closing statement was provided by Adrian Rimmer (Senior Advisor, Green Finance at the London Stock Exchange).
The role of the stock exchange
The leitmotiv of the whole session was that ESG has for too long been siloed – which, in the modern world, is an increasingly large contradiction. Information on these kinds of topics is in the public domain, the media is focusing more on ESG, and social media has brought companies’ practices into sharper focus. It’s the equivalent of sitting down to breakfast and seeing these issues splashed all over the front page of the newspaper, yet refusing to accept that they’re a part of the world around you.
All of these factors make ESG relevant to a company’s strategic decisions, and this is why there is a need for a greater integration. However, ESG is complex, far-reaching and all-encompassing, so integrating it into a business’s everyday practices is all about collaborating with all the relevant stakeholders.
Stock exchanges play a role by providing updated information for issuers. The London Stock Exchange recommends that companies include ESG in their financial reporting. From this point of view, there could not have been a more appropriate backdrop for our discussion.
The power of new ideas
It was to get rid of these silos, make sustainability part of strategy and use technology to build and speed up business processes that Marjella Lecourt-Alma founded Datamaran. It was a new idea back then, and it has now become a reality. Today, ESG is being integrated into companies’ decisions, investor decisions, into law, into services.
“New ideas need to be backed up by execution,” said Marjella. Any new idea loses credibility when nothing is being done to bring it to fruition. An idea becomes real when it goes from thought to an actual action with muscle. The increased impact of the TCFD is a powerful example of how “climate change as an important topic or idea” got translated into business reality by being positioned as a matter of risk management, with potentially severe material financial implications for companies. Indeed, the last two to three years have seen an unprecedented acceleration in the “reality of ESG” – not as a side game but as a vital business need.
Where sustainability meets strategy
This change in emphasis was underlined also by Elisa Moscolin: “A decade ago, sustainability professionals spent most of their time explaining why they exist and what was the business case for sustainability. Now we spend much more time discussing how we deliver sustainability. This shows how sustainability is increasingly becoming a business imperative rather than a nice to have".
Throughout her career, Elisa has noticed the sustainability function hopping from one part of the organization to another, from HR to PR to external affairs and marketing. And more recently, finally finding its home in strategy teams or CEOs’ offices. “It’s important to have sustainability sitting around the table where decisions are made in a company. Sustainability is raising in the organizational charts, and I look forward to the day when chief sustainability officers will have a permanent seat in executive teams and boards”.
Thanks to pressure from regulators, investors and the public, material ESG risks have become a part of company strategy. “More and more companies are shifting from old-fashioned CSR and philanthropy to sustainability, and in my view this is a very welcomed and needed shift,” said Elisa. “CSR is mostly about how you spend the money the company makes, sustainability is about questioning how it makes that money in the first place, looking at the impacts of your core business activities,” she added. TCFD is reflective of this shift as it is classifying climate change as a financial risk, inviting businesses to understand how their core business activities will be impacted and bringing this issue much closer to the business strategy.
Bringing in the board
Our speakers discussed some of the practical ways in which professionals can bring ESG issues to the board.
Count on the numbers
Our Partnerships and Technical Director, Maeva Charles, emphasized the importance of providing information that the board trusts. An evidence-based, data-driven approach gives greater credibility to a company’s materiality. “ESG or non-financial data should be treated with the same rigor that is expected from financial data,” said Maeva. This includes having a quantitative way of assessing even qualitative issues such as human rights or diversity. In order to achieve that, better processes and controls need to be implemented.
Elisa added, “it’s very important that a sustainability strategy is built on facts and data rather than opinions. It needs to be delivered in a collaborative way, engaging the right stakeholders, but needs to follow a rigorous analysis and process. This is how it’ll have the credibility needed to bring change.”
Use the right language
Both Elisa and Maeva emphasized that the language you use is especially important to gaining board and business buy-in. It’s important to speak the same language as your colleagues rather than the niche, often exclusive language of sustainability, which by its nature can distance the concept from mainstream business operation. “Engaging with the business on sustainability is not always easy, but it’s not negotiable,” said Elisa. “I found that the most effective way to start getting the business on board on this agenda is to lose the jargon and focus on the business case, the risks, the cost-efficiencies and of course, the opportunities.”
Don’t do it alone
Again, it’s crucial to avoid working in a silo. Sustainability teams need to work collaboratively with other business divisions, and ESG practices need to be embedded across the organization. Don't do sustainability alone. Due to sustainability’s breadth and complexity, engaging all the relevant stakeholders is tough. For this reason, Elisa’s team works across the entire organization.
In the same way that food’s a lot more fun when you’re sharing the experience, ESG’s a whole lot more robust when you get the right people involved. The board needs to have oversight of sustainability and everyone needs to be engaged, from the CEO downwards.A big thank you to our speakers and our attendees for a fantastic discussion, and to the London Stock Exchange for hosting. More insights about our partnerships and collaborations can be found here.
TCFD: An update on corporate disclosure following the second status report
In June 2019, the TCFD released its second status report, indicating increased adoption of its recommendations.
To coincide with its release, we are updating our previous analysis into the extent to which this adoption has been reflected in supporters’ corporate disclosure.
The analysis shows that, whether they’re supporters or non-supporters of the TCFD, companies are now talking about climate change more than ever before. More in detail, climate change is predominantly discussed through a risk rather than an opportunity lense – with 54% of FinServ TCFD supporters referring to the topic in relation to risk and 20% in relation to opportunity in 2018.
To read the full report, please fill in the form on the right.