Why ESG Has Become A Central Focus of Corporate Boardrooms
John Aronson
President/Founder at ESG Resiliency Plus, LLC & EcologicDNA, LLC
Denver, CO
One of our board members, John Aronson, President/Founder of Ecologic DNA, LLC and creator of “ESG Resiliency Plus”, recently spoke with IBC about the importance, development, and impact of ESG (Environmental, Social, and Corporate Governance) on the measurement of sustainability and social impacts of investments in companies or businesses.
John has worked in this sector since 1989, with wide-ranging national and international experience relating to environmental and social impact assessment, monitoring and management systems, regulatory support, natural resource development programs. He is also a top-notch water expert and limnologist, evaluating and analyzing the many aspects of inland water sources, such as lakes, rivers, streams, and ponds, for example, their ecological status and minimizing various impacts to these systems.
We asked John for some examples about how the sector has changed over the past few years. He began by telling us that ESG has become a “central focus of corporate boardrooms” and by explaining the logic behind this. “Good ESG management makes companies run better, act better, and mostly get invested into better.” One example of this evolution of corporate attitudes is that, whilst virtually attending this year’s PDAC (Prospector’s and Developers Association of Canada) convention, which is the world’s largest mining convention, one of the recurring themes of the convention was devoted to the importance of ESG. “It’s not just the ‘climate change’ element, like ‘if you don’t do something about climate change, we’re not going to invest in your company,’ you know, type of thing. It is much broader.”
John went on to emphasize that investment attitudes now are more about “the physical, chemical, biological, social, regulatory aspects of each of the companies.” For example, a previous attitude toward investing was that, if an oil company had an oil spill, many didn’t want to invest in it. Investment attitudes have broadened widely to include more wide-ranging aspects of company behaviors and practices these days. He also continued that there is some “confusion and concern” by financial institutions about companies that don’t have “solid ESG” built into their company and their projects.
John mentioned that some studies suggest that up to 85% of investors would prefer not to invest in a company that doesn’t have a quality ESG platform.
John: “By factoring ESG into your company operations, you’ll have a better run company, because you’ll be engaging in with communities, gender equity, minorities. Investors have been rewarding ESG-compliant and reporting companies.”
He told us that he’d had the opportunity to speak with some people who were developing software that “learns” and helps companies target, rate, and rank and suggest different ESG alternatives for individual companies, harkening to the old adage: “If you cannot measure it, you cannot manage it.” John also stressed that developing criteria for KPIs (Key Performance Indicators) is critical for long-term projects for companies. There are many different ESG evaluation platforms and metrics to consider.
Another question posed to John was, what are the “hot areas of the world” for him right now? John: “Right now the pressure I see is international vaccine passports.” He continued by remarking that in the “hot places of the world, most of the mining companies controlled [Covid-19] quite well. The key will be opening up to international travel.”
When asked where he thinks things are going, John is optimistic because of increased vaccine distribution. Most of the reports he’s seen from industries around the world have been positive because of great strides being made by the effectiveness of the vaccines.
How much emphasis has been placed on ESG by US investors and policymakers? John: “There is a lot of emphasis on ESG-related investment quality, getting not only into the environmental aspect, but also really getting into social factors.” An example of this focus was a company that won a sustainability award at PDAC this year which relocated 970 families to a new city, as part of their local mining project, which was quite a challenging effort. Imagine trying to arrange for new homes and infrastructure on this scale, in order to satisfy and improve the situations of local residents as part of the company investment. This was recognized as a well implemented relocation and resettlement plan, always a very sensitive issue with larger projects.
In summary, investment with an eye toward ESG continues to grow and become more popular. This holistic approach to company management and investing is of great value to everyone.
Further reading, videos and information selections by John:
"Nearly all investors (88%) ask managers how ESG is incorporated into their investment decision-making."
ESG and NET ZERO: a broad sampling of concepts, ideas, and recommendations, from academic, commercial, banking, and technical sources. I have selected a broad representation here.
I support strong ESG implementation, of course.
ESG Videos:
· https://www.rbcgam.com/en/ca/article/the-future-of-esg-integration/detail
· https://ssir.org/articles/entry/climate_action_is_too_big_for_esg_mandates
ESG Additional Information:
· https://ssir.org/articles/entry/making_a_better_business_case_for_esg#
· https://www.youtube.com/watch?v=K5WdGdT8NSI
· https://structuredfinance.org/multimedia-library/future-of-esg-investing-in-structured-finance/
· https://ssir.org/articles/entry/climate_action_is_too_big_for_esg_mandates
· https://www.cnbc.com/video/2020/12/17/how-one-firm-could-be-leading-the-future-of-esg-activism.html
· https://www.jdsupra.com/legalnews/esg-investing-prompts-a-slow-response-85741/
· https://www.cnbc.com/2020/12/16/climate-change-will-be-a-big-2021-focus-in-esg-market-analyst.html
· https://www.climateaction.org/news/why-esg-investing-is-more-relevant-than-ever-before
NET ZERO
· https://www.wri.org/publication/designing-and-communicating-net-zero-targets
· https://www.reutersevents.com/sustainability/six-lessons-learned-road-net-zero-carbon-emissions