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Changes to ESG Investing Rules You Need to Know

March 22, 2021 by Diane Osgood, Ph.D. Leave a Comment

If your company is publicly traded, you need to know about the new regulations in Europe that affect companies in the U.S. and around the world. 

New EU rules require companies everywhere to disclose more information in order to be considered as ESG investments. When you make sure your company reports on material issues, you’ll be less inundated with ESG surveys.

Recently the European Union (EU) established rules to regulate sustainable finance. Now in effect, the rules cover fund managers that apply environmental, social and governance (ESG) criteria. The regulation applies to all funds raised in the EU, no matter where they are managed or based.

The new rules, known as the Sustainable Finance Disclosure Regulation (SFDR), aim to provide more transparency on sustainability within the financial markets. The goal: to prevent greenwashing and ensure comparability. SRDR also covers the possible adverse sustainability impacts of investments. 

The SFDR requires all EU-based fund managers that apply ESG criteria to report how they integrate sustainability risks into investment decision-making and investment advice. Furthermore, the SFDR requires disclosure by fund managers on any ESG issue that could impact the value of their investments. 

For example, companies may find reporting only on climate change insufficient because investors want to understand performance across a broad range of ESG issues. Depending on the company and industry, investors might ask about issues such as biodiversity and land use change, breaches of ethical behavior, and diversity, equity and inclusion (DEI). 

The SFDR requirements impact the lion’s share of new ESG funds. EU investments in ESG funds consistently outpace investments from other regions. 

For example, EU investors put an estimated $142 billion into investments marketed as ESG in the fourth quarter of 2020. That compares to $49 billion from investors in the U.S. and other parts of the world combined. 

Why this matters to your company

EU investors that fall under the SFDR requirements will need to know about the sustainability performance and risks for all the companies they invest in. Investors tend to collect sustainability-related information from published reports and surveys. 

Is your company ready to provide the information investors need?

Responding to surveys is time-consuming. Most companies try to avoid this by publishing the information in stand-alone sustainability or integrated annual reports. 

SFDR will prompt more companies to publish sustainable impact data to satisfy the needs of their investors. More than 20% of publicly traded companies don’t yet publish information about their carbon emissions, waste, or other types of impacts. 

Over 80% of S&P companies and 76% of NASDAQ companies report at least one ESG metric. But not all of these companies report the information that European-based investors now need. 

The best course of action is to ensure your company reports on material issues. Following reporting frameworks and standards ensures that investors can easily locate pertinent information about your company. These standards and frameworks include:

  • the Taskforce on Climate related financial disclosure (TCFD) framework
  • the CDP (previously known as the Carbon Disclosure Project) standards
  • the Global Reporting Initiative (GRI) standards or the Sustainability Accounting Standards Board (SASB) standards. 

However, carbon emissions data alone may not suffice, since investors need to track impacts for social and governance issues as well as environment. 

Depending on your company’s industry and material issues, investors may look for DEI performance data, labor and human rights information, supply chain risks related to sustainability. For this reason, reporting only TCFD or CDP may be necessary but not sufficient to meet your investors’ needs. 

If you have questions about sustainability performance and what investors need, contact Diane Osgood at diane@osgood.com 

Filed Under: Blog, Uncategorized

Insights from green banking: What keeps customers from switching banks?

March 1, 2021 by Diane Osgood, Ph.D. Leave a Comment

Bank with solar panel on roof
Where you bank can lead to a greener, more just world.

ESG may be all the rage, but what about retail banking?

The deposits you make at your retail bank for personal and business accounts sustain the bank’s ability to make loans and investments. Loans and investment fuel growth. Put simply, a bank’s capital can flow towards fossil fuels or renewable energy, towards local business loans or financing environmentally damaging projects.

Imagine if all retail banks required environmental impact assessments for loan applications. Or committed a certain percentage of loans and investments for renewable energy projects.

Certainly, this is a vision all climate-concerned citizens can support, and the opportunity to influence banking as citizens is large. Most U.S. households (93 percent) have a checking or savings account while only 52 percent own stock …

To continue, read my guest blog on GreenBiz.

Filed Under: Blog, Uncategorized

Why sustainability professionals should drive green consumerism

March 1, 2021 by Diane Osgood, Ph.D. Leave a Comment

Everyday shopping decisions can lead to a more sustainable and just world.

Most people’s wallets are slammed shut right now, and an unthinkable number of people face unemployment and loss of business. The coronavirus pandemic offers a painful and unique opportunity to re-envision the economy we want and how we get there.

Business is driven by consumer demand. When there is a great demand, business expands. When there is little demand, business contracts. Government policy aside, this is what shapes the economy.

The good news is that the majority of U.S. consumers want to buy purpose-driven brands that support sustainability. However, despite our intentions, the vast majority of us don’t consistently shop in a way aligned with our values or desires for a sustainable economy.

Here’s how to think about changing consumer demand: Imagine a rider on top of an elephant, trying to get the elephant to go down a specific path. Our mind, intellect and will power (the rider) and our emotional body (the elephant) need to be aligned to make any progress …

To continue, read my guest blog on Green Biz.

Filed Under: Blog, Uncategorized

It’s urgent to reshape our economy towards justice and sustainability

March 1, 2021 by Diane Osgood, Ph.D. Leave a Comment

Consumers can shop in a way that reduces systemic racism.

Right now, talking about shopping can seem trite.

Yet, to address systemic racism, we need a more just economy. An economy slanted towards white ownership plus discriminatory labor practices perpetuate systemic racism.

As discussed in earlier columns (here and here), consumer demand drives 70 percent of the economy. Consumers and citizens have significant influence over the shape of the economy because we — in aggregate — ultimately control almost 70 percent of it.

Read guest blog on GreenBiz.

Filed Under: Blog, Uncategorized

When shoppers return, will they choose green?

March 1, 2021 by Diane Osgood, Ph.D. Leave a Comment

Produce seller at vegetable stand
After the pandemic and recession, will shoppers make greener choices?

Consumers are spooked.

Record unemployment, continued levels of lockdown in many places and general uncertainty have most of us startled and longing for certainty. No wonder that we’ve seen plunges in consumer spending and confidence around the world.

Once consumption resumes, will people make choices to support a more sustainable economy?

In conversations among fellow sustainability leaders, I often hear optimism that shoppers will make decisions based on how companies behaved during the coronavirus pandemic. There is hope that shoppers will remember which companies treated their employees well and stepped up to provide technical or financial support during the pandemic.

Read guest blog at Green Biz.

Filed Under: Blog, Uncategorized

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