HONG KONG, December 1st, 2020 – Governance Solutions Group (GSG) participated the 2020 SASB Symposium. An influential 3-day Sustainable Investment assembly, with renowned corporate sustainability proponents, such as Larry Fink of Blackrock, Brian Moynihan of BOA, Erkki Liikanen of IFRS, Erik Thedeen of IOSCO and Bob Eccles of Oxford University.
The conference was launched on the backdrop of the significant developments of SASB and the other 4 major sustainability standards organizations, announcing their collaboration along with their Joint Letter to IOSCO and IFRS, formally asking them to support the collaboration.
The proposed IOSCO and IFRS cooperation will initially be in the form of an IFRS Sustainability Standards Board (SSB). Mr. Thedeen, IOSCO Chairman, formally responded to the Joint Letter, stating, “[we are in a] unique position to accelerate the process, [similar to] IFRS completed 20 years ago with financial reporting”. Thedeen also stressed the need for a “flow of reliable, internationally-consistent, comparable and decision-useful information” to support investor decision-making and the design of sustainable finance products.
This anticipated SSB initiative, was a continual theme throughout the SASB Symposium, cited as the end which should resolve the current frustrating “alphabet soup” of ESG standards compliance.
Such an achievement would dramatically change the landscape and focus of the current players in ESG standards, but such an end would be met with great jubilation, states SASB’s CEO, Janine Guillot, as such a result would be a clear milestone of our collective accomplishment. (paraphrased)
One of the Symposium’s more captivating sessions was with Ms. Yafit Cohn, Chief Sustainability Officer of the Travelers Companies. Therein, Cohn makes a number of interesting claims. Firstly, stating that the CSO role may now be as central as the CFO, in that all departments and functional heads need to be aligned in order for the company to achieve accurate and comprehensive sustainable reporting. Cohn, as a seasoned lawyer, also states that the role needs to have strong legal and financial acumen as sustainability disclosure can more arduous than financial disclosure, requiring strong cooperation between legal, finance, investor relations, enterprise risk management, human resources and more. Also, unlike all other Symposium thought leaders, Cohn expressed significant trepidation about an eventual global sustainability standards regime, fearing a lack of flexibility. Concurrently, she praised the SASB Materiality Map, as it allows for such. Cohn continued that, that each organization’s leaders, “need to have a solid grasp of which sustainability issues are most salient” to each of their company’s ESG progression.
Another convincing session was with Margaret Franklin, CEO of the CFA Institute, and Cyrus Taraporevala, CEO of State Street. Herein, they stated that much of the ESG momentum is from institutional investors reaction to 3 underlying trends. Firstly, the growing correlation between ESG risks and opportunities and their impact on investment. Secondly, asset owners increasingly desire to see their ESG preferences expressed in their investments. Lastly, regulators are asking to see ESG reporting metrics, especially in the climate change area.
In alignment with most session’s speakers, they gave high praise to the utility of the SASB Materiality Map, along with the EU Taxonomy and TCFD framework, stating that these tools are the primary stepping stones, helping us reach more globally unified sustainable investment reporting.
While nearly all sessions were extremely positive on the link between “Material ESG” and investment performance, there are others that are more nuanced. Two such lectures were from Harvard’s Dr. George Serafeim and Wharton’s Dr. Witold Henisz. Their detailed sessions, both used numerous data points and research on ESG investment trends, demonstrating that ESG investment is becoming more efficient and less expensive, (like index fund investing), and due to a number of factors, an enormous amount of investment is flowing towards issuers (and PE) that are focused on sustainability improvements. The two professors differed slightly on the level of direct causal relationship between ESG investing and finding alpha, but they both agree that the trend is positive and that we need much better (and more consistent) data along with more active ownership in order to reach more conclusive results.
Regardless, I believe that most would agree that while a substantive causal relationship between ESG investment and superior returns are ideal, it’s not the absolute first priority in sustainable investment. Firstly, there are time-sensitive real-world problems that this movement is trying to resolve. Further, as the momentum continues, the money will surely follow as well.
The sessions mentioned above are those I felt demonstrated not only credible depth but also unique perspectives beyond, and even contrary to, the prevalent comments in more than 25 meetings. It has been an honor to be part of this SASB Symposium, where thought-leaders in sustainable investment conveyed pervasive concurrence on the current momentum and what needs to ensue. The goal is clear – ESG Reporting must be no different than all other financial reporting. And IFRS, the organization credited with making our accounting standards universal, is the ideal proponent to reach this goal.