Last year, I wrote about the ripple effects of BlackRock CEO Larry Fink’s annual letter to CEOs — how his letter underscored a broader trend in mainstream investors driving sustainability strategy. This is something I have noticed in my work and also something other sustainability leaders have substantiated with data: According to the 2018 GreenBiz “State of the Sustainability Profession” report (PDF), pressure from investors is one of the top two factors impacting company sustainability programs. In another survey, by BSR and GlobeScan, 25 percent of respondents said investor influence is one of the top three drivers of sustainability efforts at their organization.
In the last article in my three-part series offering insights of U.S. CSOs on trending issues, I asked leading CSOs if they also notice an uptick in investor interest in sustainability, and the implications of that interest. (My first article in this series focused on the makeup of sustainability teams, and my second article looked at how growing political polarization is affecting corporate responsibility. All of these articles build on the Weinreb Group’s latest research on CSOs.)
Here’s what they had to say.
Yes, there is a rise in interest from investors.
All of the CSOs I heard from said they had noticed more interest from investors. AT&T CSO Charlene Lake pointed out that it’s no longer just socially responsible investors asking questions. “Now the decibel level from mainstream investors has caught up,” she said.
There is a greater level of transparency required, necessitating that companies work to ensure that data in the public sphere is accurate and complete.
Campbell Soup Company CSO Dave Stangis added that in his many years working at different companies, values-based investors and NGO investors that hold enough shares for proxy resolutions have always driven sustainability. But interest from large institutional investors is growing significantly, and Campbell Soup is getting more ESG questions from larger firms and analysts every year, he said.
Because of this, sustainability teams are working more closely with investor relations.
As investor interest has grown, sustainability departments have started to work much more closely with investor relations teams. At UPS, CSO Tamara Barker said her team regularly engages with investor relations, particularly with impact investor funds. AT&T’s Lake said her team partners closely with investor relations and finance on shareholder requests, shareholder meetings and even materiality assessments.
Owens Corning CSO Frank O’Brien-Bernini said that while collaboration between sustainability and investor relations always has been strong, the interactions between the two teams have become more frequent and more detailed as investors proactively request conversations focused on ESG topics. “I really enjoy these sessions,” he said. “Through their questions, we gain insight into what’s on their minds and why they took a particular interest in our stock.”
Transparency and disclosure have become even more critical.
The growing connection between investors/finance and sustainability has had a particular impact on reporting. There’s a clear need for accurate data, and standardization seems important.
“There is a greater level of transparency required, necessitating that companies work to ensure that data in the public sphere is accurate and complete,” said MGM CSO Cindy Ortega.
Despite this demand for data, it’s not yet clear how that should be presented to meet the needs of investors. “The most challenging area is external reporting, where stakeholder opinions are still emerging about how to present data in ways best suited to the investment community,” AT&T’s Lake said.
We share our heart-and-soul strategy as part of key investor events to demonstrate our company values and how this strategy helps deliver growth for the company.
Some companies are making specific investments in transparency and disclosure. Kellogg CSO Amy Senter said the company has taken a number of steps to improve disclosure and enhance transparency, such as including sustainability and social impact progress into Kellogg’s 10-K, reporting to the Dow Jones Sustainability Index and the SASB Standards, and engaging more deeply with the Sustainability Accounting Standards Board (SASB).
“I joined the SASB Standards Advisory Group to continue to advocate for improved and streamlined investor reporting,” Senter said.
What’s next?
Looking forward, some CSOs said investor interest has catalyzed investments in headcount at the company. Hewlett Packard Enterprise CSO Christopher Wellise said HPE has hired people on the investor relations team dedicated to ESG issues. Lake said that while this trend has placed more demands on AT&T’s CSR team, the company hasn’t yet expanded the team, but it has had to reallocate resources and invest more in talent development and deployment.
Investor interest in sustainability is one trend I will continue to watch over the next few years. I believe it has the potential to help the field become even more strategic and leapfrog progress on issues that matter.
As Kellogg’s Senter put it: “We share our heart-and-soul strategy as part of key investor events to demonstrate our company values and how this strategy helps deliver growth for the company. There is a lot more we can do in this space, and we are looking forward to partnering with investors on this in the future.”