BlackRock Notes Lack of SASB Reporting in Vote Against Chairman (Newsletter 4/23)

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Regulatory News

Biden Commits the U.S. to Reduce GHG Emissions in Half by 2030

At the Climate Summit, Biden announced the U.S. will commit to cutting greenhouse gas emissions 50% to 52%, from 2005 levels, by the end of the decade. This comes after corporate leaders from Apple, General Electric, Google, Unilever, and Walmart praised the Biden administration for rejoining the Paris Climate Accord while demanding they more aggressively address climate change. Thus far, The White House released a plan mandating federal agencies end investment in foreign carbon-intensive energy projects, the U.S. International Development Finance Corp. transition to a net zero by 2040 portfolio, and climate be prioritized in public investments.

Investor Updates

BlackRock Moves on Sustainable Investing Initiatives

In BlackRock’s Q1 2021 earnings call, the asset manager has already made progress shifting towards the sustainable investment strategies it has been pushing on in recent letters and guidelines. Larry Fink forecasts that the firm’s $353 billion in sustainable investments will grow to over $1 trillion by 2030. Fink also mentioned the launch of two low-carbon transition readiness ETFs, which raised a total of $2 billion, the largest ETF launch in U.S. history. As BlackRock is set on a net zero economy by 2050, it is improving its internal “Aladdin” platform for assessing transition risks.

In line with BlackRock’s increased sustainability focus, the institution has voted against at least one public company’s Chairman, Nicholas Howley at TransDigm, due to lack of climate risk oversight, insufficient progress on climate-related reporting, and lack of SASB reporting progress (ProxyInsight). It is important to note, BlackRock also voted against the reelection of Howley in 2020, per the institution’s voting bulletin. The one key difference from the rationale this year versus last year is the mention of TransDigm not making progress on a SASB alignment.

State Street and S&P Global Trucost ESG Partnership

State Street and S&P Global Trucost announced a strategic ESG engagement where State Street’s clients can access both its ESG risk analytics and reporting and Trucost’s climate data and analytics on the StateStreet platform. The new capabilities will allow clients (with assets totaling more than $40 trillion) to access carbon footprint and environmental data mapped to portfolios along with TCFD reporting.

Largest 3 Asset Managers Commit to Net Zero

Speaking of, StateStreet has now joined BlackRock and Vanguard as part of the Net Zero Asset Managers initiative. The initiative’s signatories now total $37 trillion in combined assets under management. All signatories commit to reporting TCFD aligned and ensuring action is taken to achieve the targets. It is hard to see an outcome in which the big firms do not expect portfolio companies to make the same commitments in the near future.

Company Spotlight

ESG Content in the Proxy

Etsy’s 2021 proxy dedicates a section to E&S topics, providing progress updates on ESG initiatives (with a solidly designed and easy-to-read table), categorized as economic, social, and ecological impact goals from 2020, and shares the new 2021 goals. The proxy provides references to SASB and TCFD aligned reporting in their 10-K. Lastly, on page 27, Etsy lists material E&S risks and the corresponding board committees that oversee each of the risk categories.

Quick ESG Rundown

Tractor Supply’s ESG website section displays meaningful data that is easily accessible. ESG has its own section of the website and a viewer can easily access it from the top menu while on either the corporate site or the IR site. In an infographic format, the company provides highlights including energy reduction percentage compared to the 2015 baseline, the renewable energy goal, percentage of female workers, hours spent on workforce training in 2020, board diversity statistics, and its ISS score. The bottom of the page has direct links to ESG Tearsheets, the TCFD report, and critical policies. The ESG Tearsheet for 2020 acts as a condensed CSR with SASB alignment, UN SDGs, and additional important topics broken out by environmental, social, and governance.

Arcosa Leverages SASB as a Reporting Guide

Arcosa’s 2020 Sustainability Report uses SASB as a guide for topics to discuss throughout its report. Near the front, the company shows a materiality assessment matrix, which was based on SASB standards, and displays the most material topics – air quality, business ethics and compliance, employee health and safety, and inclusion and diversity, which became the highest near-term priorities. Arcosa expanded the SASB standards to cover all three of the sectors in which it operates. The SASB table is broken out by environmental, social, and governance metrics, and includes a column for corresponding UN SDGs. As an added bonus, the report has both a CEO letter containing Arcosa’s ESG commitments and a letter from the Chairman of the Board outlining the Board’s responsibility to provide oversight of ESG.

Ratings & Frameworks

MSCI Asks Investors to Embrace their Role in Achieving Net Zero by 2050

MSCI released a report asking investors to work towards achieving net zero emissions as soon as possible. The actions the report encouraged are:

  • Decarbonization – reduce exposure to investments most at risk of becoming stranded and focus more capital toward scaling up clean energy
  • Engagement – reallocate capital where necessary and increase shareholder engagement in the areas that companies are behind
  • Benchmarking – transition to investment policy benchmark that provides clear direction and a reference point to help portfolios move toward net-zero, i.e., climate index

Reinforcing its call to action, this week MSCI committed to net-zero prior to 2040.

Sustainalytics Expands Carbon Risk Rating

Also shortly following the Net Zero Asset Managers initiative, Sustainalytics announced updates in the methodology of its carbon risk rating and expanded the rating to 12,000 companies, increasing coverage of mid-cap companies based on investor requests. The rating measures how prepared the companies in a fund’s portfolio are to transition from a fossil-fuel based economy to a lower-carbon economy. The material carbon issues Sustainalytics looks at are carbon – own operations, carbon – products & services, and carbon finance. The ratings agency then takes a company’s exposure and evaluates what the company is doing to address emissions and manage the carbon risk. This is a separate report from the overall ESG scores currently provided by the firm.

News Bites