The Diversity Metrics Most Commonly Reported by Companies (Newsletter 9/10)
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Funds Rebrand to Market Sustainable Investments
Last year, 25 funds rebranded as sustainable, according to Morningstar data. The funds state they implemented strategies that use data based on companies’ ESG performance to make decisions. A few examples of rebranded funds include:
- American Century Fundamental Equity Fund – Sustainable Equity Fund
- USAA World Growth Fund – USAA Sustainable World Fund
- Putnam Multi-Cap Growth Fund – Putnam Sustainable Leaders Fund
Most of these funds are actively managed and experienced heavy outflows prior to the rebrand. Now as sustainable funds, they are seeing a high volume of inflows. For instance, the Wall Street Journal reports that investors were pulling money out of American Century’s Fundamental Equity Fund, then three years after rebranding as Sustainable Equity Fund, it brought in $1.7 billion. As part of the transition, funds divested from companies like Devon Energy Corp., Philip Morris International, General Dynamics, and Boeing Co. Then, the funds invested in tech companies, such as Texas Instruments and Cadence Design Systems, along with renewable energy companies.
Janus Henderson Launches Sustainable Future Technologies Fund
The investment approach of Janus Henderson’s new fund will use a positive thematic framework to select investments that align to the United Nations Sustainable Development Goals (UN SDGs) and can attribute 50% or more of revenues to the fund’s sustainable technology themes. The fund is managed by Alison Porter, Richard Clode, and Graeme Clark, based in London and Edinburgh, and the team is supported by dedicated analysts, including a sustainability analyst.
Fidelity Creates Sustainable Climate Solutions Fund
Fidelity International has launched Fidelity Funds – Sustainable Climate Solutions Fund, a fund that focuses on products and services that help limit carbon emissions and also facilitate the transition to a low carbon economy. The fund will not practice carbon avoidance, but rather focus on carbon reductions and investment in solutions for decarbonization. Velislava Dimitrova and Cornelia Furse, the co-portfolio managers for Fidelity’s Sustainable Water and Waste Fund, will manage the new fund.
Home Depot Webcasts Sustainability Progress
Yesterday, The Home Depot hosted an ESG webcast alongside a presentation led by Chief Sustainability Officer Ron Jarvis. The categories of sustainability topics for the webcast were sustainable products, operational footprint, and supply chain distribution. Progress from its sustainability initiatives include a 22% reduction of Scope 1 & 2 carbon intensity per revenue dollar, a CDP score of A-, expanding chemical policies to exclude certain hazardous chemicals from products, reducing single-use plastics, and continued improvements in renewable energy capacity and water savings. The company will set science-based targets by 2023 for Scope 1, 2, & 3 emissions aligned with the Paris Agreement. A majority of the questions were heavily focused on the environment, such as how The Home Depot plans to reduce Scope 3 emissions, if it will complete the CDP forestry questionnaire, how it will support a circular economy, and how meeting net zero commitments will impact suppliers and potentially product margins. Additional topics included resources allocated towards ESG, looming regulatory changes, how it chooses which ESG items to prioritize, the size of the sustainability team, and product-category specific improvements.
Allbirds Files First Sustainable Public Equity Offering (SPO)
Through a collaboration with Business for Social Responsibility (BSR), a sustainable business consultancy, Allbirds became the first ever company to file its IPO as a Sustainable Public Equity Offering (SPO). As explained by BSR, to list as an SPO, companies must meet certain criteria, which were established with support from an advisory council that includes MSCI and Sustainalytics leaders, amongst others. These criteria include:
- Minimum ESG rating
- Stakeholder-centric purpose and mission
- ESG progress commitments
- Best practices on value chain, climate responses, corporate governance, and people management
- Transparent ESG reporting
Fortune 50 Companies Emphasize ESG in the Proxy
Sidley Austin has released a study of Fortune 50 company’s most recent proxy statements that highlights important trends in ESG practices and disclosures. Insights from this study include:
- Climate Change – 90% of companies made climate change disclosures, with the most common of these disclosures being related to carbon emission reductions.
- ESG Oversight – Around 60% of companies had two or more committees with responsibilities related to ESG oversight responsibilities. The most common committee with ESG oversight was the Nominating and Governance Committee.
- Human Capital – Most companies made human capital disclosures and the most discussed DEI topic was community engagement and donations made. However only 26% of companies committed to disclosing EEO-1 data.
- Reporting Frameworks – The most frequently articulated ESG framework was SASB (35%), followed by TCFD (33%) and GRI (26%).
Chevron, Delta, & Google to Transparently Measure Sustainable Aviation Fuel Emissions Data
In hopes of producing a transparent model for assessing potential GHG emissions reductions due to the use of sustainable aviation fuel (SAF), Chevron, Delta, and Google are collaborating on emissions tracking of a test batch of SAF. For this project, Chevron will produce an SAF test batch in El Segundo, CA and sell the batch to Delta at the Los Angeles International Airport. Google Cloud will create an analytics framework to securely measure and assess emissions data from Delta and Chevron. Ultimately, this project’s goal is to improve SAF emissions reporting and increase transparency around the fuel.
ESG Ratings & Reporting
The Most Reported Gender Diversity Metrics
Sustainalytics, a rating agency heavily used by investors, dove into 4,600 mid- and large-cap companies’ use of human development metrics. Of the companies that report metrics, the most common metrics reported are gender diversity within the Board (79%) and senior management (71%) followed by workforce gender diversity (58%). Interestingly, less than half of the companies report on all three metrics. Additionally, on average, women make up 36% of the workforce and only 18% of senior management. The industries that performed best in workforce gender diversity were financial, healthcare, and real estate.
Featured Article: GHG Emissions Targets Cheat Sheet: Science-Based Targets vs. Net Zero
With climate change being one of the hottest topics in ESG today, it’s at the top of investors’ agendas. And those investors are pushing the topic to the forefront of their portfolio companies’ agendas as well, specifically putting pressure on companies to rein in their greenhouse gas (GHG) emissions. As a result, many leading organizations are publicly committing to science-based emissions reduction targets or even going a step further and setting more ambitious net-zero goals. If you’re still deciding which emissions-reduction approach is best for your business, consider these key points.
Understanding GHG emissions scopes.
Before you can set a realistic emissions reduction goal, it’s important to understand the extent of the emissions your business is releasing into the atmosphere, both directly and indirectly. The term “scope” relates to who owns the specific GHG emissions in questions, and there are three scopes that should be on your radar:
- Scope 1: Direct emissions from sources you own or operate
- Scope 2: Indirect emission from the electricity, heat, and steam your company purchases
- Scope 3: All other indirect emissions, such as business travel, employee commuting, and purchased goods and services
Comparing science-based targes to net zero.
Once you have a handle on the emissions you are producing, you can define your strategy for reducing them. Click here to continue reading about the two approaches organizations are committing to.
- MSCI Chief: Push to Standardize ESG Ratings is ‘misplaced’
- From 4% to 45%: Biden Sets an Ambitious Goal for Solar Energy
- Companies Are Tallying Their Carbon Emissions, but the Data Can Be Tricky
- Wall Street’s ESG Loans Charge Corporate America Little for Missed Goals
- A third of Gen Z says climate change is a top concern. A new report says the climate crisis is pushing young adults to pursue more sustainability-focused career paths.
- Webinar: Transition to Integrated Reporting: A Guide to Getting Started