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The Price of Corporate Reputation

Major brands from Starbucks and Unilever to Levi have announced that they would be cancelling all advertising on Facebook as a boycott against hate speech. This serves as the corporate reaction to the backlash Facebook was already experiencing from the public after making a decision to leave up several controversial posts about the George Floyd protests. As a result, Facebook share prices fell more than 10% over the past week.

This is one example of the increased scrutiny companies face in terms of how they interact with society as a whole. Bringing the narrative back to the world of ESG, investors are increasingly assessing companies on how they engage around these non-financial issues. Companies are getting scrutinized for everything from their environmental impact, employee health, cybersecurity, staff diversity, supply chains and more. BMO Capital Markets published an article on this topic. Looking at the rise of corporate ESG the article discusses how “ESG practices become a must-have rather than a nice-to-have for corporations to attract investors’ dollars.”

In a discussion between State Street Chairman and CEO, Ron O’Hanley and Harvard Business School Professor, George Serafeim, they explain further:

Successful companies will increasingly embrace the need to articulate a clear organizational purpose and redefine performance to include their measure on society. These issues impact valuations, cost of capital, operating efficiency and ultimately — they impact shareholder value. This process needs to be measured, priced and included in financial statements.

Nossa Feature

A new way to understand the impact of your investments
Our team enjoyed interviewing Claudia Coppenolle, Co-Founder and CEO of the IMP+ACT Alliance about the organisation’s June 24th launch. The organisation aims to allow investment practitioners to better understand the social and environmental impacts of investments. It does this by providing a technology solution that supports efforts to assess, measure and manage these impacts. Learn more in our feature.

Top stories

The World Doesn’t Want a Carbon Footprint Tracker App
Are you passionate about the subject of climate change? Do you wish more people were engaged with the issue? I know…let’s build an app! Nishul Saperia has spent the last few months investigating the notion of building an app to track people’s carbon footprints and to help them reduce it — however, he decided to stop. While staying committed to sustainability he shares the lessons learned around this investigation and the 6 main reasons why he decided to stop.
Read his story.

Trump Administration Targets ESG Funds With 401(k) Rule
One in four of every professionally invested U.S. dollar is tied to environmental, social and governance criteria. But the Trump administration’s latest proposed rule change may make it harder for ESG funds to attract interest from retirement plans. Fiduciaries of pension and 401(k) plans could need to prove investments were selected based only on economic criteria. This could dissuade some investors from incorporating ESG in a world where ESG investments have been increasingly outperforming. Be sure to check out Money Stuff columnist Matt Levine’s reply.
Bloomberg.

Dispelling the top 11 SASB Myths

  • Myth #1: SASB standards are only relevant to US companies and investors. -> Reality: Businesses and investors around the world use SASB standards.
  • Myth #2: SASB standards are complex and expensive to implement. -> Reality: Standards are designed to provide a cost-effective way for companies to disclose material, decision-useful sustainability information to investors.
  • Myth #3: SASB standards are not designed for companies that straddle multiple industries. -> Reality: Companies can use multiple industry standards to report.
  • Myth #4: SASB standards compete with GRI standards. -> Reality: SASB and GRI are mutually supportive and are designed to fulfill different purposes.
  • Myth #5: SASB is a commercial organization and companies must pay to use its standards. -> Reality: SASB is a 501(c)3 non-profit organization.

Read the full list.

Q&A Roundtable: The Future of Impact Finance

Six academics from impact & sustainable finance discuss trends, predictions and tensions related to the rapidly growing field. Shawn Cole, professor of finance at Harvard Business School shares:

“My view is that we are turning a corner. The old way of doing things, in which values were ignored, is fading away. Impact and ESG considerations are now relevant for nearly every asset class. Much of this movement appears driven by investor preference, and the asset management industry is certainly adept at developing and delivering products that meet customer needs. I do not see dilution or obfuscation, but rather a growing diversity of approaches which will swell to suit the needs of nearly all investors. This is clear in both public and private markets.”
Stanford Social Innovation Review.

Does ESG Matter for All S&P 500 Sectors?
As companies grapple with the societal impact of COVID-19, sustainable investing continues to gather steam. But how does ESG impact performance and valuation premiums? RBC Markets has prepared a heat sector map to offer some surprising clues. It highlights the influence of ESG factors (specifically high active ESG fund ownership and ESG risk scores) on specific sectors, and may provide some insights on why ESG is outperforming many of its non-sustainable counterparts.

Read the insights.

Paper Highlight of the Week:

Does the CDS market reflect regulatory climate risk disclosures?
By: Julian F Kolbel, Markus Leippold, Jordy Rillaerts and Qian Wang.

Using a forward-looking measure of climate risk exposure based on textual analysis of firms’ 10-K reports, this paper assesses whether climate risks are priced in the credit default swap (CDS) market. The paper constructs a novel climate risk measure based on BERT, an advanced context-based language understanding algorithm. Differentiating between physical and transition risks, the results find that transition risk increases CDS spreads, especially after the Paris Climate Agreement of 2015. These increases are statistically and economically highly significant. The paper does not find such an effect for physical risk.

Read the paper.

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Cuts down the time it will take your company to report on ESG and non-financial risk.

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Nossa Capital

Nossa Capital

We are an ESG reporting and data management technology company.

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