Tuesday, December 18, 2012

Study finds dramatic rise in sustainability reporting

Sustainability reporting is becoming more popular among publicly-traded companies, according to an analysis from New York-based Governance & Accountability Institute.

In 2011, 53% of S&P 500 companies reported on their environmental, social and governance (ESG) impacts, up from just 19% the previous year, the study found. Similarly, 57% of Fortune 500 companies reported on their sustainability effort in the latest analysis, compared with 20% in the prior year. The majority of companies that report in the S&P 500 and the Fortune 500 use the GRI framework.

“An increasing number of corporate managers and boards are recognizing the many benefits that measuring, managing, and disclosing their strategies and performance on Environmental, Social and Governance (ESG) factors can have for their companies,” the study said.
There are tangential benefits to sustainability reporting, the G&A Institute says. “Companies that are measuring and managing their sustainability issues appear to perform better over the long-term in the capital markets.”

In addition, the analysis states that companies that report on their sustainability strategies, initiatives, programs and ESG performance appear to be more likely to be selected for key sustainability reputational lists, ranked higher by sustainability reputation raters and rankers, and, selected for inclusion on leading sustainability investment indexes.

The study notes that as 53% of S&P500 and 57% of Fortune 500 companies are reporting on their ESG impacts, for the first time, the non-reporters are in the minority.

"We believe this minority universe will continue to shrink as it has in the past few years as more large-cap companies embrace sustainability reporting,” said G&A Institute Chairman Hank Boerner in a press release. “The benefits of sustainability reporting are becoming increasingly obvious over time and the long-term benefits of adopting sustainability strategies and reporting on performance become easier to measure and quantify."

Friday, December 7, 2012

Mercer investigates loyalty program for long-term shareholders

Mercer is exploring the concept of loyalty rewards for long-term shareholders over concerns that short-term decision making in the market could be damaging the way corporations are managed. Such rewards could include loyalty dividends, warrants or additional voting rights, Mercer said in a news release.

"With the launch of this project, we are looking to dig deeper into the various proposed solutions to short-termism and determine the possible role that loyalty and related instruments could play," said Jane Ambachtsheer, Mercer's Global Head of Responsible Investment. "There are some interesting precedents, and a range of opinions. Towards the end of this project, we will have a much better sense of whether and how incentives could be utilised by a broader range of issuers, and if not, why not."

Earlier this year, the Generation Foundation published a white paper which included loyalty shares as one of five key actions to accelerate the mainstreaming of sustainability by 2020.

"While we do not have all the answers, we do have some ideas we think may work,
such as incentivizing longer term, engaged ownership," said Peter Knight, Partner at Generation Investment Management and Trustee of the Generation Foundation. "By commissioning Mercer to undertake this consultation, the Generation Foundation wants to see if this idea has merit among key stakeholders.”

Mercer will lead the project with support from Canadian legal firm Stikeman Elliott LLP.

Mercer, Stikeman Elliott and the Generation Foundation will conduct interviews and focus groups to investigate short-termism from various perspectives, discuss possible solutions, and determine the level of interest in, feasibility and practicality of loyalty  instruments.

Mercer has put out a call for interested parties to participate, including topic experts, such as legal practitioners and academics, corporations that have considered or implemented loyalty instruments, investors and other stakeholders.

Findings from the interviews and focus groups will be discussed at a summer 2013 event, after which a report will be publicly available.