Gustavo Bernal Torres
Tuscany, Activism, Food, and Executive Compensation
This is the last Insights ESG Weekly Update of the year. The Insights ESG team wishes you and your family good health and happy holidays!
Here are 5 things you might have missed this week:
The Factory by a Tuscan Beach and the Future of ESG Investing-
This FT piece tells a different story to the ESG ratings and hints to the future regulatory changes.
“This idyllic beach [Rosignano, Italy] perfectly resembles that of a pristine Caribbean resort. But this apparent paradise is a mere illusion; the area is just an open landfill of Solvay’s industrial chemical waste”
Solvay rejects the accusation and says it adheres to strict environmental standards related to the discharge of effluent from the plant, which it says poses no risk to health or the environment. “We regret that occasional sensational and biased attacks continue to be made regarding our plant in Rosignano,” it says.
One of the reasons that Solvay is attracting attention from investors is that it has a triple A rating on ESG risks by MSCI, a London-based firm which provides assessments of a company’s record in these categories. MSCI certifies Solvay as a “sector leader” for chemical safety, water usage and clean tech opportunities.
The Future of Activism Feels Like ESG-
ESG activism has been moving from the fringes of shareholder activism landscape into the mainstream in recent years, as the strategy promises strong returns for first movers
Companies with good ESG practices are experiencing growing demand for their shares, in many cases resulting in premium valuations. For activists, the opportunity is in targeting ESG laggards and pushing for improvements that close the sustainability gap between worst- and best-in-class companies, hoping for a bump in the share price in the process.
Energy companies are arguably an extreme example of the opportunity set in the ESG sector and one with higher risks. Gianluca Ferrari of Clearway Capital, a European activist fund, sees more openings at companies that do not have to change their entire business model to survive in an ESG economy.
“There is so much low-hanging fruit out there. We can find companies with strong business models and a low financial risk profile that are undervalued by the markets primarily because they are not taking sustainability as seriously as they should be,” says Ferrari.
Global Food Industry on Course to Drive Rapid Habitat Loss – Research-
World faces huge wildlife losses by 2050 unless what and how food is produced changes.
The global food system is on course to drive rapid and widespread ecological damage with almost 90% of land animals likely to lose some of their habitat by 2050, research has found.
A study published in the journal Nature Sustainability shows that unless the food industry is rapidly transformed, changing what people eat and how it is produced, the world faces widespread biodiversity loss in the coming decades.
ESG Standards Convergence Could Happen in Next 12 to 24 Months-
Reporting standards in the world of ESG investing, long a thicket of competing frameworks, could converge within 12 to 24 months, said Janine Guillot, head of the Sustainability Accounting Standards Board.
Standards and guidelines around sustainability reporting have bloomed, and companies have said that the reporting requirements are onerous. Investors, meanwhile, have said that without common standards they can’t compare companies adequately.
The efforts under way to develop a global reporting system include one backed by the SASB, another led by the International Financial Reporting Standards Foundation (IFRS), and then the World Economic Forum’s International Business Council, in concert with the Big Four, which unveiled its own set of universal sustainability metrics for reporting stakeholder capitalism. Companies are also reporting according to the guidelines of the Task Force on Climate-related Financial Disclosures, or TCFD.
SASB supports the IFRS initiative. Guillot said it “is the path to what I call global legitimacy for standards. In the same way that they [converged with] GAAP [generally accepted accounting principles], they can leverage the existing work and we can integrate the work of TCFD and SASB and that can happen relatively quickly.”
ESG Metrics in Canadian Executive Compensation-
Canadian boards are increasingly incorporating ESG metrics into executive compensation.
A Hugessen Consulting Inc. survey of 53 Canadian corporate boards found that:
23% currently incorporate ESG metrics into exec compensation
32% plan to do so in the upcoming year
19% plan to do so in the following year
26% have no plans to do so
Notably, 28% of respondents represented small/micro-caps, which may help to explain why roughly that proportion of respondents have no plans to bring ESG factors into compensation at this time.
One more thing: Bill Gates reviews 2020 in his latest post "These breakthroughs will make 2021 better than 2020".
Find the blog post here- https://www.linkedin.com/pulse/breakthroughs-make-2021-better-than-2020-bill-gates
Do share your comments or the content you think our community should not miss!