ESG matters. Stakeholders have steadily and increasingly focused on this issue over the past few years. Investors are now adopting formal policies governing their proxy-voting and investment strategies. The SRI crowd is growing, activist investors are using it as another potential lever against management, and it matters to investors who are likely towards the very top of your investor profile – passive investors.
All companies in all sectors are constantly being scrutinized and rated on their corporate responsibility practices and communications. The need to increase awareness of the company’s commitment to ESG, to engage with, and understand, your various internal and external stakeholder groups is paramount to a successful sustainability strategy. Investors need to understand that this is a top-down business priority, with a primary focus of relevancy to the strategy through the lens of financial materiality, prior to communications of culture and values based corporate responsibility initiatives. With an estimated 85% of total S&P 500 assets intangible, there is a need to communicate the risks and opportunities of the business in relation to these assets that typically fall outside the realm of FASB and traditional financial reporting.
Clearly conveying the company’s ability and success in recognizing, navigating and acting upon sustainability challenges represents both a significant business risk and opportunity. But where do you start? How has your company integrated sustainability practices into the business strategy and how does this reflect on your culture? Are you focused on the right issues, the right stakeholders, the right frameworks and the right reporting agencies?
Understanding how to clearly communicate around an opaque and ever-changing issue can be challenging. At Rivel, we assist clients with navigating their corporate responsibility challenges the following ways:
Rivel is positioned to assist your company communicate its own unique story, to ensure a suitable degree of alignment with peers and the sector, strengthen the relationship with investors and other primary stakeholders, and clearly articulate the company’s ability to understand and mitigate risks, and embrace opportunities for a sustainable business.
If you are interested in learning more about Rivel’s governance services please contact David Bobker, Managing Director, Governance and Sustainability at +1 (203) 803-1515 or via email at firstname.lastname@example.org
The ESG Reporting Evolution
Increasingly, stakeholders at all companies—including investors—are showing a heightened interest in sustainability. To communicate a commitment to environmental, social and governance (ESG) sustainability, companies are seeking to strengthen and improve internal procedures, gain a deeper understanding of primary stakeholders’ perceptions and expectations of ESG issues, ensure suitable alignment with peers, and create focused communications that are integrated with existing governance and investor messaging.
In today’s world, a growing percentage of public companies’ assets are “soft,” intangible assets, and therefore outside of the realm of existing financial disclosures and FASB reporting. In 1975, an estimated 17 percent of assets in the S&P 500 were intangible. In 2015, this had grown to 84 percent, as assessed by the Ocean Tomo “Annual Study of Intangible Asset Market Value.” Investors and other stakeholders seek information on all matters that impact a company’s strategy and future potential returns and growth, and are turning to an ever-expanding pool of alternative data to help understand the risks and opportunities companies face.
This has resulted in an evolution of financial reporting, but one that is very challenging for the SEC and other regulatory bodies to universally apply standardized approaches, given the incredibly diverse nature of companies across all sectors, and their unique strategies and situations. As this evolution is being driven “bottom-up” by the markets and interested stakeholders, it is imperative that companies take back control of their narrative, and provide stakeholders with accurate and insightful information that they require. With so many third-party rating agencies, coalitions, and other commentators impacting financial markets and creating significant investment and public bias, companies need to understand the demands of investors and provide focused, strategically and financially relevant ESG-related information, in addition to disclosures that are reflective of its culture, values and ethics.
Rivel provides the strategy, structure, and directional guidance to successfully navigate these challenging times for the long-term.