About six months ago, I wrote that 2020 would be a pivotal year for environmental, social and governance (ESG), and that what happens this year and over the next decade could determine the next century. While it would be the world’s biggest understatement to say 2020 isn’t turning out the way we all thought or hoped it would, I stand by my conclusion.

This is a critical time for corporate sustainability. What we do or don’t do will change the world, but for reasons nobody could have predicted in December.

The mass climate protests of 2019 and subsequent outpouring of major corporate climate commitments from the likes of Amazon, IKEA and Kering, among others, seemed to indicate that 2020 would be the year of the E in ESG — when corporate climate action hit critical mass.

In January, the momentum built as Microsoft committed to becoming carbon-negative and BlackRock Chairman Larry Fink’s now-fabled letter to CEOs called the climate crisis a “defining factor in companies’ long-term prospects.” The climate crisis even topped the discussion list at the World Economic Forum Annual Summit in Davos.

And then along came a global pandemic, and everything changed. As the world went into lockdown, ESG conversations shifted from the E to the S, or social — how companies were responding to COVID-19 in terms of employee health and welfare. The emphasis on the S intensified even further after the murder of George Floyd sparked a movement for racial justice and employees, customers and investors demanded companies take a stand. 

As social issues move to the forefront of ESG discussions, 2020 is turning out to be the breakout year for the S. To better understand what this means for the future of corporate sustainability, thinkPARALLAX recently gathered investors and corporate sustainability practitioners from TPG, JUST Capital, Workday, The Estée Lauder Companies and KKS Advisors for a digital Perspectives discussion. 

The S moves to the front seat

In the long road trip of corporate sustainability, the S mostly has ridden in the backseat — with the E and G commandeering the wheel and Spotify playlist. That’s because social issues are tough to quantify. 

While calculating a carbon footprint is comparatively easy, how does one create science-based targets for worker welfare or racial injustice? Sure, an organization can make efforts to diversify its board and workforce, or create programs to improve worker welfare, but this is only a start. 

Addressing deeply rooted systemic inequalities requires a much greater commitment and means of measuring success. Until now, companies have gotten by with doing nothing or just the bare minimum. No longer, thanks to the events of 2020.

“We’re at a turning point in ESG,” said Martin Whittaker, CEO of JUST Capital. “What’s happened in the past three months has done 20 years of S work.” 

What’s happened in the past three months has done 20 years of S work.

Moving forward, corporate board members, investors and executives will be expected to consider worker welfare and complex social issues such as racial inequality. “Companies are scrambling to address these issues, and everyone needs to throw out the manual and completely rethink how they approach equity in the workplace, because something is not working,” Whittaker said. 

But as the S takes over the wheel, are environmental issues, the E, getting pushed into the backseat? No, said Alison Humphrey, director of ESG at TPG. “It’s just joined climate in the front seat.”

E and S: better together

The great thing about ESG is that it isn’t a zero-sum game. A renewed focus on the S actually might help companies do a better job of addressing environmental challenges because the two are linked. People of color or low-income socioeconomic status, for example, are suffering and will continue to suffer first and worst from the negative effects of the climate crisis, says Union of Concerned Scientists. 

“There’s so much interesting intersectionality with social justice and climate — they are both so connected,” Humphrey said. “Climate work is hard and exhausting, and many people don’t feel the urgency or balk at the initial cost of the transition or fail to grasp how dependent humanity is on our ecosystems. In many ways, it mirrors many of the challenges with social justice — and you can’t address one without the other.”

While measuring social impact remains difficult, this no longer will be an excuse for companies not to try. 

“With this sharp focus on how integral social issues are to our ability to achieve an equitable society and make environmental progress, we will collectively need to get a lot better at measuring and communicating the S, just as we have with environmental topics,” said Aleksandra Dobkowski-Joy, executive director of ESG at The Estée Lauder Companies.

Even before the events of 2020, Workday factored social impact into its environmental sustainability strategy, said Erik Hansen, director of sustainability at Workday. “The events of the past months have illustrated how valuable systems thinking is, and showing that we are a connected, global community. That connection between climate, the environment, people and health.”

When Workday installed EV chargers at its headquarters, for example, this was not just so software engineers could come to work in a Tesla, Hansen said. It was also so that the company could minimize environmental impacts such as air pollution, which disproportionately hurt disadvantaged communities. Likewise, as Workday works toward its 100 percent renewable energy goal, the company is advocating for a just transition to clean energy that accounts for those who might be affected economically — such as workers in the fossil fuel industry — and ensure that nobody is left behind.

One of the most effective ways to honor the E and the S might be focusing on the G, according to Anuj Shah, managing director at KKS Advisors: “One of the things we’ve looked at is how the G — the governance part — supersedes the E and the S. If you can get the G right, the E and S will follow.” 

What racial justice means for business

As mass protests erupted across the globe after the murder of Floyd, a chorus of companies voiced support for addressing racial inequality, and some even committed to doing something about it. But what comes next?

“We’re at a point where we need to take substantive action, as individuals and as corporations, to deliver on social justice. I’m incredibly proud of the commitment made by The Estée Lauder Companies to promote racial equity, as a starting point for real progress and lasting change,” Dobkowski-Joy said.

According to Humphrey, TPG came out with a statement and commitment to take action by first taking a step back to reflect on its role and how it can best address system inequalities as a private equity firm. “The question is, what is your company’s role in rectifying injustice in our system? This needs to come uniquely from each department, a top-down and bottom-up approach.”

A hopeful future for ESG

Despite the setbacks of 2020, there remains reason for hope. The ongoing global pandemic is shattering the longstanding myth that companies must sacrifice return to be a good corporate citizen — ESG funds are outperforming the wider market during this economic downturn. 

And we are learning through much trial and error — emphasis on the “error” — how to address an intractable problem that harms everyone yet that no single government, organization or individual can solve alone. Relentless competition may be giving way to constructive collaboration. And these lessons might still be applied to address the ultimately more existential crisis of the climate. 

We will collectively need to get a lot better at measuring and communicating the S, just as we have with environmental topics.

“In the midst of this tremendous upheaval, we’re all pulling together in ways which were unfathomable just months ago — and showing that collective action is actually possible,” Dobkowski-Joy said.

Climate may begin to take on a new importance as a long-term threat to society as climate risk exposes inequities just as COVID-19 has, Whittaker said. “COVID-19 has taught us the importance of resilience, interdependence and systemic risk and how to address that — and how we can be more effective working together. I’ve seen a lot of collaboration over the last three months, which I wouldn’t have expected to see. I think it has brought out a lot of humanity in business which has all been about profit making.” 

Shah of KKS was more cautiously optimistic. “I’m concerned that a lot of companies are going to feel pressure to maximize profits coming out of the pandemic into a new normal. ESG and short termism don’t necessarily go together. Long termism is a prerequisite for ESG.”

However, Shah added that he has been inspired by the mass movement for racial justice being driven by the younger generation. As Millennials and Generation Z continue to take over the workforce and enter leadership roles, this activist mindset could change the future of ESG. 

Humphrey suggested companies should take a look at business model resilience and how it is intertwined with ESG issues. “Perhaps we can focus less on the rolling back of budgets, which has happened for many companies across the board, and instead on how the pandemic has compelled us to look beyond one-off CSR and sustainability initiatives toward a more strategic, integrated and business-aligned approach to managing these 21st-century risks,” she said. 

As we continue to push forward toward an uncertain future, the only certainty is that things will change. And it’s up to all of us to make sure that it’s for the better.

With record high unemployment, a reeling global economy and concerns of food shortages, the world as we know it is changing. But even as these shifts expose inequities in the health and food systems, many experts hope that the current moment offers an opportunity to build a new, more sustainable food system.

To understand what it will take to move forward, Food Tank has compiled its summer reading list to delve into the issues that affect our food system today. These 20 books provide insight into food access and justice in Black communities, food relief and school nutrition programs, the effects of technology on global food supply chains, the relationship between climate change and food production, and much more.

1. “Be My Guest: Reflections on Food, Community, and the Meaning of Generosity” by Priya Basil (forthcoming November)

Priya Basil explores the meaning of hospitality within a variety of cultural, linguistic and sociopolitical contexts in this short read. Basil uses her cross-cultural experience to illustrate how food amplifies discourse within families and touches on the hospitality and the lack thereof that migrants and refugees experience. “Be My Guest” is at once an enjoyable read and a hopeful meditation on how food and hospitality can make a positive difference in our world.

2. “Biodiversity, Food and Nutrition: A New Agenda for Sustainable Food Systems“ by Danny Hunter, Teresa Borelli and Eliot Gee

Leading professionals from Bioversity International examine the positive impacts of biodiversity on nutrition and sustainability. The book highlights agrobiodiversity initiatives in Brazil, Kenya, Sri Lanka and Turkey, featuring research from the Biodiversity for Food and Nutrition Project (BFN) of the Alliance of Bioversity International and CIAT. Through this analysis, the authors propose that the localized activities in these countries not only are benefiting communities, but also are transferable to other regions.

3. “Black Food Geographies: Race, Self-Reliance, and Food Access in Washington, D.C.” by Ashanté M. Reese

Ashanté Reese draws on her fieldwork to highlight community agency in response to unequal food access. Focusing on a majority-Black neighborhood in Washington, D.C., Reese explores issues of racism, gentrification and urban food access. Through her analysis, she argues that racism affects and exacerbates issues of unequal food distribution systems.

4. “Black Food Matters: Racial Justice in the Wake of Food Justice“ edited by Hanna Garth and Ashanté M. Reese (forthcoming October)

Access, equity, justice and privilege are the central themes in this forthcoming collection of essays. The food justice movement often ignores the voices of Black communities and white food norms shape the notions of healthy food. Named for Black Lives Matter, “Black Food Matters” highlights the history and impact of Black communities and their food cultures in the food justice movement.

5. “Diners, Dudes & Diets: How Gender and Power Collide in Food Media and Culture“ by Emily J.H. Contois (forthcoming November)

Emily Contois looks at media’s influence on eating habits and gendered perceptions of food. Focusing on the concept of dude foods, the book follows the evolution of food marketing for men. In doing so, Contois shows how industries used masculine stereotypes to sell diet and weight loss products to a new demographic. She argues that this has influenced both the way consumers think about food and their own identities.

6. “Feeding the Crisis: Care and Abandonment in America’s Food Safety Net“ by Maggie Dickinson

The Supplemental Nutrition Assistance Program (SNAP) is essential for individuals who face food insecurity on a daily basis. Still, the program fails to reach many, including those who are unemployed, underemployed or undocumented. “Feeding the Crisis” provides a historical overview of SNAP’s expansion and traces the lives of eight families who must navigate the changing landscape of welfare policy in the United States.

7. “Feeding the Other: Whiteness, Privilege, and Neoliberal Stigma in Food Pantries“ by Rebecca T. de Souza

Rebecca de Souza explores the relationship between food pantries and people dependent on their services. Throughout the work, de Souza underscores the structural failures that contribute to hunger and poverty, the racial dynamics within pantries and the charged idea of a handout. She argues that while food pantries currently stigmatize clients, there is an opportunity to make them agents of food justice.

8. “Feeding the People: The Politics of the Potato“ by Rebecca Earle

Rebecca Earle tells the story of the potato and its journey from a relatively unknown crop to a staple in modern diets around the world. Earle’s work highlights the importance of the potato during famines and war, and explains the politics behind consumers’ embrace of this food. Interspersed throughout are potato recipes that any reader can try.

9. “Food in Cuba: The Pursuit of a Decent Meal“ by Hanna Garth

Hanna Garth looks at food security and food sovereignty in the context of Cuba’s second largest city, Santiago de Cuba. Throughout the work, Garth defines a decent meal as one that is culturally appropriate and of high quality. Through stories about families’ sociopolitical barriers to food access, Garth shows how ideas of food and moral character become intimately linked.

10. “Franchise: The Golden Arches in Black America“ by Marcia Chatelain

Scholar, speaker and strategist Marcia Chatelain provides readers insight into the ways fast food restaurants expanded throughout Black communities. Chatelain traces their growth during the 20th century and their intersection with Black capitalists and the civil rights movement. This book highlights the dichotomy between fast food’s negative impacts on Black communities and the potential economic and political opportunities that the businesses offered them.

11. “Honey And Venom: Confessions of an Urban Beekeeper“ by Andrew Coté

Andrew Coté provides a history of beekeeping while taking the reader through his own trajectory in the industry. A manager of over 100 beehives, Coté raises colonies across New York City, on the rooftops of churches, schools and more. Coté’s passion for beekeeping comes through clearly as he narrates the challenges and rewards of his career.

12. “Life on the Other Border: Farmworkers and Food Justice in Vermont“ by Teresa M. Mares

Agriculture, immigration and Central American and Mexican farm workers may conjure ideas of the Mexico-U.S. border, but in “Life on the Other Border,” Teresa Mares gives a voice to those laboring much farther north. Mares introduces the readers to the Latinx immigrants who work in Vermont’s dairy industry while they advocate for themselves and navigate life as undocumented workers. This is an inspiring read that touches on the intersection of food justice, immigration and labor policy.

13. “Meals Matter: A Radical Economics Through Gastronomy“ by Michael Symons

Michael Symons argues that economics used to be, in its essence, about feeding the world but has become fixated with the pursuit of money. Symons introduces readers to gastronomic liberalism and applies the ideas of philosophers such as Epicurus and John Locke to the food system. Through this approach, he seeks to understand how large corporations gained control of the market and challenges readers to rethink their understanding of food economics.

14. “No One is Too Small to Make a Difference“ by Greta Thunberg

Greta Thunberg addressed the United Nations at the 2019 U.N. Climate Action Summit and has become a global symbol of environmental activism. Her community organizing and impassioned speeches are uncompromising as she argues that climate change is an existential crisis that needs to be confronted immediately. “No One Is Too Small to Make a Difference” includes Thunberg’s speeches and includes her 2019 address to the United Nations.

15. “Perilous Bounty: The Looming Collapse of American Farming and How We Can Prevent It“ by Tom Philpott (forthcoming August)

Journalist Tom Philpott critically analyzes the centralized food system in the United States and argues that it is headed for disaster unless it sees some much-needed changes. Philpott argues that actors within the U.S. food system are prioritizing themselves over the nation’s well-being and provides well-researched data to back up his claims. Providing readers insight into the experiences of activists, farmers and scientists, this is a great read for those starting to learn about the state of the country’s food system and for those who are already deeply involved.

16. “Plucked: Chicken, Antibiotics, And How Big Business Changed The Way The World Eats“ by Maryn McKenna

In this exposé on the chicken industry, acclaimed author Maryn McKenna explains the role antibiotics played in making chicken a global commodity. “Plucked” makes it clear that food choices matter and show how consumers’ desire for meat, especially chicken, has affected human health. McKenna also offers a way forward and outlines ways that stakeholders can make food safer again.

17. “Stirrings: How Activist New Yorkers Ignited a Movement for Food Justice“ by Lana Dee Povitz

Between 1970 and 2000, food activists in New York City pushed to improve public school lunches, provide meals to those affected by the AIDS epidemic and establish food co-ops. In “Stirrings,” Lana Dee Povitz draws on oral histories and archives to recount the stories of individuals who led these efforts. She highlights the successes of grassroots movements and reminds readers of the many female leaders in the New York food justice movement.

18. “The New American Farmer: Immigration, Race, and the Struggle for Sustainability“ by Laura-Anne Minkoff-Zern

Laura-Anne Minkoff-Zern offers a look at farm labor in the U.S. Although most farm owners are white Americans, farm workers are overwhelmingly immigrants and people of color. In this book, Minkoff-Zern details the experiences of farm laborers who are becoming farm owners themselves and outlines the many barriers that workers must overcome during this transition. Through interviews with farmers and organizers, Minkoff-Zern shows that these farmers bring sustainable agricultural practices that can benefit our food system.

19. “The Story of More: How We Got to Climate Change and Where to Go from Here“ by Hope Jahren

Hope Jahren breaks down climate change for readers in an accessible and data-driven book. “The Story of More” explains how greenhouse gas emissions and consumption of natural resources in developed nations exacerbate climate change and outlines the consequences of these actions. Although she argues that the planet is in danger, she also provides a variety of everyday actions, such as decreasing meat consumption, that consumers can take to make a difference.

20. “Vegetable Kingdom: The Abundant World of Vegan Recipes“ by Bryant Terry

Author, chef and food justice activist Bryant Terry provides readers with over 100 recipes to create approachable and flavorful vegan dishes, without relying on meat alternatives. This book is a wonderfully practical recipe book that begins with a list of recommended tools, is organized by ingredients and even includes a music playlist. Vegans and non-vegans alike will appreciate “Vegetable Kingdom.”

Alonso Diaz also contributed to this article.

Earlier this year, when I was chatting with venture capitalist Nancy Pfund of DBL Partners about which new areas of climate solutions were intriguing to her, she pointed to business models that had the potential to monetize land conservation.

The example we discussed that day wasn’t one I would think of immediately: Better Place Forests, which is creating what it calls “conservation memorial forests.” It’s a different model for saving trees that takes a cue from the end-of-life industry. 

Instead of buying a cemetery or mausoleum plot for cremated ashes, you or your family can pay toward the preservation of a tree — the fee starts at $2,900. The ashes are mixed with soil at the base, along with a memorial marker. Currently, the company is protecting forests in Northern California and Arizona. But that’s not all: For every person and tree it memorializes, it plants at least 25 impact trees in collaboration with the nonprofit One Tree Planted. And as of July 2019, the company had raised $12 million in early-stage venture funding (led by True Ventures) to help with its mission.

When I started poking around to identify other for-profit ventures in the business of land conservation, two other organizations that have been working with Microsoft jumped to mind, both of which provide technology for mapping and measuring forests: Pachama and Silvia Terra. 

In May, I spoke with another intriguing agroforestry startup, Propagate Ventures, part of the fall 2018 cohort at Elemental Excelerator. The company, which recently raised $1.5 million in seed funding from the Grantham Environmental Trust, is focused on helping agricultural operations figure out how to profit from planting trees. 

How do we improve the pasture but make sure it isn’t a sink on the wallet?

Like Pachama and Silvia Terra, Propagate’s competitive edge is analytics and information. It analyzes the costs of the investment, the potential revenue, the labor implications and the anticipated yield. Co-founder and CEO Ethan Steinberg said the concept is similar to the analysis tool a developer might use to assess the viability of a solar energy project. 

“It’s focused on both the economics and the ecological value that is driven,” he told me. That includes formulating plans specific to keeping ownership of the investable assets (trees) separate from the real estate; that’s an important consideration for farmers who lease the land they are working.

The idea is to help agricultural operations use land that is otherwise fallow or unused to plant trees, usually intended for fruit, nut or timber cultivation. 

When I spoke with Steinberg, the company had more than 20 projects on the books — ranging from livestock producers looking for a source of shade for animals to those growing specialty grain crops who are looking to diversify their income. Most of these organizations so far are in the Northeast and Mid-Atlantic regions of the United States, where Propagate is proposing the most ecologically approach options for their particular region. “Farmers shouldn’t transition to something that isn’t viable for their land,” Steinberg said.

What’s more, these arrangements generally are structured with a buyer or cultivation partners in place. “We are not having to recreate those relationships from scratch,” he noted.

One organization testing out this model is Handsome Brook Farms, a network of pasture-raised egg farms in states including Arkansas, Indiana, Kentucky, New York, Oklahoma and Tennessee. Chickens raised in this manner are free to roam in pastures — generally there are 400 birds to an acre. The farmers sell their eggs to Handsome Brook, which handles the processing and distribution. They have the autonomy to run their own operations, provided they meet the requirements for the pasture-raised model — the network farms are both certified and humane organic.

Kristen Wharton, director of strategic planning and development for Handsome Brook, said the idea of incorporating nut trees on certain properties is appealing and it’s testing the idea over the next year with a limited number of farms, starting in Kentucky. The main concern is cost, but many farmers are also leery of managing a secondary project. “How do we improve the pasture but make sure it isn’t a sink on the wallet?” she mused.

One possible option is a cost-sharing model, in which Handsome Brook would share some investment or investigate participation in grant programs that support soil health and water quality improvement projects, Wharton said. The top goal is to get the chickens to roam across a larger portion of the property, a habit that would counteract compacted soil and erosion around the barns where the hens take shelter. One question Handsome Brook hopes to answer: “How might this model set us apart?”

What other for-profit agroforestry ventures have caught your attention? Share ideas with me at [email protected].

This article first appeared in GreenBiz’s weekly newsletter, VERGE Weekly, running Wednesdays. Subscribe here. Follow me on Twitter: @greentechlady.

The Rocky Mountain Institute (RMI) is banking on banks to get us over the carbon-neutral finish line by 2050. 

The nonprofit announced Wednesday that it’s partnering with four of the world’s largest financial institutions — Wells Fargo, Goldman Sachs, JPMorgan Chase and Bank of America — to launch the Center for Climate-Aligned Finance. The center will serve as a hub for cross-sector collaboration, bringing traditional financial instruments to innovative ideas to decarbonize the planet. 

“It’s not the responsibility of any single country or single sector,” said Paul Bodnar, managing director for climate finance at RMI. “But one sector provides the lifeblood that powers all the others and that’s finance.” 

A new buzzword, climate-aligned finance, is RMI’s answer to the uneven responsibility put on the financial sector. Its goal is to integrate the financial sector’s attempts at going green, including green business investments, exclusionary policies for certain fossil fuels and the industry’s ESG policies, into one complete strategy. 

The Center for Climate-Aligned Finance will focus on four areas using RMI’s knowledge of sustainability in a variety of sectors and its deep understanding of the financial world. First, it will create specific, personalized initiatives for high-emitting sectors such as steel and cement production, utilities and the energy supply. Secondly, it will generate global frameworks on climate-aligned finance to guide other financial institutions around the world. 

It’s important that the tools we develop be as practical and commercial as possible.

“We really need tools now to take us from theory to practice,” said Marisa Buchanan, head of sustainability at JPMorgan Chase. “It’s important that the tools we develop be as practical and commercial as possible.” 

The center also will support individual institutions and shape public discourse in the financial sector as the two other main areas of focus. 

According to Bodnar, while the strategy starts with advocating a vision of carbon neutrality for the highest energy-using corporations, it will need to be stewarded by the loans, grants and investments doled out by these large financial partners.

Wells Fargo has pledged to lend or invest $200 billion to sustainable businesses and projects by 2030. Goldman Sachs plans to help its clients transition into a climate-resilient model with $750 billion by 2030, and Bank of America is directing $300 billion towards these efforts as well. And in February, JPMorgan announced a goal to facilitate $200 billion in financing in 2020 for transactions related to climate action and the United Nations Sustainable Development Goals.

“To serve our clients requires really analytical tools,” said John Goldstein, head of the sustainable Finance Group at Goldman Sachs. “Real technical chops required to do this work thoughtfully for analyzing, advising, financing and navigating.”

While the banking industry has invested a lot into a green future where it sees an opportunity for job creation, profitable returns on innovative new companies and risk mitigation, it hasn’t seemed ready to walk away from the fossil fuels that built the sector’s wealth. 

But pressure is mounting for the banks to overhaul their lending practices holistically. This includes a focus on solutions that will benefit vulnerable communities on the front lines of climate change that often have been overlooked by the environmental movement. 

“The communities that are disproportionately affected by pollution from heavy industry, it is pretty well documented that communities of color and low-income communities tend to suffer the most,” Bodnar said. “That is an urgent call for us to accelerate the transition out of the assets that are generating the most pollution.”  

As a Brit based in Santa Monica, California, Daniel E. Ingram is the chair of investment advisory company Wilshire’s ESG and Diversity Committee. Wilshire, which has more than $8.6 billion in assets under management and $168 billion in assets under advisement, recruited Ingram in 2017 as part of an effort to expand its ESG and socially responsible investing capabilities. Previously, Ingram was head of responsible investing for BT Pension Scheme, the United Kingdom’s largest corporate retirement plan.

Ingram is also a member of the CFA Institute’s ESG working group responsible for defining an industry standard, along with representatives from the International Monetary Fund, BlackRock, the Principles for Responsible Investment and other prominent players in the responsible investment arena. 

Ingram helps advise institutional asset owners on how to protect and grow long-term capital by integrating ESG risks and opportunities into investment decisions. We recently spoke about the expansion of ESG analysis in investment strategies, the end of shareholder primacy and why investors may be better off preparing for the next potential crisis sooner than later.

Shannon Houde: Tell me about your role in ESG and how you ended up in this space.

Daniel E. Ingram: My role mainly involves delivering educational workshops to trustees and investment staff from public and private retirement plans, foundations and endowments on the investment case for ESG. As discussions move from why ESG to how, I help to design ESG policies, source high-performing investment products and conduct impact analysis on investment portfolios. 

I’ve been working in the ESG space since before the term was coined. My interest in issues like climate change stems from my early career in public service on the graduate program at Her Majesty’s Treasury. I worked as chief of staff for — now Lord, then Sir — Nick Stern on his landmark review on the economics of climate change. Even though it was published 14 years ago, much of the findings of that seminal report are relevant today, namely that the benefits of addressing climate change, sooner than later, far outweighs the costs.

Houde: What’s the investor outlook for ESG?

Ingram: Investor interest in ESG issues continues to grow, and it’s becoming increasingly self-evident that the management of ESG risks and opportunities, such as resource efficiency and board skills/independence, can have a material impact on asset values. As a result, there’s been a show of confidence in ESG strategies, with Q1 2020 seeing inflows to some ESG funds. 

In terms of performance, some ESG funds have posted relatively positive returns due to lower exposure to conventional energy and balance sheet leverage, and higher exposure to quality growth factors and technology.

Governance is king. It tends to lead to better environmental and social performance.

Houde: What’s the role of corporate governance and investor stewardship in crisis?

Ingram: Governance is king, and it tends to lead to better environmental and social performance. In times of crisis, like the 2009 financial crisis or COVID-19, investors are compelled to take a closer look at corporate governance practices like disaster contingency plans, cybersecurity risk management and decisions about capital structure — [such as] share buybacks & M&A activity. 

Investors may also be compelled to become better stewards of financial capital by holding companies to account for their leadership actions, incentive structures and strategic decisions.

For example, the San Francisco Employee Retirement System issued a statement calling for corporations to find innovative ways to reorganize their manufacturing, distribution, resources and service capabilities to address COVID-19.

Houde: Is this a moment of reckoning for the S in ESG?

Ingram: Yes, I believe so. The S — for social — relates to issues around human capital management such as labor practices, employee health and safety, and employee engagement, diversity and inclusion. These issues are becoming increasingly financially material, particularly for the extractives and services sectors. 

In recognition of this fundamental shift, the U.S. Business Roundtable issued a new statement in 2019 that redefined the purpose of a corporation away from its previously held position that corporations exist principally to serve shareholders to its new position that corporations should serve for the benefit of all stakeholders — customers, employees, suppliers, communities and shareholders. 

The S — for social — relates to issues around human capital management such as labor practices, employee health and safety, and employee engagement, diversity and inclusion.

Houde: What’s next for how investors approach ESG?

Ingram: In the same way epidemiologists have been warning of a deadly coronavirus outbreak for years, climate scientists have been warning us for decades about the social and economic risks from rising sea levels, droughts, wildfires and air pollution. While there’s no way we could have predicted the devastating scale or exact timing from the coronavirus pandemic, many of us would readily admit we could have been much better prepared and responded more rapidly. 

Investors require high-quality advice to help them prepare and position their investment portfolios for climate change and potential future lower-carbon investment opportunities. These preparations may include: measuring portfolio exposure to different transition and physical risks; developing an ESG policy; evaluating how active investment managers take climate risks into account in valuations; or investing in a lower-carbon passive index fund.

Houde: What advice do you have for someone wanting to work in ESG?

Ingram: There are so many great ESG opportunities right now — if you’re not working in the space and want to get in, maybe find yourself a coach to help present yourself in the best possible light. The ESG community tends to be relatively close-knit and highly approachable. 

If you can participate in an ESG conference or reach out to ESG professionals via LinkedIn, most of us will gladly offer our 10 cents of advice and tell you how incredibly rewarding it can be to work in this increasingly important and fast-growing industry.