So what is ESG? A set of underlying issues that fall into the three main buckets of Environmental, Social, and Governance. ESG is an approach being taken by both investors and corporate management that considers material ESG issues in the corporate governance, strategies, policies, programs and disclosure of the company. Standardized disclosures of corporate ESG performance are being assessed by a large universe of investor service providers, with analysis, data, rankings and ratings being supplied to the investment community. Today, ESG factors are being used by capital markets players as a major component in making investment decisions. Savvy capital markets leaders point to good governance and management of these issues as an excellent proxy for evaluating the quality of executive management and boards.
Who uses ESG approaches? The largest global asset managers are adopting ESG approaches -- including BlackRock, State Street, Rockefeller & Company, Morgan Stanley, Goldman Sachs, TIAA-CREF, Bank of America, AFL-CIO Office of Investment, and Vanguard. Fiduciaries such as state and municipal public employee pension funds and retirement systems (such as CalPERS, CalSTRS, New York State Common Fund), as well as endowments, foundations, sovereign wealth funds, mutual funds, and family offices –are adopting ESG frameworks for portfolio management and including ESG expertise as a requisite in their RFPs to external asset managers.
Third-party service providers are feeding data, scores, ratings and other information to investors, including MSCI, Sustainalytics, Institutional Shareholder Services (ISS), RobecoSAM Group, Bloomberg, Refinitiv (Thomson Reuters), Vigeo-Eires, Storebrand, Oekom, and dozens of others (both for-profit and not-for-profits).
Credit agencies are organizing in this new environment by integrating ESG data into debt ratings and and providing critical information for banks, asset owners and managers, hedge funds, index managers, insurers, and other parties.
This is the territory in which the G&A team operates – and our knowledge of material ESG issues is available to our corporate clients to make sure you are positioned as a favorable investment by this growing pool of capital markets players.