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Sustainability

Sustainability

Sustainability

By Steven Rubis

Panelists:

Eileen Buckley, Vice President, Corporate Responsibility, Stryker

Megan Lum, Global Director, Environmental Programs & Sustainability, Baxter International Inc.

Brooks Rennie, Head of Investor Relations, Byline Bancorp, Inc.

Moderator: Brian Matt, Head of ESG Advisory, NYSE

KEY TAKEAWAYS

  • Environmental, social and governance (ESG) issues continue to become increasingly important considerations during investors’ due diligence. However, investor relations officers (IROs) may struggle to find the right balance in terms of the type and amount of information to offer the investment community. Furthermore, the right type and amount of information can vary from industry to industry and company to company.
  • In developing and overseeing a sustainability program, it’s important to think about how to “translate” internal ESG/sustainability language to be better understood by external investors, said Megan Lum of Baxter. This includes translating qualitative data into the more quantitative data that many investors demand. Investors also ask how you intend to do better in the future if they consider the current results to be lacking. A good frequently asked questions (FAQ) document can help companies better inform investors.
  • Establishing an ESG program “from scratch” may be daunting, but it’s worthwhile, said Brooks Rennie of Byline Bancorp. Internal and external due diligence should create a business case that tells the executive team and board of directors, “Why do we want to invest” in ESG?” Key partners in developing an ESG program include IR, the general counsel and chief human resources officer. Be prepared to spend significant time developing your first ESG report, which took Byline roughly six months and may require considerably longer for larger companies. Timing will vary based on the data sets needed and how many internal teams and external resources need to be included in the process.
  • The number of ESG shareholder proposals have increased, but support has declined over recent years, said Eileen Buckley of Stryker. Roughly 75% of Fortune 500 CEOs have compensation structures tied to ESG-related outcomes. Scope 3 emissions remain a difficult issue for companies given the requirement to obtain accurate data from a company’s vendors and supply chain. Investors across the board care about the “G and S” (governance and social) issues, but interest in environmental data varies by industry.
  • IRO need to help ensure that their companies’ boards are engaged and well-informed about ESG and sustainability issues. This includes providing board members with context specific to the company and its industries. Board members often have a wealth of experience and knowledge about ESG and governance, but may lack knowledge of industry-specific nuances, which emphasizes the importance and value of context.
  • Be prepared for internal and/or external pushback in several areas. ESG/sustainability programs do not fund themselves and face competing priorities for capital. Investors may expect results quickly. If your company provides 10-year sustainability goals, be prepared to answer skeptics who wonder, “Why will it take you so long to achieve these goals?”