Insider’s “Financing a Sustainable Future” series included stories and events designed to help companies set sustainability goals and figure out the best path to funding, measuring, and reporting outcomes.
This article surfaces eight key themes that emerged through our reporting.
Click here to view all the stories from “Financing a Sustainable Future.”
Insider’s “Financing a Sustainable Future” series, which was launched in partnership with Bank of America, aims to help business leaders set sustainability goals and work out the best path to funding, measuring, and reporting outcomes.
While the climate crisis is a dominant theme, we chose to look at sustainability holistically, with content dedicated to each of the four pillars of stakeholder capitalism as defined by the World Economic Forum: people, planet, prosperity, and principles of governance.
Companies may have access to capital, but there is a lot more to an authentic sustainability program than simply borrowing money to put against projects. It’s an ongoing and iterative process of identifying what’s most important to your stakeholders and material to your business, as well as finding the best way to report on progress toward goals.
The Securities and Exchange Commission has proposed a rule that would mandate climate-risk disclosures for publicly listed companies to provide investors with consistent information about where business is vulnerable and what action is taken to mitigate that risk. The pressure has increased on leaders to assimilate and understand their risks and responsibilities and get started on their own sustainability plans.
Insider has assembled stories and virtual events that answer some of the big questions about how and what to do to get started.
We convened an experienced advisory council to help, which featured sustainability leaders from AB InBev, Bank of America, Carlyle, Cognizant, Deloitte, Dow, Ford Motor Co., Honeywell, Infosys, Just Capital, Impact Investment Exchange, Pfizer, and Walmart.
The following are eight key takeaways that have surfaced through the reporting, events, and conversations that Insider put together throughout the series.
SEC climate-risk-disclosure rules might be coming. The good news is that it could help standardize reporting.SEC Chair Gary Gensler.
Evelyn Hockstein/Pool via AP
There are a wide variety of opinions about the SEC’s proposed rule that would require companies to disclose climate risk in their financial filings.
But there is no doubt that investors are paying closer attention to climate risk in their decision-making, and companies have a confusing assortment of options for sharing that information with them.
SEC Chair Gary Gensler told Insider that requiring climate disclosures could bring about much-needed standardization.
“Investors are already making decisions based on climate-risk disclosures. Hundreds of companies in the US, thousands of companies around the globe, are making disclosures around climate risk,” Gensler said. “We can play a role in helping bring some standardization to that, or what we like to call consistency, comparability, and decision usefulness.”
A review of the comments received by the SEC on the proposed rule shows that business leaders have framework fatigue from navigating the so-called alphabet soup of guidelines and organizations.
“In our view, there are too many frameworks that companies are asked to align their reporting to,” Prat Bhatt, a senior vice president at Cisco and its chief accounting officer, said in a statement. “As such, we believe a global framework would be ideal, but it may not be practicable unless there is widespread support and adoption by all stakeholders of such a global framework.”
Insider Q&A: SEC Chair Gary Gensler unpacks proposed climate-change rules
6 takeaways from the massive debate about the SEC’s proposed climate rule
Want to explore issuing a green bond? There are plenty of models to help.
PepsiCo
Green bonds are what many think of when they consider sustainable finance.
Last month, Insider reported on PepsiCo’s environmental, social, and governance initiatives and its 2019 bond issuance. One month after that story appeared, the company announced on July 10 yet another $1.25 billion 10-year green bond.
There’s plenty of models for green or sustainability bonds out there. As companies identify their goals and put the governance frameworks in place to measure progress, they have plenty of resources available to them to tap into green bonds and other debt instruments to fund their ambitions.
The companies of several members of our advisory council had recently initiated green bonds when we published our opening feature, including Walmart and Pfizer.
“We first started talking about a green bond back in 2019,” said Kathleen McLaughlin, an executive vice president and the chief sustainability officer for Walmart Inc., the president of the Walmart Foundation, and a member of the advisory council. “We wanted to do it as a way to demonstrate not only our own commitment to sustainability in a very tangible way but also providing an opportunity for investors to participate alongside us.”
While Honeywell hasn’t tapped into green-financing instruments through banks yet, Evan van Hook, its chief sustainability officer, said it’s something the company was looking at closely.
“I think it’s a great development in the financial world,” he said.
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Diversity, equity, and inclusion are both internal and external priorities.
Kazi Awal/Insider
Companies setting diversity, equity, and inclusion goals are investing in recruitment and retention programs to ensure inclusion, and access to opportunities, at every level of the organization.
Karen Fang, the managing director and global head of sustainable finance at Bank of America, told Insider for an advisory-council roundup that the firm had invested in raising wages, building diverse talent pipelines, and setting up competitive health and wellness programs for all employees.
The investment extends to the communities in which it operates.
“We strive to advance racial equality and economic opportunity in the communities where we live and work.” Fang said. “We make long-term investments through community partnerships and grants that support education and job-skill programming through our $1.25 billion five-year commitment to advance racial equality and economic opportunity.”
Investors are also increasingly looking for companies to set and meet diversity, equity, and inclusion goals.
“We’ve seen increased expectations of investment offerings that take into account a number of DEI characteristics,” Alistair Jessiman, a managing executive of PNC Institutional Asset Management, said. “Some focus on senior leadership, others on the overall employee base, and some on a broader set of programs, such as diverse-supplier initiatives, or some combinations of those.”
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Investors have an opportunity to drive faster progress in diversity, equity, and inclusion
Americans agree — companies should invest in workers, including paying employees a livable wage
Investing in workers drives innovation and opportunity.Members of the Bosch Internet of Things apprenticeship program in Plymouth, Michigan.
Courtesy of Bosch
The pandemic, remote working, and the so-called Great Resignation have contributed to forging a new kind of relationship between employer and employee.
Ensuring that people have fair wages, equitable opportunities, and chances to thrive is a cornerstone of the United Nations 17 Sustainable Development Goals.
It’s also critical that companies manage the accelerated pace of innovation, particularly around sustainability, and bring workers along as the demands of the business evolve. Bosch, a global engineering and tech company, pledged to spend 1 billion euros over the next five years on employee reskilling.
“One thing we learned is the timing is very important,” Mario Luecke, the director of human resources for powertrain solutions at Bosch in North America, told Insider. “People need a chance to apply the new skills they develop right away.”
Automation sparks fear for some workers. But Ravi Kumar, the president of Infosys and a member of the advisory council, wrote in an article for Insider that companies needed to embrace artificial intelligence and automation for mundane tasks and train workers for the more rewarding and lucrative opportunities that only humans can perform.
“The path with the most prospects for advancement is upskilling workers for higher-level roles as technology takes over simple, repeatable tasks.” he wrote. “In addition, there’s significant payoff for broadening someone’s capabilities to include digital skills that allow the person to participate in the economy that creates and deploys technology.”
As companies innovate and adopt green solutions, reskilling employees becomes a top priority
Companies need to embrace an innovative path to create employment opportunities
Nonprofits hold companies accountable — and provide valuable data and guidance.World Wildlife Fund supporters take part in the Global Day of Action for Climate Justice march through Glasgow, Scotland, during COP26.
David Bebber, WWF-UK
Nonprofits and nongovernmental organizations hold corporations accountable for polluting the environment and discriminatory behavior and are often visible at global summits like the UN General Assembly and COP26.
But nonprofits are also critical partners for driving progress toward sustainability goals. The advisory council told Insider the top organizations they turned to for guidance, with the World Wildlife Fund topping the list.
The World Wildlife Fund is doing more than encouraging companies to do the right thing; it’s helping them figure out what the right thing is. During COP26, the World Wildlife Fund rolled out new guidance on nature-based interventions that companies can employ to mitigate climate impact.
“We are at a point where there is a lot of interest, particularly from multinational corporations, in investing in nature,” Marcene Mitchell, WWF’s senior vice president for climate, told Insider. “It’s very important that it’s done in a way that has high integrity and has the long-lasting impacts that we want for people, nature, and the climate.”
Nonprofits like WWF give companies guidance and guardrails for going green
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Sustainability goals are business goals, and reporting is a tool for growth.
Insider
A 2019 McKinsey report found that a strong ESG plan helped companies tap into new markets, reduce costs, limit legal and regulatory pressures and liabilities, and engage with employees and customers.
Companies we spoke with for the series said the same.
“We believe that if we help people and the planet flourish, so will our business, so we’ve always set goals to help track our progress on sustainability,” Deb Geyer, the corporate-responsibility officer at Stanley Black & Decker, told Insider.
Investors are playing close attention to ESG reporting because it’s relevant to their decision-making, Sophia Mendelsohn, the chief sustainability officer and global head of ESG at Cognizant, said. Mendelsohn is a member of the advisory council and spoke at Insider’s virtual event “Funding the Energy Transition to Net-Zero.”
Mendelsohn added that regulators were paying close attention to ESG reporting because of what it shows about the company.
“ESG has become a critical part of a company’s financial structure, strategy, infrastructure investments,” Mendelsohn said. “So it’s, therefore, no surprise that it’s now at the level of attention of large investors, and therefore the SEC.”
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How a nonprofit is holding companies like Stanley Black & Decker accountable to sustainability goals using a ranking system
Social bonds, while not as common as green bonds, are growing in popularity.Esohe Denise Odaro, International Finance Corp.’s head of investor relations and sustainable finance.
IFC
The pandemic brought into focus systemic inequities around access to healthcare, education, and community investment. Social bonds have seen a significant uptick, as companies have sought to use them as a way to address some of the gaps.
According to Refinitiv data supplied to Insider, about $192 billion worth of social bonds were priced globally last year, on top of $165 billion worth in 2020. Before that, social bonds barely registered above $10 billion a year, the data showed.
“The applicability of the social bond has come to shine in dire circumstances. And the pandemic has definitely helped kick that off,” Esohe Denise Odaro, International Finance Corp.’s head of investor relations and sustainable finance, told Insider. “It takes real-life situations to educate people as to how to use it.”
Nevertheless, some companies are wary of the risks of wading into social policy.
“A lot of businesses are set up as an enterprise, not a social enterprise,” Odaro said. “There’s this fear of putting a spotlight on your business through issuing a social bond. And if your company’s strategy is not going in the right direction, you’re opening yourself up to a lot of market scrutiny.”
Social bonds are on the rise, but issuers and investors are still learning the merits of this new-age debt instrument
Mastercard extends its ‘In Solidarity’ program to support digital innovation for small businesses in St. Louis
Creating a culture of sustainability requires real accountability.Organic cilantro crops.
Chipotle
Chipotle ties its executive-bonus structure to its sustainability goals across a variety of categories, including emissions, DEI, and local and organic food served in its restaurants.
Marissa Andrada, the chain’s chief diversity, inclusion, and people officer, told Insider that it’s an extension of the company’s culture.
“For us, it’s this really big commitment to living out our purpose,” she said. “It’s only natural that we actually put our money where our mouth is and hold ourselves accountable.”
That kind of financial goal can make the sustainability targets less remote and more actionable. Eunice Heath, the global corporate director of sustainability at Dow and a member of the advisory council, wrote in an article for Insider that it’s important for executives to go out into their communities and see the problems firsthand.
“It’s easy to view sustainability and climate change as abstract problems — saving a rainforest from deforestation thousands of miles away or preventing invisible carbon emissions from warming the planet so that polar ice caps don’t melt,” she wrote. “That’s why I encourage any business leader focused on impact to step away from the screen and see sustainability in action.”
Chipotle incentivizes executives to support farmers going organic
Want to be a sustainability leader? Get away from the screen and go see it in action.
