[Ed. note: In observance of Independence Day here in the US, no blog will be published Monday or Tuesday. We wish everyone a safe and happy Fourth.]
It’s been some time since I was last at a conference and honestly, I wasn’t that excited about going to GreenFin 23 in Boston last week. Like many of you, I’ve put in a lot of time “on the circuit” in past decades and am pretty jaded. As it turns out, this conference was one of the best I’ve been to in a long, long time. Here are my main takeaways from the week:
- There is still plenty of confusion and a sense of being overwhelmed with what ESG is and means. Too much “alphabet soup” and a continuing proliferation of standards. So it isn’t just me (or you)…
- Investors are past the “disclosure only” phase in ESG. They now expect implementation of ESG initiatives and want to see proof of your work. This doesn’t always mean audits or assurance, however.
- Data quality questions remain. IT systems are improving availability and auditability of ESG data, but that isn’t the same as actually auditing it.
- One development I was very happy to see is that how companies are communicating ESG today has definitely evolved from the old days, especially from what I called “the sustainability train wreck.” It feels like most garbage economics are a thing of the past and ESG professionals have learned to speak in terms that are important to their different audiences, rather than in terms that were only meaningful to other sustainability professionals.
- Speaking of how we communicate, many folks are questioning if we should we continue to use the term “ESG.” I didn’t hear anyone specifically mention Larry Fink’s recent remark about no longer being comfortable with the phrase, but many conversations at the conference came to the same point. However, I didn’t feel a sense of consensus about its replacement. I heard “long term value” a few times, but “sustainability” seemed much more common. I personally am not convinced that is the right direction to go. I simply like the term “business”. We’ll see what happens.
- There is more recognition that ESG is primarily for investors, but also appeals to other stakeholders. This creates internal conflict about the how, what and when to undertake initiatives. ESG ratings are intended for an investor audience, but as companies prioritize ratings, they can miss other ESG elements important to communities, customers and even employees.
- The conference was unable to avoid a bit of shocking cherry-picking of numbers and out-of-context application. I walked out of one presentation that quite obviously was intended to fear-monger by using carbon emissions estimates that must have at least quadruple-counted Scope 3 emissions. I guess people who don’t really understand the technical basis of GHG emissions quantification might not have caught that, but this was a sophisticated audience and everyone I spoke with was upset with that particular presentation.
- I heard several conversations around disclosing corporate “political footprints” as part of confirming that companies are implementing ESG programs. There is a growing concern that companies are disingenuous if they say they are moving ahead with ESG while concurrently are members of anti-ESG organizations or lobbying for/funding anti-ESG policies.
- Finally, ratings continue to be a source of much controversy and opinion. Ratings/raters remain inconsistent and opaque, yet are relied on too much – perhaps more by the companies than investors. Investors appear to be using them more as only a single indicator in a broader range of factors/due diligence. One panelist critically pointed out that raters aren’t picking stocks, so ESG ratings are disconnected from any specific investment thesis, and largely not fit-for-purpose beyond use as a single data point.
We’re heading to another conference in NYC this fall, although we aren’t sure which one yet. I’m optimistic that will be just as fulfilling and valuable as this one.