We all complain about ESG’s alphabet soup of abbreviations and acronyms. Those complaints are well-deserved. While that may be fodder for jokes, it isn’t necessarily funny and can be a real distraction to getting things done. The increase in abbreviations and acronyms is in many ways a response to the proliferation of industry programs and initiatives – which are intended to be helpful but may now be counterproductive. A recent survey of asset owners by Responsible Investor found that consolidation among ESG and sustainability-focused initiatives is needed:
“The vast majority of respondents to a survey of asset owners by Responsible Investor believe consolidation among ESG and sustainability- focused initiatives is needed… ‘Forty-one percent of respondents revealed that they belonged to between 11-20 initiatives and 55 percent to between 1-10 groups. One asset owner admitted they did not know how many they were signed up to. Eighty-five percent saw room for consolidation, with one telling RI that the ‘pace of new initiatives being introduced, and the total number, have become unmanageable’.
‘We need to stop the growing number of initiatives and align and improve the ones we have,’ wrote another.”
Although the survey is specific to investors/asset owners, the findings apply to just about any industry since similar ESG initiatives have been launched by most sectors’ associations. Deciding which initiatives/frameworks are most important is similar to determining materiality for any specific company. Here are some highly insightful points from the survey:
“Ninety-one percent of asset owners said they periodically review their sustainability and ESG memberships, and the remainder planned to do so in the future. One UK-based local government pension scheme, which revealed that it is a member of ‘several initiatives’ through its pension pool manager and individually, admitted that it ‘probably need[s] to have a clearer strategy about how we approach these different memberships’.
Two-thirds of asset owner respondents said they had considered leaving an initiative in the last 12 months. The most commonly selected reasons were ‘duplication around goals/aims of initiatives’ and ‘lack of impact’. These were followed by ‘resource constraints’, ‘credibility concerns’ and ‘costs’. Other factors shared by asset owners included attempts to keep the number of memberships down, lack of materiality, and ‘increasing levels of coercion’.
If you haven’t already taken a critical look at the ESG initiatives you have adopted and memberships in which you are participating, you should. Management, executives, investors and staff responsible for managing associated programs/data will probably thank you.
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