Voting with Their Dollars: Public and Investors Increasingly Back Corporations That Support Sustainability
by Tanara Bowie
Fortune 500 companies such as Apple and Google began investing in renewable energy years ago to cut costs, reduce their exposure to fossil fuel price fluctuations and support the expansion of clean energy.
Their investments in clean energy sources, such as wind and solar, have paid off financially. So much so that Apple recently filed to become a utility company.
Beyond the economic benefits, investments in renewable power and other sustainability measures by a growing number of major U.S. companies has offered brand-building benefits with two segments of the population:
- a public that increasingly wants to support companies doing right by the environment; and
- with investors who place a high value on corporate social responsibility, particularly as it relates to addressing climate change.
The high regard the public and investors hold for socially responsible companies is evident in at least two 2015 surveys:
- The 2015 Global RepTrak® 100, the Reputation Institute’s annual survey examining the reputations of 100 corporations; and
- Sustainable Signals, the Morgan Stanley Institute for Sustainable Investing’s examination of investor views.
Among the 2015 Global RepTrak® 100 companies, both Apple and Google ranked in the top 10, with Google reaching number one for the second year in a row.
Companies as varied as LEGO, Sony and Intel also made the list.
Meanwhile, a poll conducted by the Institute for Sustainable Investing found that 71 percent of “active individual investors” classify themselves as interested in sustainable investing, while almost 75 percent of investors believe corporations with Environmental, Social and Governance (ESG) standards can make more money and “are better long-term investments.”
Undergirding these findings are people’s deep concerns about global warming, with 54 percent of people across 40 nations viewing climate change as a very serious problem, according to a November 2015 Pew Research Center global poll leading up to the Paris climate talks.
With recent surveys showing that large percentages of the public are concerned about climate change, and with an increasing number of investors making financial decisions driven by worries about our warming climate, it is time for more companies to move decisively in the direction of sustainable investing.
“What used to be a bifurcated decision – one between investing to make money and giving to do good – is increasingly becoming a blended conversation as investors look to harness the power of the capital markets as a force for positive impact,” said Audrey Choi, Managing Director and CEO of the Institute for Sustainable Investing.
Investors and the public alike are also looking to make a positive impact through greater disclosure from corporations related to sustainability. In April 2016, the Securities and Exchange Commission (SEC) noted in its request for public comment that investors and groups want greater disclosure for investment and voting purposes. In the past, the SEC had determined that environmental and other social issue disclosures were not required, except under specific circumstances (e.g., a Congressional mandate).
In advance of its July 2016 comment period deadline, the SEC has already received letters from sustainability-focused groups such as Ceres, the US SIF Foundation and the Sustainability Accounting Standards Board, as well as 9,000 letters from the public.
Unfortunately, there is no global standard for climate risk disclosures. Even worse, some corporations, such as ExxonMobil and Chevron, have been resistant to policies that would help limit global warming, despite concerns from investors. In fact, ExxonMobil has been in the news lately, as a number of state attorneys general investigate the oil giant for failing to disclose to investors and the public climate change risks, including those it had uncovered in its own research on the topic.
The good news on the disclosure front is that by the end of this year the Task Force on Climate-related Financial Disclosures, which was established in December 2015 by the international Financial Stability Board, will issue recommendations for voluntary climate risk disclosures for companies to provide information to lenders, insurers, investors and other stakeholders.
These recommendations will be an important first step in addressing the concerns of both the public and investors when it comes to corporate sustainability.
“Minimizing climate risk and keeping the public and investors informed is good for corporations’ brands and their bottom lines because in a growing number of economic sectors their competitors are already taking these steps,” said Mark Sokolove, Tigercomm’s Executive Vice President. “It’s almost like setting up a competition to see which company can ‘out-sustain’ the other. Corporations can get on board now by choice or risk market punishment later.”