By Ted Dhillon, CEO and co-founder of FigBytes
IROs are used to answering questions about business metrics like debt, earnings and dividends. But recently they’ve started fielding inquiries of a different nature: inquiries about carbon emissions, board diversity, water stewardship and other concerns that fall under the broad umbrella of ESG.
According to Bloomberg Intelligence, global ESG assets may surpass $50 tn by 2025 , or one third of the projected total assets under management globally. This is a trend that’s not going away.
The aim of ESG is to bring business goals into alignment with the larger social good. The question is how to communicate when asked about your efforts. One option is to offer a lengthy treatise about your ESG or sustainability policy. That’s especially tempting if, like many organizations, you’ve started publishing an annual report. By all means attach a report if you have it. Bear in mind, however, that it’s probably more information than most stakeholders want to digest.
There are several easier ways to reassure them that you’re on the right side of the fence, whether they’re ESG enthusiasts or skeptics. Ideally, you want to start by making these points:
Data – Stress that your program has quantitative goals tracked with an abundance of data and advanced analytics. Extra points if the data (or most of it) is verified by a third party
Transparency – Note that all ESG data is available to investors through an easily accessible online dashboard or report
Engagement – Express your interest in the stakeholder’s questions and feedback. ESG is a relatively new field. The definitions of success and standards for measurement are still evolving. It’s no surprise stakeholders might be curious or confused. Even more so than usual, it’s vitally important to stay in communication with the investors that reach out about ESG in order to understand the questions and concerns of the ones you never hear from
Impact – Acknowledge that making an impact with ESG involves collective action. After all, even the largest organization can make only a small dent in the issue of climate change. To this end, it can be helpful to cite the industry-standard reporting frameworks your organization employs.
For example, the Partnership for Carbon Accounting Financials is an industry-led partnership aimed at promoting transparency and accountability around greenhouse gas emissions in accordance with the Paris Agreement.
Another good example is the TCFD, which was created to make standardized recommendations for how companies should disclose appropriate climate change-related risks to investors, lenders and insurance underwriters. The proposed SEC rule on mandatory climate risk disclosure will be based on the TCFD framework so following these recommendations and standards can certainly benefit and prepare your business.
No matter what framework you use, as long as it has strong industry support it will serve as a signal to stakeholders that your organization is taking ESG seriously. Obviously, in order to make these points, your organization will have to adopt a robust system for gathering and analyzing ESG data.
It will have to implement technology to make that data easily accessible to external stakeholders. It will need to adopt standard data-reporting frameworks. All of which is to say that clear communication about ESG requires a well-defined and well-supported ESG program.
The sheer volume of ESG data and the complexity of measuring it can overwhelm even professionals. That’s why it’s important to choose reporting mechanisms with communication in mind, ensuring you can distill data into visual assets and bullet points suitable to an audience unfamiliar with the ins and outs of ESG reporting.
So the next time you get an inquiry from investors asking about ESG, you will be able to send them away fully satisfied.
FigBytes helps companies and governments to plan, track and fulfill goals along their ESG journey. Its ESG Insight Platform helps integrate strategy, align data and report on progress while engaging stakeholders.
