Going Beyond ESG Summit - Summary
On 29th March, Social Value International and our partners hosted the Going Beyond ESG Summit, the culmination of Beyond ESG Month – a series of discussions throughout March 2022 on how we can collectively evolve the current ESG agenda to achieve sustainable development for all. Below you will find summaries of each of the conference sessions.
Keynote Address
Our Keynote Address was presented by three incredible leaders in the industry who discussed the different ways in which the corporate, investor and public sectors are looking at ESG, how we can work together to break down silos, and what they think is next for the world of ESG:
Kathy A. Seabrook, CEO of Global Solutions Inc.
Bettina Reinboth, Director of Human Rights & Social Issues at UNPRI
Karen Wilson, Senior Advisor at the Well-Being, Inclusion, Sustainability and Equal Opportunity (WISE) Centre, OECD
The Keynote Address, designed to be an opportunity to frame the discussions, highlight the trends we have seen in the past few years, and understand what is already happening to evolve the ESG agenda, was focussed around two key questions and below you can find summaries of the discussions that these questions generated.
How do you see the term ESG to be changing conversations or behaviors within your respective sector?
Each of the speakers introduced themselves, their work and the different perspectives they are approaching the discussion from – the corporate sector, the responsible investor world, and the OECD context. Despite approaching the subject from varying viewpoints, there was a lot of overlap in what all three speakers were saying – proving the point made by all speakers about the convergence that is happening across sectors on these issues.
Kathy described ESG as providing the possibility of a win-win situation, bringing us all together from across sectors with a common goal to bring about positive change – to create a world that is good for business and the economy as well as for people and the environment. Karen similarly noted that although we are still approaching the concept of ESG and impact from very different viewpoints and through different language, we are all moving towards a similar direction of thinking about these issues.
The rapid growth of ESG in the past years was also highlighted, although it was noted that this has not happened in equal amounts, with ‘S’, for example, still being quite underdeveloped.
The evolution of impact investing from niche to more mainstream - with more and more focus being placed on impact rather than merely risk mitigation - was also discussed. Bettina noted that although many investors are still thinking about ESG in terms of risk, and how those risks impact their portfolio, some are starting to think about the impact of their portfolio on the real world and adding the much-needed third dimension to risk and return: impact. Karen echoed this point, noting that more and more people are looking to find ways to make a positive change through ESG investing and starting to think about these issues through the whole spectrum, from risk mitigation to impact.
However, the speakers also already at this point alluded to some of the challenges we are seeing regarding these positive developments, a key one being the fact that E, S and G still tend to largely be viewed in silos, with all speakers emphasizing the importance of understanding the interdependencies between people and society, the enrivonement, governance, business performance, the economy, etc. If we are to evolve the ESG agenda and create real meaningful change, it is vital that we recognize these interlinkages. Kathy also highlighted the importance of going beyond merely reporting (although transparency is of course vital too) and placing the focus on understanding the real value we create and changing the way we make decisions.
What are the risks that you see in the current ESG practices (reporting and investment) and what are the opportunities?
Building on the previous points made on convergence, an opportunity that is evident in current ESG practices is that there are so many allies out there that we can join forces with to achieve positive change for all. Kathy, for example, shared a promising KPMG survey with us which found that 58% of CEOs around the world are looking at being purpose-led and at ESG - not just in terms of reporting information but on how they can make impact management actionable within their organizations.
Another important opportunity that was identified was the need for better awareness and education on the various issues surrounding ESG and impact. As Bettina noted, sometimes there might be a real willingness on investors’ part to create more positive impact through their investments but there is a lack of understanding on how to do this effectively. However, as Karen importantly added to this, it is not only investors and companies that need education – we need to focus on youth education too. Young people are incredibly motivated by the global issues we face, and they are the leaders of tomorrow.
However, many risks exist too, some of which have already been touched upon. Another key risk, relating to the previously mentioned opportunity of education, is that of data collection and impact measurement – there is a risk that companies end up only measuring their activities, which does not provide a real understanding of the actual impacts on people and the planet and therefore does not allow stakeholders to make good, well-informed decisions for the long term.
Organizations need to instead measure the actual value, or outcomes, of their activities. However, the argument that we do not have enough data or the right data, or that we do not understand the data, cannot be an excuse for inaction either, as all speakers emphasized. We simply have to make sure that the data we have is sufficient and relevant to the decisions that we need to make – “measure what you treasure, do not treasure what you measure”, as Karen quotes. Or, as SVI always says, “enough precision for the decision”.
Another risk, which Karen pointed out, is that until we have mandatory standards in place, we will see overselling of ESG, impact and sustainability – and everyone trying to promote their own take on these. However, there is a clear move towards mandatory standards and regulation which is very promising.
Although ESG or impact management might not be mainstream yet, what is clear from what all three speakers said is that we are on the right path, even if it sometimes feels slow or painful, as Karen noted. There are many positive developments happening and some are happening fast. The speed at which the IRFS Foundation, for example, created the ISSB is extremely encouraging, even if it does not go quite far enough yet. Other developments in policymaking and regulation are also happening and this is what is really going to help drive action and systems-change. More and more people are also importantly starting to understand the interdependencies between E, S and G issues and to move from merely risk and return considerations towards an impact approach.
Panel Discussion: Is the financial sector willing and able to go beyond ESG?
In the first panel discussion of the summit, we looked at how the financial sector is responding to the rise of ESG and explored the question of whether it is willing and able to go beyond ESG. We were joined by three fantastic speakers from the investment, banking and asset management industries who shared eye-opening insights into the topic at hand. These speakers were:
Boris Couteaux, VP, Business and Product Development at impak Finance
John Levy, Director of Impact at Franklin Real Asset Advisors
Tom McGillycuddy, Co-Founder of CIRCA5000
Each of the speakers took some time to introduce themselves and their work, and what immediately shone through was both speakers’ passion to transform financial services into a force for good through impact investing. Our moderator then shared some of the key takeaways from the first event of Beyond ESG Month (which you can read here) and asked our speakers what their reactions to these were. The discussion that followed can be divided into the following two broad themes:
1) Double materiality vs single materiality
One of the key internal challenges that was highlighted in relation to the financial sector’s willingness to go beyond ESG was the still widely shared misconception that impact investors must choose between impact and financial return. Added to this is the fiduciary duty investors have towards their clients to act in their best interest, and it is for these two reasons that the idea that you would consider anything other than pure financial return on a risk-adjusted basis still scares a lot of people within the financial sector.
Although impact investing has certainly become much more mainstream due to growing concern over issues such as climate change and rising inequality, the primary driver for most customers is still financial return (even in CIRCA5000, which is an impact investment platform). Wanting to have a positive impact is a close second.
Therefore, as John pointed out, while our goal should absolutely be double materiality, in order to internally justify impact-focused investments within a business, you must start with single materiality. In other words, you need to start with a returns-based argument. You need to first and foremost prove
that an investment is viable business, viable from a returns-point of view. Tom further noted that ultimately, for impact investing to have any meaningful impact on the financial industry, it needs huge scale, and in order to do that the language used needs to be framed in a way that puts profit first but adds positive impact as a bonus.
While it is true that not all investments that have a positive impact on stakeholders will be profitable for the company, the key to moving towards double materiality – something that SVI has long been strongly advocating for - is finding and presenting the positive correlations between investments that have a positive impact on stakeholders as well as a positive financial return.
2) ESG vs Impact
While the persisting focus on single materiality in the financial sector is certainly a challenge to going beyond ESG, there was also some more forthright criticism of the concept of ESG, with Tom arguing that ESG should be decoupled from the concept of impact entirely. Impact starts from a completely different point of view than ESG, one where we are actively trying to create positive impact from the outset. What ESG is essentially asking is whether a company is a good corporate citizen, and this is not enough to move the world in any meaningful direction. Tom further argued that for the financial sector to have a real meaningful impact, we need to abandon ESG and move towards an impact management approach.
John echoed Tom’s sentiments, pointing out that much of what we do from an ESG perspective is ex-post – it is essentially about looking backwards at what a company did rather than looking forwards at how the company can improve its impact. Impact, on the other hand, is ex-ante – you go in with an intention and a plan to create positive impact. However, John noted that ESG does seem to be evolving in a direction where it is no longer enough to simply report on your ESG policy and procedures, but where you need to show how your findings are changing the way you invest. It is also increasingly expected that you provide evidence of the contribution your money has made to the positive impact.
In addition to moving towards double materiality and impact management approaches, other specific solutions to going beyond ESG were discussed too, including education, building trust, regulation, having the rights incentives in place,
and diversifying as well as breaking barriers to investing. To wrap up the session, each panelist was asked to share a key takeaway and the advice they shared was incredibly helpful:
Tom: Shake off any preconceptions you have about what impact investing is and start doing it!
John: Impact investing is growing and giving people another avenue to be part of the solution. This is empowering and something to be optimistic about, but we also need to continue to go beyond ESG and find new ways to create powerful and better social outcomes.
Panel Discussion: Towards an impact management approach
The 2nd panel discussion of the day, picked back up on the theme of impact and impact management, as we discussed how to evolve the ESG agenda towards an impact management approach. Joined by:
Jeremy Nicholls, Co-Founder of SVI & Assurance Framework lead at SDG Impact
Manjit Jus, Managing Director, Global Head of ESG Research at S&P Global Sustainable1
Marta Santamaria, Senior Director at Capitals Coalition
Belissa Rojas, Impact Measurement & Management Lead at SDG Impact
Sara Olsen, Founder at SVT Group, Chair of SVI Methodology Sub-Committee, Board Member of SVI and SVUS.
The panel discussion kicked off by first trying to better understand how the rise of ESG had impacted on the work of all the panelists. What was evidently clear is that there has been a huge uptake in ESG over the last few years, that has impacted on the work of everyone working in this space in different ways. But it was also clear that whilst the growth of ESG disclosure, reporting and investing has seen a huge rise, this growth has coincided with (and been linked to) mainstream growth and understanding of what sustainability means and why it is important, and globally businesses are demanding (and being demanded to show) better sustainability practices.
This global increase of demands for organizations to better demonstrate sustainability, has led to a boom in reporting (including ESG reporting) but Jeremy Nicholls made it clear that whilst increased reporting and transparency is good, unless this is also leading to a change in the way in which we make decisions, and unless this is leading to greater accountability to those whose lives we are impacting upon, then we are failing to really make the necessary changes. It is therefore vital that we work to go beyond disclosures and reporting and move towards an impact management approach.
The panelists then went on to discuss whether the rise of ESG should be considered a risk or an opportunity and general consensus across the panel (a consensus that has been reflected in previous discussions throughout Beyond ESG Month also) is that it should be considered as both a risk – in most part due to the known ESG washing/impact washing/green washing that we have seen, but also as an opportunity, as the boom in ESG reporting and investing is increasing knowledge and driving forward practice. It was agreed that to overcome the risks of greenwashing that has plagued so much of ESG, a greater focus on both regulation and assurance was needed.
This formed part of the discussion on what is next for ESG, and the panelists discussed what they would like to see happen in the coming 2-3 years. Belissa, noted that for her, and the team at SDG Impact, the ideal scenario would be that we are able to move away from just reporting and instead focus on strategy, and how to ensure that sustainability is embedded into strategic decision making across organizations. This view of the future was seconded by Marta, who noted that strategic thinking around this at an organizational level was vital, to ensure that businesses and companies are thinking in terms of long-term impacts on people and planet; but it was clear, that for this shift to take place, there was need for more guidance and education.
A change in the regulatory environment was also discussed as a clear driving force in achieving change in ESG reporting and disclosure, and in the achievement of the SDGs and sustainable development and Jeremy Nicolls noted that “if we can change the regulation on how we define profit, then regulation has a huge potential”. But Belissa noted that we also all have a personal responsibility to improve our own practices and to support others, instead of critiquing the work of others, or saying that’s ESG and not impact we should instead re-frame where we are coming from and ask “What is the problem we are trying to solve? How can we help?”. This shift in mindset towards collaboration was reflected again in responses to the final question from Sara, who when wrapping up this discussion on moving towards an impact management approach asked “How do we make this shift accelerate? How can we get faster to where we need to get?”
Marta noted that there are many opportunities for collaboration and that we all need to come together. She also highlighted the business case for valuation in helping move towards an impact management approach, and the need for the development of more guidance to help us get there.
Jeremy said we need to be “grumpier” and come together to start campaigning and lobbying for policy change, whilst Belissa focused on the need to try and find champions and enterprises looking to implement the impact standards and Manjit again stressed the importance of collaboration, the breakdown of silo thinking and an understanding that we can all see ourselves as a ‘lever’ in achieving the change we want to see.
Panel Discussion: Bringing the “I” into ESG – An Indigenous perspective.
The final panel discussion of the day was delivered in partnership with the Global Centre of Indigenomics, and we were joined by:
Carol Anne Hilton, CEO and Founder, Global Centre of Indigenomics
Rangimarie Price, Director, The Connective
Vanessa Roanhorse, CEO, Roanhorse Consulting
Brad Densmore, Economic Development Consultant, Landmark Resource Management Ltd.
Mark Sevestre, Senior Advisor and Founding Member, National Aboriginal Trust Officers Association
This panel discussion kicked off with introductions from each of the speakers, sharing their knowledge and expertise on this topic. Carol Anne then opened the panel discussion by asking “What are we igniting by including the Indigenous perspective in ESG frameworks?”. The panelists discussed that by including the Indigenous perspective into ESG, we are better able to understand and recognize that sustainability is not something new and has been part of the Indigenous view which is more qualitative and more nuanced than Western ways of thinking.
This recognition that sustainability is not something new, and the inclusion of the “I” in ESG better enables community interests and values to be identified and included in discourse and ensures that there are meaningful measurements through which corporations can be held accountable. Mark also noted that as well as being the right thing to do, including the Indigenous perspective makes a lot of business sense as fully participating Indigenous communities will have a positive impact on economies – and so bringing in the Indigenous perspective into the ESG framework should be seen as a win-win.
However, whilst there were many strengths to made from inclusion of the Indigenous perspective into ESG, Vanessa noted that ESG itself needed to evolve as one of the biggest challenges is that ESG is so quantified – it's not yes/no or winners/losers; instead as Rangimarie noted, we need to expand this narrow mindset and way of looking at ESG “the inclusion of “I” in ESG means that we need to change the mindset”. This topic of evolving ESG was then further developed when Carol Anne asked, “How can Indigenous inclusion evolve ESG?”
The discussion noted how Indigenous knowledge helps advance ESG because it helps to move away from thinking in silos and instead offers wider peripheral vision, but it was clear that the solution to Indigenous inclusion was not just to add “I” onto the end of ESG, but instead understand that the “I” is cross-cutting across all aspects of ESG. Rangimarie noted that including the I in ESG is not about doing a favor to Indigenous people, but instead is creating a different mindset, and as such the “I” is not and should be seen as an add on, but instead seen a critical enabler of good, that allows and enables a shifting to a transformation.
This shift in mindset, to understand that the “I” should be covered across all aspects of ESG was then drawn out further in the discussion around “What do we need to do differently to effectively include “I” in ESG?”
Power was the core thing that needed to be changed and challenged if we wanted to effectively include the “I” in ESG. This includes shifting power across communities, investing more in community members, changing who you have around the table when making strategic and system level decisions, and sharing power with those who have traditionally been excluded. Brad also noted that power and communication go hand in hand in being able to be assertive in what is needed, and we need to ensure that through communication we build systems of accountability and trust.
Brad also noted that it is vital to remember that ESG doesn’t do anything on its own, it’s just a tool, which Vanessa agreed with, stating that if we remember that the systems around us have been created, and are not set in stone, then we can collectively imagine something better, and the Indigenous perspective is able to offer an alternative system that creates reciprocity and a better environment for all.
The panelists in this session, along with many others are already ensuring that this power is shifted, and in the final question, Carol Anne asked these leaders “What are you inspired by in your work and emerging in ESG?”
Vanessa noted that she is inspired by the fact that we can have these conversations and that Indigenous peoples and communities are not just being invited to the table but are building one! She also noted this is a global conversation, something that was also reflected by Rangimarie who noted that she is encouraged by the fact that these conversations are happening globally, and there appears to be a true hunger and appetite for difference, as well as humility to learn and be curious. Brad echoed this noting that what inspires him is there's been interest and appetite even from those you wouldn’t have expected it from; whilst Mark noted that “we have learnt to express our traditional values in a way that can be understood – in the finance/business language” and that the Indigenous view is starting to catch on and its being welcomed
The final question from the audience then built on how, non-Indigenous people can ensure that the “I” is included across ESG, and act as an ally in this conversation and movement, and to collective answer from all panelists was to build relationships, make connections, establish common ground and put in the time and work to learn and develop trust – for ensuring that “I” is included and centered in ESG and conversations around sustainable development is only possible where there are strong and respectful relationships between us all.
Next Steps
The Going Beyond ESG Summit was the culmination of a month-long series of discussions that took place throughout March. Over the coming weeks, SVI will work on capturing the main actions from these discussions, as well as feedback from our global membership, to produce a document that showcases the links between ESG and social value, and how we as a global community and movement can help evolve ESG to ensure sustainable development for all.