A New Era in Company Reporting – What Does it Mean?

I’ll tip my hat to the new constitution

Take a bow for the new revolution

Smile and grin at the change all around

Pick up my guitar and play

Just like yesterday

Then I’ll get on my knees and pray

We don’t get fooled again

– Song by The Who. “Won’t get fooled again” from the album Who’s Next 8/71

Caveat emptor (let the buyer beware)

A new indicator that ESG has matriculated into the mainstream investment universe is the seeming endless, perhaps counterintuitive, range of companies who suddenly proclaim they have now drunk the Kool-Aid and are now or soon to be, cleaner, fairer, and overall committed to being good citizens of the sustainable world – if not potentially our saviors.

But beware the ESG industrial complex. Is there a watchdog? And if so, why should we believe them?

This edition the Socially Inspired Investor Digest/Podcast attempts to touch on the very complicated and evolving subject of ESG ratings.  Without the right data you, the investor, really are challenged to make informed decisions on which investment options most closely align with your values. 

Will we ever get to the point where respected rating agencies give us a meaningful measure of how a company meets a generally accepted ESG standards?  Respectfully – that’s a hard one to absorb. It’s probably not even possible as much of it may be subjective. But some guidance is better than no guidance. Recently the SEC proposed significant criteria for companies to include relating to their disclosure on environmental impact and risks associated with them.

Ratings services nevertheless decided it’s worth their time and capital to develop their own rating systems. And that is actually a very good thing, even if imperfect. Like it or not, that’s part of the deal at this point, and that has to be ok with you. To make it even more bemusing is that most of the input for the data actually comes from the companies themselves.  

So, what are we to make of these rating agencies and the data they use? Is this the cavalry to the rescue? Or a concerted effort to fool us once again?

Our SPOTLIGHT ON question this issue posed to our panel of experts this question:
“It seems more expansive company reporting on sustainability factors creates a better business model – WHY?”

To help us further understand the ratings process we are fortunate to have Tamara Close from Close Group Consulting as Pat O’Neill’s special guest on our very interesting PODCAST

We hope you enjoy this important edition of the SOCIALLY INSPIRED INVESTOR DIGEST/PODCAST.  Since we first published – just as the COVID-19 pandemic began – we have seen tremendous progress being made in the investing community, as we inhabitants strive for a better, more sustainable future.   

Enjoy!

It seems more expansive company reporting on sustainability factors creates a better business model – WHY?

We reached out to leading experts in the ESG investing industry to find out their responses, and this is what we found…

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERMarci Bair, CFP, Bair Financial Planning

ANSWERThe more ESG data a company has the better it can analyze that data and information that is pertinent to the success of their company. ESG data is critical for a company to know its sustainability score for the long-term health of their company. Shareholders are educating themselves on companies ESG scores and supporting those companies that are creating a better business model that supports diversity, equity and inclusion. Employees are also becoming more decerning on whether the company they work for shares their values and those companies with higher ESG scores will attract employees focused on the future and shared success of the company.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERRebecca Self, Director of Sustainable Finance at South Pole

ANSWERComprehensive reporting on sustainability factors provides important insight on the drivers of value creation and destruction in an organization. This supports long-term strategic decision making, looking beyond simply the financial results alone. Creating a better long-term business model requires a good understanding of a company’s customers, employees and other key stakeholders. This type of sustainability information, as well as environmental metrics, give a rounded view of business impact and the future drivers of financial results.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWEREvan Zall, President, Longview Strategies

When you want to build a better engine, you poke at the gears, you examine how the pieces fit together, and you also step back to look at the machine in broader context. How can it safely perform at peak performance – for the operators, the mechanics, and everyone else involved? Same thing for expansive reporting on sustainability factors. The process that companies follow to develop accurate and authentic sustainability reporting uncovers operational risks, areas of strength, and pathways to improvement that were previously left unexplored. The resulting communications can drive greater trust in the brand, increase customer loyalty, enhance employee recruiting and retention, and boost shareholder confidence.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERRabo Garba, Senior Business Development Manager – Silicon Ranch Corporation

I think the key to successful sustainability reporting is to focus on the most impactful areas within a company’s control without losing sight of overall improvement. When leaders can take an honest look at the entire organization’s role in society and where they want to go, sustainability can then be aligned and integrated throughout the organization. I believe this kind of focus leads to better execution.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERVishal Thiruvedula, Head of Product at RS Metrics

ANSWERExpansive company reporting based on a standardized framework reduces the disclosure gap and the risk of misleading investors by providing precise information needed for investment decisions. Advances in geospatial technology such as satellites and sensors are giving companies additional tools to address the environmental disclosure gaps.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERTea Ivanovic, Co-founder and Chief Operating Officer at Immigrant Food

Impact investors are no longer a niche in the financial industry, and companies are catching on to that new reality. Doing “good” doesn’t have to come at the expense of companies’ bottom line and businesses have a much larger responsibility than maximizing returns to shareholders: we are entering an era where stakeholders are the community at large, not merely investors.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERAbass Bila, Doctorate Candidate, FMVA, CSMA, Asset Management

ANSWERCompanies’ sustainability factors disclosure exercise scarcely responds to the general call for more transparency in their reporting. Yet Transparency towards sustainability reporting represents a fundamental part of the sustainability process, which can ultimately enable innovation. Hence, expansive company reporting on key factors can help them bridge sustainability and profitability for better value propositions along with disruptive and long-term business models.

QUESTIONIt seems more expansive company reporting on sustainability factors creates a better business model – WHY?

ANSWERPablo David Necoechea Porras, Ph.D., ESG and Sustainability Senior Manager, Investor Relations, Televisa

ANSWERCompanies are increasingly reporting sustainability factors because environmental, social and governance (ESG) management is linked to greater value creation. A strong, consistent but ambitious ESG proposal can help companies access new market niches and expand in existing markets. In addition, ESG management can also significantly reduce companies’ operating costs through the efficient use of resources or the introduction of circular economy strategies in their value chain. Finally, a strong ESG management can help companies recruit, select and retain labor talent and enhance employer branding; which increases company productivity by promoting a sense of purpose and an organizational culture based on organizational development.

How Investing in Diversity, Equality and Inclusion (DEI) Makes a Difference

I can change the world, with my own two hands

Make a better place with my own two hands

Make a kinder place, with my own two hands

– Song by Ben Harper, Diamond on the Inside. 2003

Our new issue focuses on the importance of Diversity, Equity and Inclusion (DEI), the extent to which DEI is important for investors – and the potential risks of failing to take it into account when making investment decisions.

Doesn’t it seem like our understanding of the impact of DEI on investing should be further evolved by now? Our contributors within the SPOTLIGHT section of this digest point to a variety of ways that companies benefit from social oriented policies – and examples of some who have not.

They will discuss the impact of how a company treats its employees, its community and the fairness of how it utilizes its capital on its performance. Do DEI considerations affect every aspect of the business – supply chains, product or service strategies, logistics and human resources? Clearly, a Socially Inspired Investor will take DEI into consideration – perhaps as much as other ratios or quantitative factors. We know you will enjoy listening to our PODCAST guest, Lorraine Wilson, Chief Impact Officer and Head of ESG Methodology at Novata, who brings it all together.  

We hope you continue to benefit from the work we do here at the Socially Inspired Investor and our thought leadership. Please feel free to pass us along to others.

Welcome to 2022, everyone!

Does investing in Diversity, Equality and Inclusion make a difference and why?

We reached out to leading experts in the ESG investing industry to find out their responses, and this is what we found…

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWERTonderai Njowera, Senior Partner, ImpactVest Global Advisory

ANSWERYes, it makes absolute sense! It aids in social esteem building, yielding collective long-term social, environmental, and economic dividends for those less exposed to opportunity and for the entire society, the global society.

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWERRupini Deepa Rajagopalan, Head of ESG Office at Berenberg

ANSWERIt is really simple in my view, investing in areas that have positive change indirectly also creates positive returns. Why? Because companies that advocate for issues such as social justice or promote social values, just means intrinsically they are built upon a culture that promotes long-term stability and even inclusion. Which is why I believe in investing in our values and coin the term “Finance with a heart”.

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWERKlarissa Nura, Research Analyst, ImpactVest Metrics

ANSWERIn a capitalist society, the allocation is the principle tool to create an equitable world for society and the planet where race, gender, economics and climate change is carefully considered.

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWEROlivia E. Knight, Racial Justice Initiative Manager at As You Sow

ANSWERInvesting in social justice is an investment in the future; corporations exist in a symbiotic relationship with the communities they serve and this relationship must be just and equitable to be healthy. Investors serve as a company’s liaison to the community and can exert a direct influence on corporate policies by promoting social justice. An investment in social justice is an investment in the community, and a healthy thriving community is essential to sustainable corporate success.

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWER Jennifer Priest, Content Strategist at Xactly Design & Advertising Inc.

ANSWERInvesting in social justice does make a difference…certainly to the lives of the people who benefit from improved situations. But there are also ripple effects into other areas. For example, in alleviating poverty, if individuals have more economic power they have more choice, and can buy products/services that are more sustainable vs what’s cheapest. Another thing to consider are the costs of allowing negative situations to continue (often hard to quantify, I admit).

QUESTIONDoes investing in Diversity, Equality and Inclusion make a difference and why?

ANSWERHarold Overholm, CEO at Alight

ANSWERInvesting in social justice can mean many things, but being from Sweden where education is free, I believe a fundamental investment in social justice is education accessible for all. The possibilities of childrens’ futures should not be dependent on for example the financial capability of their parents. Societies benefit from having that equal opportunity for higher education where everyone can go get a PhD (like myself)

Wind Power’s role in the renewable energy transition: what are the risks and opportunities?

Where the wind blows babe

You can bet

I’ll be riding high with it

Holding on for my dear life

Just like I always did

– Song by Zac Brown Band, Uncaged 2012

“Nature provides us with a chance to feel the things we cannot perceive with the naked eye” (Literary Devices)

Wind energy offers many advantages explaining why it’s one of the fastest growing energy sources in the world. And here’s a little secret you may not know –

Wind power now accounts for the largest share of renewable energy sources – 8.4% of total US. electricity generation and about 43% of electrical generation from renewable energy in 2020 (U.S. Energy Information Administration).

Wind is free and available and extensive years of development and research have reduced costs and significantly addressed concerns on the impact on wildlife, specifically birds and bats. Offshore solutions and technological advancements claim to realize its potential as the preeminent breakthrough solution. Despite strong demand amid a shift toward renewable power, many companies are having a hard time delivering turbines on budget and on schedule due to shipping delays, rising steel costs and other problems.

This Issue of the Socially Inspired Digest and Podcast – the 3rd episode of our 2nd season- delves into how wind energy is adapting to its new leadership role and what we can expect in the future.

Our Podcast this issue features Steven Pugh, Partner Hermes Infrastructure, a leader in renewable energy development in the UK. We also hear from our panel of experts in our Spotlight section who tackle the question:

Wind power’s role in the renewable energy transition: What are the risks and opportunities?

World attention has never been more focused and aligned to meet the environmental fight of our lives. The recent COP26 conference in Glasgow, Scotland underscores the world’s readiness to invest where necessary. More reason to be inspired.

Our mission at the Socially Inspired Investor is to keep you informed so you can not only achieve your investment goals but also to do it while aligning with your personal values. Please pass along this link sociallyinspiredinvestor.com to others whom you think will be interested and benefit from our Digest and Podcast.

We hope you enjoy this important issue.

Wind Power’s role in the renewable energy transition: what are the risks and opportunities?

We reached out to leading experts in the ESG investing industry to find out their responses, and this is what we found…

QUESTIONWind Power’s role in the renewable energy transition: what are the risks and opportunities?

ANSWERWendy Green– Principal Specialist, Low Carbon Energy Incubation Solutions by SASOL

ANSWERGreen hydrogen is critical for the decarbonization roadmap for many hard to abate sectors such as steel and manufacturing. The green hydrogen value chain uses electricity to deconstruct water into hydrogen and oxygen. Wind power is an excellent source of renewable power for green hydrogen plants, and is a major cost of green hydrogen.

QUESTIONWind Power’s role in the renewable energy transition: what are the risks and opportunities?

ANSWERPeter Fusaro, Founder, Wall Street Green Summit

ANSWERWind power has made tremendous strides in reducing its cost and is now globally deployed to fight climate change. Offshore wind is now ramping up with projects as varied as the US East Coast and Taiwan. Norway’s Equinor is deploying $50 billion for offshore wind projects by 2024. Germany’s Siemens has made technological breakthroughs in induction wind which does not have a gearbox and reduces operating costs. We are at the dawn of the golden age of wind power to be globally distributed.

QUESTIONWind Power’s role in the renewable energy transition: what are the risks and opportunities?

ANSWERMegahan Petersen, Management consultant and board advisor for ESG/Sustainability

ANSWERWind power will be essential in renewable energy investments. There needs to be a diversified renewable energy source mix for reliable delivery and wind is an essential part of that. Its cost structure provides an affordable entry into renewables which will be critical for any company or country that has committed to net zero or low carbon transition.

QUESTIONWind Power’s role in the renewable energy transition: what are the risks and opportunities?

ANSWERPooja Khosla, Executive Vice President Client & Product Development at Entelligent

ANSWERWe are living in the world of climate urgency. Where both speed and scalability matters. With wind power we have constraints both on speed and scalability.  Speed because it may take up to 10 years from project idea to project execution. Scalability because windiest sites are often far from the cities that consume most electricity.  The most recent energy crisis in Europe is attributed to The Wind Turbine fallouts. These fallouts are classic examples of hurdles that other nations could face as they ramp up their reliance on renewable power if the balance between speed and scalability is not met.

It’s all about Water

Someone told me long ago

There’s a calm before the storm

I know, it’s been comin’ for some time

When it’s over, so they say

It’ll rain a sunny day

I know shinin’ down like water

– I wanna know, have you ever seen the rain?”
Creedence Clearwater Revival

Welcome to the next issue of our Digest and Season 2, Episode 2 of our companion PODCAST entitled: It’s All About The Water.

As the movement toward repairing the earth makes headway, we are inspired to believe that serious focus and real progress is underway. The spotlight, at least lately, seems though more likely to focus on carbon reduction and climate change – clearly critical. But clean water for drinking, farming, electricity and industry is also a growing concern around the world. So, what does the future hold, and what about investment opportunities and risks when it comes to water?

Betsy Moszeter, Chief Operating Officer of Green Alpha Advisors, cites a Fidelity paper a few years back entitled: Water, Structural Demand Growth Creates Investing Opportunities. Recognizing, as they say, that “fully one in six gallons of all the fresh water we produce is wasted through old leaky deteriorating infrastructure”, there is much to do. Water is fundamental, not just to the health of the Earths’ ecosystem but also to the health of global economic activity. Unlike oil, there are no alternative sources.

According to The American Society of Civil Engineers in their 2020 report entitled: The Economic Benefits of Investing in Water Infrastructure, “without adequate investment in water systems, people could see higher incidences of illness, hospitalizations, and lost working days… under current investment levels, the nation will spend $1.067 trillion on water infrastructure over the next 20 years”, still perhaps a third of what’s needed, but a significant start.

We hope you find this issue enlightening and educational. We enjoy producing this educational series. Our mission is to make socially inspired and ESG investing more consumer friendly.

Thanks for your interest and please feel free to pass us along to others.

Are you optimistic that we are making progress in ensuring that we will have clean, usable water in the future?

We reached out to leading experts in the ESG investing industry to find out their responses, and this is what we found…

QUESTIONAre you optimistic that we are making progress in ensuring that we will have clean, usable water in the future?

ANSWERTyler Wood, Director of ESG & Sustainability at Gravitas Carbotura

ANSWERI’m a naturally optimistic person but unfortunately we’ll be seeing mass migrations due to water quality and scarcity in our lifetimes within the United States. There are already examples we are seeing in other countries and this is just the beginning. We are making great progress with tremendous efficiencies and technologies, but not to the scale necessary. There is far too much water waste and ultimately not sustainable for our generations to come. 

QUESTIONAre you optimistic that we are making progress in ensuring that we will have clean, usable water in the future

ANSWERThomas Schumann, Thomas Schumann Capital

ANSWERI am an optimist. In answer to your question only Benjamin Franklin comes to mind: “When the well is dry, we know the worth of water.” (Poor Richard’s Almanac, 1746)

QUESTION Are you optimistic that we are making progress in ensuring that we will have clean, usable water in the future?

ANSWERMark Gero Partner GEA@27TM Oceanic Carbon Capture Protocol

ANSWERNo, I am not.  In the distant future, maybe. In the near future having clean usable water for all is unlikely, if we continue in the direction we are going today. The very rich will have it…. eventually.  The masses will fight and die for it.

It’s Electric – A Move To Electric Mobility

The best is yet to come, and won’t that be fine?

You think you’ve seen the sun, but you ain’t seen it shine.

– Frank Sinatra

We begin the 2nd season of The Socially Inspired Investor by taking a deeper dive into the topic of Electric Mobility a.k.a. “The EV” movement. GM has announced that they will offer over 30 electrics by 2025 while publicly and loudly charting a path to an all-electric future. Clearly, Tesla has a huge lead but waking a giant rarely comes without consequence. Even Jaguar announced it will go 100% electric by 2025. Mercedes-Benz will shift its focus entirely to electric vehicles in 2025 and be prepared to sell nothing but electric cars by 2030.

As giddy as investors have been about EV, we are far from clear about how it will all develop. Experts tell us that gas combustible driven cars will still be the norm for the foreseeable future. Jeremy McCool, Founder and CEO of HEVO Power, is our featured guest on our PODCAST discussing the latest on the industry including their development of wireless EV charging.

But it’s not all roses. In our SPOTLIGHT ON section, we ask our experts to speak to the challenges and investments opportunities we face as we move toward mobility. Their observations were very insightful.

Despite the excitement, it appears the EV market currently faces epic supply chain disruptions – most notably a semiconductor chip shortage and the challenges of long charging times – especially during extended trips.  And then there is the scarcity of many of the raw materials found in the batteries that these vehicles use.

In California 20% of purchasers of EV vehicles actually revert to gas, according to a study by researchers at the University of California Davis (www.thehill.com).

Even tires will require innovation. The average EV vehicle can weigh almost twice as much as its older siblings (www.thehill.com). Companies like MICHELIN® see this as a unique opportunity to build market share and we investors should take note. On April 1, the MICHELIN® pilot® product line was launched, taking into account the higher weight characteristics associated with electric sports cars.

Yes, we are in the very early stages.

But yet we are very inspired about all the prospects that electric mobility can bring. Along the journey, we expect to find many good investment opportunities. With so much to be settled, the final story may be a long time coming.  But in the investment world, this is not necessarily a bad thing. The market adage “buy the rumor, sell the news” should inform the investor when it comes to how to “play” the EV category.

Welcome back! We have a great new season planned. If you haven’t already done so, please subscribe at www.sociallyinspiredinvestor.com to receive notices of new issues and feel free to invite others.

What are the challenges and investment opportunities we face as we move toward electric mobility?

We reached out to leading experts in the ESG investing industry to find out their responses, and this is what we found…

QUESTIONWhat are the challenges and investment opportunities we face as we move toward electric mobility?

ANSWERKarl Brauer, Executive Vice President at CarExpert.com

ANSWERThe move toward EV mobility is inevitable, but the rate and timeframe of this shift will be difficult to predict. Multiple variables, including government incentives, fuel prices, infrastructure build out, battery costs, and the health of the economy, will all play critical roles. So while it’s clear we’ve moved from an “if” to a “when” scenario, the “when” will likely take 10-15 years. Keeping investment in EVs proportional to this shift over the next decade will be the challenge across the industry.

QUESTIONWhat are the challenges and investment opportunities we face as we move toward electric mobility?

ANSWERTonderai Leonel Njowera, Senior Partner, ImpactVest Global Advisory

ANSWERNew energy sources coupled with innovations in cloud computing technologies are changing the entire transport industry. Challenges are associated with the availability, sustainable extraction and distribution of mineral and other resources associated with electric vehicles and necessary associated infrastructure. However, as performance and safety improves and battery costs fall, sales of electric vehicles are growing with numbers increasing from approximately 3 million electric vehicles to over 1 billion by 2050, when 75% of passenger car activity (passenger-kilometres), would be provided by electric vehicles under the Remap Case.

ANSWERThis makes investments along the entire electric vehicles value chain bankable in the run up to a carbon neutral economy by 2050, for both current auto companies, energy companies and startups too.

QUESTIONWhat are the challenges and investment opportunities we face as we move toward electric mobility?

ANSWERLiubov Volkowva, PhD, MBA, MS; Energy Markets and Sustainability at CIMA Energy, Mitsubishi Corp.

ANSWERThe EV market has grown at about 60% per year globally, topping 2.1 million in 2019. While the COVID-19 pandemic caused a temporary decrease in the use of vehicles and disrupted the automobile industry, it has boosted consumer interest in all-electric and hybrid electric vehicles (McKinsey Center for Future Mobility, March 2021). The key challenges and opportunities associated with the rapidly growing electric mobility market are changing consumer attitudes, drastically varying by region, EV charging infrastructure, regulatory changes, and battery technology and manufacturing, which primarily drive EV prices. In addition, the micromobility subsector, including electric bikes, scooters, and skateboards, with the $5.7 billion already invested since 2015, will continue expanding and present new opportunities for investors.

QUESTIONWhat are the challenges and investment opportunities we face as we move toward electric mobility?

ANSWERLiana LE, Junior Market Analyst at Kayrros

ANSWERI believe we are in the midst of a pivotal point in history for electric mobility, especially as we recover from a pandemic that left many of us rethinking our individual impact while we were locked up. The EV market is hitting full speed with growing consumer demand for electric vehicles that are equipped with innovative technology and automation. Investment opportunities will arise as more companies shift their portfolios and investments to focus on green tech and disruptive technologies. Tax incentives and subsidies will still make or break the challenge of EV infrastructure and operating costs. There are also concerns on supply meeting demand as we are seeing increasing costs of raw materials that are needed for batteries. In the end, with enough investments to further develop R&D in existing companies and as new startups arise to make electric transportation more feasible, we will inevitably reach the goals of shifting into an electric mobile world. 

QUESTIONWhat are the challenges and investment opportunities we face as we move toward electric mobility?

ANSWERJuliana Ennes, Communications and Strategy Development Consultant specialized in Renewable Energy

ANSWERWidespread adoption of electric vehicles in the United States faces challenges that go beyond what tax incentives can do. The public needs information.

ANSWERPeople and goods moving around the US by cars, trucks, trains, ships, airplanes and other vehicles account for 29% of the country’s GHG emissions. Over half of the transport-related emissions come from passenger vehicles and trucks with internal combustion engines.

ANSWERBoth public and private sectors aim at tackling this issue with electric vehicles. The Biden administration’s American Jobs Plan includes $174 billion towards encouraging Americans to switch to electric cars and trucks. In parallel, major car automakers have announced goals to phase out internal combustion engines. However, today EVs account for only 1.8% of new light-duty vehicles sold in the US.

ANSWERThere is a perception that costs are too high, even though studies show that albeit upfront costs are actually higher, in a lifetime of the vehicle this is offset by lower costs with maintenance and fuel.

ANSWERIt is true that batteries need more research and that the energy mix of the country and state where the car is being charged can elevate the carbon footprint of EVs. But studies show that even with coal and gas-power generation in the mix, EVs still can have a carbon footprint up to 40% lower than internal combustion engines.

ANSWERElectric vehicles are not a panacea and transport plans should still prioritize public transportation and bike infrastructure, but the switch is more than welcome and the technology is already there.