You have to wonder what’s driving sustainability reporting by smaller companies. They’re less likely than large companies to be doing it in response to proposals from “activist” shareholders. But there are also shareholders whose attention companies actually want to attract. A recent SquareWell Partners study says that providing ESG info is the “price of entry” for companies of all sizes that want to add big investors to their rosters – or keep them there. Here’s a few key findings:
– Nearly all of the top 50 asset managers (managing $50.6 trillion) are signatories to the UN “Principles of Responsible Investing” – committing to incorporate ESG factors into investment & ownership decisions
– Oddly, the Global Sustainable Investment Initiative reports “only” $30.7 trillion of sustainably invested assets last year – so it’s possible the PRI signatories aren’t following through on the principles
– One-third of the asset managers clearly disclose their approach to integrating ESG factors into fixed income;
– 64% of the asset managers are signatories to the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD);
– Close to 80% of the asset managers engage with portfolio companies on ESG issues;
– 68% of the asset managers use two or more ESG research and data providers;
– Only 20% of the asset managers have a low receptivity to activist demands; and
– A quarter of the asset managers have gone public with their discontent at portfolio companies since January 2018.
For even more on this topic, see Aon’s 28-page report on responsible investing trends. Also check out the recap from Cooley’s Cydney Posner about a recent meeting of the SEC’s Investor Advisory Committee – where reps from AllianceBernstein, Neuberger Berman, SSGA and Calvert discussed how they’re using ESG data for all their portfolios and (for the most part) called for the SEC to guide companies toward more standardized disclosure.
On the debt side, take a gander at a recent PepsiCo announcement about a $1 billion “green bonds” offering where the proceeds will be used to finance the company’s “UN Sustainable Development Goals.” A Moody’s alert says that green bond issues could top $250 billion this year – much higher than what was originally forecast – and walks through some of the global trends. To keep track of memos on this growing trend, we’ve added a new “sustainable finance” subsection to our “Debt Financings” Practice Area.
-Liz Dunshee, TheCorporateCounsel.net November 19, 2019
