usually they are a standalone document that really shows investors how a company is thinking through the risks and opportunities. She noted that opportunities can be related to provisions of the
Inflation Reduction Act and Infrastructure Investment and Jobs Act that incentivize and make certain investments much more attractive. In the transportation sector, the U.S. Environmental Protection Agency is looking to aggressively roll out regulations to reduce carbon emissions. “Putting management’s attention on this phenomenally big
transition to a clean energy economy that we’re heading toward, thinking that through, and providing that important strategic information to investors is critical. It’s going to help companies that are ahead of that curve lead the transition so that ultimately entire markets can make that shift.”
Providing Context for ESG Decisions “Listening to the two of you, it seems that providing the context of disclosure decisions is important, including the rationale and thinking behind what’s being disclosed,” Nielsen observed. “Just as importantly if there’s an area where you are not disclosing in- formation, it is important to explain that it’s not because of a lack of effort but rather a conscious decision. I think investors tend to look more favorably at a lack of disclosure if there was thought and consideration behind it. Investors appreciate that context and level of thinking.” Hoeppner offered this example: “Regarding racial equity audits,
our firm has taken the stance that having a more diverse workforce, understanding how your products or marketing strategies could hurt your local communities, is really important. We’ve taken a position that this might create long-term value and we’re often go- ing to support calls to conduct these reports from a value creation perspective. Other people are going to support these reports for ethical reasons. All investors supporting these resolutions are going to get lumped in a big bucket and you will not know how they’re thinking about it unless you speak with them. Similar cases can be made on climate issues.”
Changing Perceptions of ESG Nielsen noted that the ESG landscape appears significantly different than it did one year ago because of different points of view from a range of stakeholders. He asked panelists to comment about how they perceive these changes and what they look for from companies. “For financial professionals, there’s nothing controversial about
ESG,” McHale said. “Tey’re thinking about it as a risk and an op- portunity. Tat’s how it’s been and continues to be. But outside the financial world, the term ESG has been hijacked for political purposes.
18 FA L L 2 0 2 3 ■ IR UPDAT E
“Out of approximately 275 climate-related shareholder proposals filed during the 2023 proxy season, about a third were withdrawn for corporate commitment.” - Cynthia McHale, Ceres Investor Network
“In terms of our investors’ response to that, they have a fiduciary duty to their beneficiaries to understand, manage risk, and achieve their financial goals. So, they’re not wavering. Tere’s no change in their core understanding of the components of ESG risk. Tey’re continuing to engage with companies on the same issues.” Hoeppner offered, “Certain investors are going to pursue integrat-
ing environmental considerations because they just think it’s the right thing to do. Te financial implication doesn’t always matter. Tere is a line somewhere, and how that line is determined is being debated in public discourse right now in the United States in particular; it isn’t really being debated in the United Kingdom and Europe.”
niri.org/ irupdate
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