Fishburn Hedges

07.06.2011

It's environmental, social and governance in case you're wondering.  Jargon.  More on that later.

I had the pleasure last night of attending one of the well respected Green Monday events in the heart of the money quarter at Bank of America Merrill Lynch.  Up for debate was the role of institutional investors in driving corporate sustainability strategies.  Alongside the hosts, B&Q, Unilever and Osmosis Captial were on stage.  It was the first time Green Mondays had tackled the investor community's view on the issue which rather feels like being the crucial missing link in the evolution of a greener economy.  Government has been pumping out legislation for many years, leading businesses have been showing the way and even consumers, the surveys tell us, are keen to buy green.  But a large, and largely silent, partner is investors.  What about them?

Well to be fair there has always been a niche of socially and environmentally-motivated investors.  But isn’t there fundamentally an inconsistency between mainstream investors' desire for quick, easy wins and the core philosophy of sustainability which is longer-term and takes a somewhat steadier pace?  This contrast was highlighted at the launch of Unilever's Sustainable Living Plan last year when their chief exec Paul Polman said “Unilever has been around for 100-plus years. We want to be around for several hundred more years. So if you buy into this long-term value-creation model, which is equitable, which is shared, which is sustainable, then come and invest with us. If you don’t buy into this, I respect you as a human being, but don’t put your money in our company”.

Brave words.  But last night’s expert panel were at pains to stress that not all of the investment community are after a quick buck.  Pension funds are looking for prolonged, steady growth.  But still the majority of mainstream investors remain largely uninterested in sustainability although questions are starting to be asked.

This creates both an opportunity and a challenge for companies telling their sustainability story.  The opportunity is to show leadership to the investor community and differentiate themselves from the competition.  The real challenge is how to do this and one of the key barriers that emerged from last night’s event was that of language.  The sustainability and the investor community both have their own lexicon which has the potential to confuse and alienate, particularly as elements of the investor community aren’t bought-in to the need to ‘go green’.  Sustainability professionals may talk of “greening supply chains” but investors would better understand “supply chain resilience”.  You say “conserving precious resources”, I say “risk management”.

A quick survey of the investor attendees beforehand also confirmed that one of the best conduits for these messages remains the CEO.  All investors need to believe in the senior management team so it’s critical for the top tier to show leadership on these issues, backed up of course by the right figures.  Which is another issue.  And although numbers of companies reporting to for example, the Carbon Disclosure Project, are growing, it’s still far from being ubiquitous creating a lack of reporting consistency.

So while today’s investors still aren’t fully engaged, the room’s view was that tomorrow’s investors will be more so.  And those companies leading the way today are best placed to secure sustained investor interest.  Sustainability strategies do not bear fruit overnight and a reputation for leadership takes time to build.

Posted by Peter Chalkley