Attendees at our October 24 program were treated to a wide ranging discussion of the risks and potential opportunities of ESG. Our moderator, Tanuja Dehne, began the session by citing the most recent PwC director survey showing that the majority of boards do not ascribe relevance or importance to environmental, climate change or other ESG issues. However, the overarching message of our panel was that ESG should be imbedded into your company’s business strategy. Data has shown that board and senior management focus on material ESG risks translates to better operational, financial and stock price performance.
As explained by Prof. Tensie Whalen of NYU’s Stern School of Business, while traditional CSR—Community, Social, Regulatory—programs centered on philanthropy and employee involvement in community projects, the thrust of ESG—Environmental, Social, Governance—is broader and encompasses environmental, societal, governmental and sustainability issues that can impact other constituencies, such as supply chain, customers and human capital. And a company’s attention to ESG is a factor for investors interested in socially responsible companies; these investors now represent about 1/5 of investment dollars. In addition, there is now interest in impact investing, i.e., companies who are in the business of delivering services for the greater good, such as a manufacturer of water conservation equipment.
The panel discussed the difficulties of implementing ESG efforts as a horizontal function within a business that is organized vertically or in siloes. Dan Bross, who led ESG at Microsoft, offered suggestions for implementation of ESG across verticals:
Creating a company culture that values ESG
Having the commitment of senior leadership
Making sure that the ESG leader is effective at working across the verticals
Having Board focus on ESG, which need not be a separate committee
The Board asking: how and where does ESG fit into the organization
James Hamilton, Director and a member of the BlackRock Investment Stewardship team provided an investor perspective of ESG, beginning with the recent letter to CEO’s from Larry Fink, Chairman and CEO of BlackRock emphasizing strategy, purpose, stewardship and engagement. James stressed that governance is the starting point for managing environmental or social risk and recommended that companies seek conversations with investors before there is a problem or crisis, which lays the groundwork for the conversation that occurs when an issue does arise. He noted that among some of the most often-mentioned ESG problems by directors are those related to human capital management and, in particular, how technology is affecting the workforce.
The panel engaged in a lively give-and-take with the audience on the connection between many ESG issues and political, regulatory and policy concerns. The following were some of the high points on how these issues may be addressed in an apolitical manner:
Look at ESG as part of the strategic and risk assessment exercise—what are the material ESG risks that can impact your business or provide opportunities?
In other words, for example, distinguish between taking a position on climate change and managing the risk that climate change might affect your business.
As we continue to deal with societal issues that require solutions: what solutions can present business opportunities?
Refer to tools from organizations such as the Sustainable Accounting Standards Board (SASB) and MSCI that can help identify ESG metrics and other data relevant to your company and industry.
Integrate the risk/opportunity discussion and the data into your strategic planning process.
Look beyond the company itself to your supply chain and other providers, e.g., product design, reduction of waste, societal impact of materials and assembly, design and siting of data centers, power utilization.
Develop ESG capability among your board members—be sure to educate yourselves about material issues that can affect your company.
Make sure your management team is thinking about ESG and looking ahead, including possible knock-on effects that can impact other stakeholders such as communities.
Look at ESG through the lens of your company’s values.
Consider whether the ESG/CSR data that your company may be providing in various reports should be externally validated and if this data is included in SEC filings considered the Audit Committee’s role in ensuring there are proper internal controls over the accuracy of the metrics or non-GAAP data.
Understand investors’ agendas with respect to ESG before there is a problem.
Tanuja M. Dehne Board Member, Advanced Disposal Services, Inc. and Granite Point Mortgage Trust, Inc.; Senior Advisor, The B Team
Tanuja Dehne is a public company director and former C-level executive of NRG Energy, Inc., a Fortune 250 power company. Tanuja is a member of the Board of Directors of Granite Point Mortgage Trust Inc. (NYSE: GPMT) where she serves as the Chair of the Nominating and Corporate Governance Committee, and Advanced Disposal Services (NYSE: ADSW) where she serves as the Chair of the Compensation Committee. Tanuja also served on the Board of Directors of Silver Bay Realty Trust Corp. (NYSE: SBY) from 2012-2017. She is a Senior Advisor on corporate governance matters for The B Team, an NGO focused on mobilizing global leaders to drive a better way of doing business for the well-being of people and the planet.
Tanuja joined NRG in 2004 as Deputy General Counsel and Corporate Secretary in the Legal department, where she led corporate governance and corporate transactions including financings, mergers and acquisitions, public and private securities offerings, stock exchange matters, and financial reporting compliance. She also led NRG’s Human Resources Department before becoming Executive Vice President, Chief Administrative Officer and Chief of Staff, in which role she was responsible for accelerating NRG's transformation through prioritization and collaboration across all company functions, regions and business lines. She oversaw NRG's Human Resources (11,000+ employees), Information Technology, Communications, Sustainability and Corporate Marketing departments, the company's charitable giving program, M&A integrations, as well as the construction of NRG’s sustainable, corporate headquarters in Princeton, N.J. Tanuja was also responsible for shaping and guiding the company's vision, narrative and culture, ensuring that all messaging to internal and external stakeholders was consistent with and supported the execution of NRG's strategic plan.
Tanuja is a frequent speaker on topics including leadership, corporate governance, climate change and talent development. In 2017, she authored an article on board culture and composition in The Legal Intelligencer entitled “Creating Long-Term Value by Changing the Supply and Demand,” and co-authored an article entitled “CEO Succession and Crisis Management” in The Review of Securities & Commodities Regulation. Tanuja was recently named one of the “2018 NACD Directorship 100” which recognizes the most influential leaders in the boardroom by NACD Directorship Magazine, and as a “2017 Director to Watch” by Directors & Boards. She is also an NACD Board Leadership Fellow, and was featured in “Women on the Move: Navigating to the Boardroom” in the 2017 Women in Leadership Report published by The Forum of Executive Women. In 2013, she was named an honoree at the YWCA Tribute to Women Awards, and in 2011, Tanuja was also recognized as one of the "Best 50 Women in Business" by NJ BIZ.
Tanuja earned her undergraduate degree from Lafayette College, her Master's degree in Political Science from the University of Pennsylvania, and her Juris Doctor degree with honors from Syracuse University College of Law.
James Hamilton Director, and Member of the BlackRock Investment Stewardship ("BIS") team
James Hamilton, CFA, Director, is a member of the BlackRock Investment Stewardship ("BIS") team based in New York. He is responsible for the evaluation of governance, proxy voting and engagement with boards and management at portfolio companies within the Financials sector in the US and Canada. In addition James helps drive the execution of the team's strategic projects and facilitates the engagement of the regional advisory and global oversight committees.
Prior to his current role, James was the Chief Operating Officer of BlackRock Investments, LLC – the FINRA registered retail broker dealer arm of BlackRock. He also worked within the Global Retail & iShares Executive team managing areas such as the RFP group and the Retail Risk Council.
James joined BlackRock from Standard Chartered, where he spent 12 years in the Financial Markets and Securities business in London, Singapore and New York. After joining on the Analyst program, James joined the Structured products team where he was responsible for pricing, trading and marketing multi-asset derivatives to Corporate and Institutional clients. James then moved to Singapore where he became Business Manager to the Global Structured Products head and helped build the team from 35 to 100 staff. From there, James moved to New York to expand the Structured products business in the Americas before joining the Regional COO team. Here he focused on regulatory issues such as Dodd Frank and Volcker; governance issues such as the management of the securities broker dealer; and various projects related to Audit, Operational risk, BSA/AML and Sanctions, Resolution planning and Training.
He earned a B.Sc. degree in Math and Finance from the University of Leeds (UK) and spent his junior year abroad at the University of California, Berkeley.
James received the Chartered Financial Analyst (“CFA”) designation in 2006 and the Certified Regulatory and Compliance Professional (“CRCP”) designation at The University of Pennsylvania, Wharton in 2016. He holds Series 7, 63 and 24 FINRA registrations.
Daniel T. Bross Former Microsoft Senior Director of Business and Corporate Responsibility; Founder & Executive Director of the Microsoft Technology and Human Rights Center
With a background in public policy and government and public affairs, Dan has led corporate social responsibility, government affairs and public policy teams at two Fortune 100 companies and has over twenty-five years of experience in the private, public and nonprofit sectors.
Dan joined Microsoft in 1998 and in 2002 was instrumental in developing and managing Microsoft’s global corporate social responsibility program to support the company’s business goals and meet Microsoft’s corporate responsibility to address key societal challenges globally. Dan worked across key business groups and corporate functions within Microsoft to develop public policy positions to advance the company’s business and policy objectives and to position Microsoft as an industry thought leader on key policy issues such as human rights, responsible sourcing, privacy and security, corporate governance, transparency, et al.
He founded and served as Executive Director of the Microsoft Technology and Human Rights Center and in 2012 led a cross company process to develop Microsoft’s first global human rights policy statement. Under Dan’s leadership, Microsoft became one of the first multinational corporations to “adopt” the UN Guiding Principles on Business and Human Rights and develop and implement a cross company human rights impact assessment process.
In addition to his internally facing responsibilities, Dan was responsible for Microsoft ’s proactive global outreach and engagement with a variety of key stakeholders including the socially responsible investment community; the World Economic Forum; a range of CSR organizations and related NGOs; various UN agencies, with a particular focus on UN Human Rights; the UN Global Compact; and the Global Reporting Initiative.
Before retiring from Microsoft at the end of 2016, Dan served as Microsoft’s Senior Director of Business and Corporate Responsibility and Executive Director of Microsoft’s Technology and Human Rights Center. He also served as the Co-Executive Sponsor of GLEAM (Gay and Lesbian Employees at Microsoft).
In addition to his corporate experience, Dan has management and program development experience in the nonprofit sector. During his tenure as Executive Director AIDS Council, the nation’s leading AIDS advocacy organization, he chaired a broad national coalition of health and human service organizations and non-governmental organizations and served as an advisor to President Clinton’s Domestic Policy Advisor on the structuring and staffing of the White House Office of National AIDS Policy.
He holds a B.A. in Political Science from Catawba College in Salisbury, NC and a master’s degree in Public Administration from the George Washington University in Washington, DC.
Dan is currently working with a number of organizations in both the public and private sector including UN Human Rights, Article One Advisors, the Global Reporting Initiative and Boston College Center for Corporate Citizenship.
He is a member the Board of Trustees of Catawba College; the World Economic Forum’s Global Future Council on Human Rights; the Board of Directors of the Interfaith Center on Corporate Responsibility; and a Fellow at the Haas Center for Responsible Business at the University of California, Berkeley.
Tensie Whelan Clinical Professor of Business and Society, NYU Stern School of Business Director, Center for Sustainable Business
Tensie Whelan joined New York University Stern School of Business in November 2015 as Clinical Professor of Business and Society. She leads the School’s efforts around issues of business and sustainability, driving research and coursework on natural resource-based challenges including climate change, water scarcity, biodiversity loss, poverty and unsustainable development.
Professor Whelan also launched Stern’s Center for Sustainable Business, whose mission is to ensure current and future business leaders develop the knowledge and skills to embed sustainability in core business strategy so they can reduce risk; create competitive advantage; develop innovative services, products, and processes; while building value for society and protecting the planet.
Professor Whelan was formerly the President of the Rainforest Alliance, where she worked since 2000. In 2014, she was appointed as the School’s 2014-2015 Citi Leadership and Ethics Distinguished Fellow.
During her tenure at Rainforest Alliance, she increased the organization’s budget from $4.5 million to $50 million; ensured that 15% of the world’s tea, 14% of the world’s cocoa and 5% of the world’s coffee was certified by the Rainforest Alliance; and increased the visibility of the Rainforest Alliance seal from zero to nearly 45%. Under her leadership, the organization recruited 4,000 companies and nearly 5 million producers and their families in more than 60 countries.
Professor Whelan has been working in the environmental field for more than 25 years. Her published works include one of the first books on ecofriendly tourism, Nature Tourism: Managing for the Environment. She has been recognized as one of the “100 Most Influential People in Business Ethics” by Ethisphereand was awarded the James Beard Foundation Leadership Award in 2012. She serves on the advisory boards of Nespresso Innovation Fund, Arabesque, Inherent Group, Corporate Eco Forum, Odebrecht Global Advisory Council, GoodWell, and sits on the board of Globescan.
Professor Whelan has also served as the Vice President of Conservation Information at the National Audubon Society, Executive Director of the New York League of Conservation Voters, Managing Editor of Ambio and management consultant to nonprofit organizations such as the Environmental Defense Fund.
She received a B.A. in Politics from New York University and an M.A. in International Communication from American University.