All industries are prone to hectic merger and acquisition activity. We covered a number of these events in the pharmaceutical industry in previous entries. Silicon Valley has reached a peak – sounds like an oxymoron! – with the giants acquiring relatively new, expensive and promising companies.
This year, Cisco
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paid $28 billion for enterprise cloud protection company. Splunk’s president and CEO will join Cisco’s leadership team. In a similar spirit, Alphabet
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acquired Photomath in 2023 for about $550 million, enriching its founder considerably.
Microsoft
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, the Office Suite king, sits on its giant pile of cash waiting for its next opportunity after acquiring Activision in 2023 for $69 billion. Before the deal took place, the CEO was in line to take in $500 million.
These costly transactions show that in these fast-moving industries, money flows freely and founders reap massive financial rewards. Huge piles of money make most people happy. As Caesar said, we must take the current when it serves.
Recently, Elon Musk got into a dispute with OpenAI. Musk’s argument is that he personally financed OpenAI and had an agreement that the company would stay nonprofit and share its technology. Now the company is pushing for profit. Musk sees this as a betrayal.
The Musk-OpenAI dispute is much closer to old-time disputes between management and “corporate raiders.” Among the biggest of such battles was Icahn and Clorox
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, $11.7 billion, 2011. After becoming its biggest shareholder, Carl Icahn fought with the Clorox board.
Musk’s OpenAI dispute follows his long, contentious acquisition of Twitter, now X. Now part of history, Musk’s Twitter acquisition uncovered the venom of his business enemies and even his newly acquired employees, some of whom profited considerably.
Elon Musk
After the Electric Car King indicated his interest in acquiring the social media giant, the anti-Musk gang lined up, saluted and started firing. A bunch of politicians, some of whom had received hefty gifts from Musk, shuddered to think of what the acquisition would reveal about how Twitter favored certain candidates for office. They turned on their benefactor.
Some employees and executives at Twitter opposed the purchase, fearing that embarrassing practices would be exposed. If nothing else, the management style of the company would be held up for ridicule. They turned on Musk in a nasty public fit of anger.
As the Twitter situation came to a boil, people under the Twitter tent, especially rights activists, approached Apple
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, Disney
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, Coca-Cola
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and others grumbling that the post-acquisition Twitter might feature racist posts and hate speech. They recommended cutting advertising. Talk about disloyalty!
Tesla
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and Space X have raked in billions from the federal government. Musk rubs shoulders with the top echelon in Washington. But, when critics came after him for taking over Twitter, his elected friends ran for cover or sniped at the multibillionaire.
Like Julius Caesar, Musk is a lightning rod. Jeff Bezos, fellow billionaire and founder of Amazon
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, has had a long public feud with Musk over a range of issues. Musk and Meta’s
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Mark Zuckerberg have also gone at each other publicly. President Biden, head of the political party that strongly advocates for electric cars, took shots at Musk for a variety of reasons, including Twitter.
As Brutus said, “Chew upon this.”
On top of his detractors, Musk’s massive wealth sent a signal that a hefty premium would be demanded for any acquisition. Warren Buffet has always had to pay significant premiums. In his 2022 acquisition of Allegheny for $11.6 billion, the Oracle paid a premium of 16%. Precision Castparts was acquired for $37 billion in 2016, which included a 21% premium.When he bought Burlington Northern Santa Fe Railroad, the premium was 31.5%. Musk’s premium for Twitter was estimated at 38% in one of the largest acquisitions ever made and puts him at the top of the list of premium payers.
So, we see from these events that even money does not seal friendship. Plenty of people smile, appear to be friends and stab you. Win or lose any of these public battles, Musk remains a Caesar-like target.
In this bi-weekly series, Equities News in collaboration with Till Investors provides readers with an overview of specific mutual funds and ETFs within the sustainable investing marketplace. The goal is to help readers identify investment funds that meet their risk profile, impact interest and investment goals.
Today, we’re providing insight into a sustainable fund that focuses on bonds – the lower-risk, lower-return alternative to stocks. While the vast majority of ESG funds invest in stocks, ESG fixed income funds are carving out a niche amongst investors as well. But what does a sustainable bond fund look like, and who is it a good fit for? Let’s dig in and find out by taking a look at…
iShares ESG Aware U.S. Aggregate Bond ETF (EAGG)
Who is iShares?
iShares is a brand of funds managed by Blackrock. Blackrock is one of the world’s largest asset managers with a diverse lineup of ESG funds. Their largest ESG bond fund is the iShares ESG Aware U.S. Aggregate Bond ETF (EAGG), with over $3.5 billion in assets. Like most iShares products, this fund is structured as an ETF, and like most ETFs, it is designed to follow an index – in this case the Bloomberg Barclays MSCI US Aggregate ESG Focus Index.
What does the EAGG bond ETF offer?
The index this fund tracks is based on the broadest market of U.S. investment-quality bonds, known as the Barclays U.S. Aggregate, or “the Agg.” It is designed to represent the broad investment-grade bond market in the U.S., including Treasuries, mortgage-backed bonds, asset-backed bonds, and corporate bonds. The ETF structure means that management costs are very low for this fund. At the same time, passively following the index means that Blackrock does minimal research into its holdings and makes no judgements about sustainability. They pay for that insight from third-party providers, specifically MSCI, a large provider of indices and portfolio analysis tools.
Does it say what it does?
The fund is very clear in its fund documents about how it selects assets for this fund. The index it tracks starts by mimicking the Agg. Then, where relevant, it applies MSCI’s screening and rating process to remove entities involved with “bad” industries like alcohol and tobacco, controversial weapons, and certain fossil fuels. It also sidesteps bond issuers with high controversy ratings, while overweighting companies who score well in MSCI’s ESG ratings.
Does it do what it says?
The phrase “where relevant” is doing a lot of work here. ESG screens and ratings in this fund are only relevant to corporate bond issuers. Government bonds, government-backed bonds, and other kinds of asset-backed bonds either don’t get ESG ratings or the ones they receive aren’t used in this fund’s methodology. The vast majority of any fund that is following the Agg index will be made up of these government and asset-backed securities that are included with limited ESG thought.
So, while the entire fund is labeled “ESG,” the most recent prospectus shows that only around 30% of its holdings are “subject to the Index Provider’s optimization process” – which is a complicated way to say that ESG criteria are being applied. As a result, EAGG’s portfolio looks very similar to the Agg, with just a slightly higher ESG score. The MSCI ESG Quality Score for EAGG is 6.7, while the Agg scores at 6.2 (on a scale of 1-10).
With such little difference between EAGG and the Agg, it’s unsurprising that their performance and risk metrics are very similar as well. One place where there is a difference – it’s going to cost you about 0.07% (7 bps) more in fees to choose EAGG over a comparable fund that does not use the ESG filter.
Who is this good for?
EAGG is a reasonable choice for investors who want to dip their toes into ESG-themed fixed income funds. If you want to invest in bonds to lower your risk or diversify your portfolio, EAGG provides the performance and risk profile to suit your needs. And its ESG approach is legitimate, even if it is limited. Just set your expectations that this fund isn’t all-ESG approved throughout.
Check out EAGG’s fund profile card below where we provide an overview including historical returns, expenses and identify this fund’s ‘Fighting Styles’.
The “S,” or social, in ESG is typically the most neglected of the three components that make up sustainable and impact investing. S&P Global defines S as “a company’s strengths and weaknesses in dealing with social trends, labor, and politics.” This broad definition includes a range of issues including workplace health and safety, harassment and grievance policies, wages and working hours, supply chain practices, and DEI (equality, diversity, and inclusion).
Why Is the S Neglected?
One reason is that while we now have robust metrics and frameworks to track a company’s carbon footprint, human capital management policies and procedures and the downstream effects of a company’s culture on employees are more challenging to measure and have not received the same attention as environmental factors.
The social component of ESG is also arguably the most political. If, as many traditionalists believe, a business’s sole focus should be maximizing financial returns, anything beyond that, like human rights or social justice issues, are thought to be a breach of fiduciary responsibility. In fact, we are seeing a backlash to the growing popularity of sustainable and impact investing, particularly social issues.
The June 2023 Supreme Court ruling that ended race-conscious admissions programs at Harvard University and the University of North Carolina has spurred legal attacks, or the threat of them, on corporate diversity programs. In July 2023 thirteen state attorneys general sent a letter to the CEOs of the top 100 corporations arguing that the ruling could also apply to employers. By mid-2023, DEI-related job postings fell 44% from the same time a year prior, and many businesses, including Meta and Google, were slashing their DEI programs and initiatives.As part of the contentious March 2024 spending bill, the US House Office of Diversity and Inclusion was axed.
In response to these challenges, many businesses and universities are scrutinizing their social policies and wondering whether it’s time to retrench or cut back rather than move forward. This article presents three reasons why going backwards is not a viable option and choosing to recommit makes good business sense.
Reputational Risk
One of the key drivers in the push for sustainable and impact investing has been public opinion—for example, consumers and other stakeholders who push to boycott a product or service, or post negative online reviews of a company based on its use of child labor, safety problems, or other workplace issues. For instance, S&P Global Market Intelligence found that people were more likely to shop at Walmart after it stopped selling certain guns and ammunition. Younger consumers in particular are taking a more active role in scrutinizing products and services, and can be unforgiving in how they use their purchasing power.
Trent Romer, third-generation co-owner of Clearview Bag Co, Inc. from 2000 to 2021, told me the story of how he tackled reputational risk to his family’s plastic bag manufacturing business. Concerned by the damaging effects of plastic on the environment and growing consumer outrage, Romer began to educate himself and his employees on how his company could be both more sustainable and profitable. Over five years, he and his brother restructured the company, starting with creating a recycling process that repurposed materials and reduced waste by 25%.
He introduced certified compostable materials and, together with employees and customers, created a new vision: healthy planet, healthy people, healthy company. The company became more profitable, grew overall value, increased customer and employee satisfaction, and increasingly attracted outside investment opportunities. Romer wrote two books about his experiences and advises other business owners, further burnishing the company’s reputation as a sustainability leader in a tough industry. Longer term, Romer talks about the challenges for small to midsize businesses in managing the challenges of the regulatory landscape.
Regulatory Risk
The regulatory pace for ESG disclosure is accelerating, even in the U.S., despite fierce opposition from some sectors, particularly the fossil fuel industry. In 2020, for the first time the SEC specifically addressed the social component by approving amendments to Regulation S-K. Public companies are required to disclose human capital measures or objectives related to business management, including development, attraction, and retention of personnel. The SEC has hinted that it will be looking more closely at these issues in the future.
In 2021 (and updated February 28, 2023) Nasdaq adopted diversity disclosure rules that require companies listed on its U.S. exchange to “publicly disclose board-level diversity statistics annually using a standardized template; and have, or explain why they do not have, diverse directors.”
In March 2024, the SEC adopted rules that will “enhance and standardize climate-related disclosures by public companies and in public offerings.” Required disclosure covers actual and potential material impacts of any identified climate-related risks on the registrant’s strategy, business model, and outlook, beginning with annual reports for the year ending December 31, 2025.
The EU has been passing much stricter regulations over the past ten years, and U.S. companies doing business there need to pay attention. Starting in January 2025, the Corporate Sustainability Reporting Directive (CSRD) requires any EU listed company or non-listed company generating more than €150 million on the EU market or with over 500 employees doing business in the EU to report on all ESG issues.
The global ESG regulatory landscape is still fluid, varying by country and required disclosures, and in the U.S. heated controversies around regulations will continue. But it is increasingly clear that going backwards is not a long-term answer, and businesses that understand opportunity risk will have the advantage.
Opportunity Risk
Climate change, AI, pandemics, supply chain disruptions, political unrest—the global economic and business challenges are enormous, as are the opportunities. A July 2023 report by McKinsey looked at what it calls “a rapid evolution in the way people work and the work people do.” The following two findings alone should make companies and investors wake up to the importance of S: by 2030, roughly “30 percent of hours currently worked across the U.S. economy could be automated,” leading to “an additional 12 million occupational transitions,” a much higher number than projected in 2021. That means millions of workers having to switch jobs or careers, with most of the disruption falling on low-wage workers and women.
An article for the Harvard Law School Forum on Corporate Governance makes the compelling argument that companies and investors who understand how to integrate social factors into their business models and portfolios will gain a competitive advantage and be better poised to thrive in a rapidly changing global economy.
And what about younger employees—the ones who will be leading the innovation charge? Deloitte’s Global 2022 Gen Z and Millennial Survey presents a snapshot of what they want: “Higher compensation, more flexibility, better work/life balance, increased learning and development opportunities, better mental health and wellness support, and a greater commitment from businesses to make a positive societal impact.” And 52% want to see more diverse and inclusive workplaces.
In an interview I did with Anna-Lisa Miller, Executive Director of Ownership Works, a nonprofit organization that partners with companies and investors to provide all employees with the opportunity to build wealth at work, she explained how paying attention to the S can result in wealth creation for everyone. After one company offered shared ownership, the value of the business increased, employee engagement and productivity rose, and employee retention skyrocketed.
In Part 2 of this topic I will cover some of the best frameworks being used to track the S in ESG and look at how businesses are incorporating social KPIs into their overall business strategy–a crucial component in driving employee innovation in the workplace and addressing some of the most challenging issues in advancing basic human rights.
Inspired by Women’s History Month, we’re launching an ongoing interview series with top women in the worlds of finance & investment, clean technology, environment and society. These are virtual fireside chats with some of the most experienced and knowledgeable women in their industries. We’re thrilled to kick off this series with a two-part conversation with Kristin Hull, founder and CEO of Nia Impact Capital.
In Part I, we learn about Kristin’s background, which blends the worlds of finance and education, get introduced to Nia Impact Capital, and ask Kristin about the wins she is most proud of. (Read to the end, because those wins are pretty big.)
This interview has been edited for length and clarity.
Birgitte Rasine: Kristin, pleasure to have you with us for this inaugural story for Women of Impact. Tell us about the impact investment firm you run, Nia Impact Capital.
Kristin Hull: Nia is the Swahili word for intention and purpose. Our work is about harnessing financial markets for social justice as well as for environmental gains. And so that’s really where the term Nia comes in: it means purpose. Bringing that sense of intention and purpose, both to every company that we invest into and to building our own firm to follow best practices in human capital management, training young people in sustainable finance.
We build high impact public equities portfolios with intention and purpose. We design concentrated portfolios, investing at the intersection of environmental sustainability and social justice. We look across our six solution themes for companies that are going to benefit from, and help us in, the transition to a just and sustainable economy: which companies are going to play a part, which ones are poised to help in the transition and which ones are doing the very best human capital management. Currently we have $475M under management.
So that’s the product side. We have a Changing the Face of Finance internship program, which is a core component of what we do, and that’s training. It’s really making a space for young and potential changemakers to come in and learn how to do sustainable finance because there are just so few shops, firms, asset managers doing sustainable and social justice investing in an authentic way. There’s a lot of greenwashing out there and not very many people who know how to do it in a way that can actually change systems.
The other piece [of our work]—that we don’t get any revenues from, although we’re well known for it—is engaging with every company that we invest in, as part of our due diligence process. Getting to know the people behind the ticker symbol and working to make change. We know that change happens one conversation at a time and we have those conversations with as many companies as we can.
BR: How would you describe the kinds of people attracted to Nia and its model?
KH: Our clients are our investors; we work to empower them to feel that they can invest in a really competent way. Nia attracts forward thinking investors: those who care about the environment, and those who understand we are in a transition to the next, just and sustainable economy and who want their assets aligned with and benefiting from that transition.
We also tend to attract those investors who are interested in the benefits of diversity in leadership, and companies that include women in senior management.
BR: How did you originally become interested in finance? What motivated you to focus specifically on responsible or impact finance?
KH: I grew up in a trading firm. My dad started a trading firm in a garage—as one does in California—and so we were talking puts and calls and pork bellies, and commodities, futures, options, derivatives. So that’s what I was hearing since I was about 14—and not necessarily loving that [laughs]. It was a family company, and it was a requirement to work there and it was a way to connect with my dad. Later we moved to Chicago—it was summers on the trading floor and the mantra at the dinner table and the backseat of the station wagon was always, buy low and sell high, as often as one possibly can, which is what you do in a high-frequency trading firm.
I would ask questions like, what kind of good are we doing, what are we doing by being the market maker. There were times where being that middleman seemed to make sense and yet it was always very transactional. When we sold that company to Goldman Sachs, that’s when we really got to take a step back and see what was next.
By then I had started a career in education. I had started a charter school in Oakland and I was helping with the fundraising for the charter school, working with the city, with the banks and foundations to get loan guarantees. As the capital campaign came together I realized that the people in my community—the teachers and the parents—had few financial skills or aptitude. I had to do something about that. So creating products that were transparent, focused on the solutions, and meant something and were tangible to the people in my community, that’s what motivated me to create Nia.
BR: What an inspiring story—especially love hearing about your commitment to education. I imagine you put just as much thought into supporting your team. We know it’s not easy being a woman leader in the investment space.
KH: It’s definitely not easy to be a woman in finance, and to be an asset manager, where women-led firms make up just 0.7% (yes, less than 1%) of the $80T under management. Every day can bring challenges, and yet at Nia, we have built an incredibly strong and talented team. We’re thoughtful. Thoughtful and intentional. We recognize we are humans in this space—and we’re also women in this space. We’re in financial asset management, the belly of the beast, which has been white male dominated, you know, since inception. So, we aren’t just trying to build a status quo company, we want to build a company that honors individuals. Just like we don’t want to invest in companies in a transactional way, we don’t want our company set up that way either.
BR:You’ve worked on issues ranging from renewable energy to gender equality to social justice, and you’ve been able to move a few mountains in the seven short years Nia has been around. What have been your greatest gains in terms of moving the needle on large corporations?
KH: There are some big standouts. We won a shareholder resolution at IBM for enhanced diversity reporting which was really important to us because of their size and the role IBM plays in the global economy. We won with 94% of that vote, which is pretty unheard of for a shareholder resolution. The company actually ended up supporting our resolution, which then garnered more support.
Particularly with AI, the algorithms that are going to rule our world, we need to make sure that there are diverse people at those [corporate] tables. They now have a chief diversity officer and she has, I believe, 50 people reporting to her, so it’s not just a checkbox—they actually have a program and are really rolling this out. And we can check in with them on their progress. That was a pretty big win.
BR: The IBM case study is well worth a read—it makes you appreciate just how much work—and conviction—went into persuading a large corporate entity to work with you rather than against you. You were also able to make a shift at one of the world’s largest and best known companies.
KH: Yes—another win announced last year was Apple. Because of our collective work, Apple removed concealment clauses from all of their employee contracts. We got everything we wanted: US employees, international employees, and all contract workers. That was a big deal.
BR: That is a big deal—and just for our readers’ information, a concealment clause in an employment contract limits a worker’s ability to talk about any unlawful activities at work, such as harassment and discrimination. In other words, if a woman—or any person—can’t speak up about harassment or discrimination on the job, they are effectively silenced and put into a vulnerable position. Kristin, having achieved these significant shifts, what are you most proud of?
KH: I think the thing I’m proud of personally, is just our perseverance. That we’re still here and we’re still doing this. I ran into someone I knew from our co-working space over 10 years ago—she had moved away to Vermont and happened to be in town that weekend. She said, “You’ve inspired me in so many ways. I’ve watched you grow Nia from nothing to this.” I think showing other women that change is possible, that means a lot.
Join us next week for Part II, where we talk about some of the challenges in the work Kristin’s team is doing, both in the male-dominated venture world and the larger sphere of corporate influence, and how far we still have to go.
Read about another woman powerhouse, this time in the professional football arena (yes, really!)
This interview has been edited for length and clarity.
Welcome to another episode of “The Impact” on FinTech TV. I spoke to Josh Hatch, Principal & Partner at Brightworks Sustainability, about how they are assisting clients in establishing & implementing sustainability programs. We also discuss the growth of the digital economy, the intersection of ESG & AI in tackling climate change, Brightworks’ future investment plans, and the main drivers of the sustainability conversation.
Jeff Gitterman: Josh, thanks so much for joining me today. Tell me about yourself and Brightworks Sustainability.
Josh Hatch: Brightworks Sustainability has been in business since 2001. It originally started as a sustainability consulting practice and grew really fast. We got into green building work as that was one of the bigger drivers of sustainability impact for a long time. As the broader markets are catching up, we’re doing a lot more in the ESG space: helping a lot of companies both from top down corporate strategy, but also from bottom up implementation in their facilities and their policies and their supply chain.
JG: Define the difference between ESG within building spaces and sustainability—I think people either conflate the two or get the two confused.
JH: I think classically green building and sustainable buildings [means] thoughtfully designing and running buildings: it’s their energy use, energy efficiency, water materials, green cleaning products, the whole spectrum of designing and running a building sustainably. When you get to ESG, the notable difference to me is the policies, the governance, the regulation. In the beginning you had a green team, and they wanted to do things better, but eventually it grows up and then it needs policies, it needs corporate goals, it needs the level of data and tracking to see how you’re doing and eventually to roll up to investors. So it’s the grassroots growing up and becoming serious adults.
JG: And you guys take this into the space of digital infrastructure. Can you explain what got you interested in that aspect?
JH: Yeah, mostly for impact. As we’ve seen, our lives are becoming increasingly digital, professionally and personally. It’s a fast-growing sector. It’s growing a lot, it has large impact. It’s also been one of the more innovative sectors. What motivates me in my work is that we feel like we can really make a difference. They’re funding some of the more innovative strategies, and the hope is that we can socialize and spread that and democratize those solutions to all the other sectors. So it allows us to do some of the leading work and then share it with all the clients we work with.
JG: We hear a lot about the growth of the digital economy and everything else we see in the stock market, the Magnificent Seven is mostly being driven by a digital economy. Is that growth sustainable in your opinion?
JH: I think what we’ve seen over the past few decades is unfettered growth. There haven’t been that many constraints. Digital has become increasingly part of our lives in that time period, and these companies have grown exponentially. We’re now seeing there’s always been constraints, but they’re becoming much more significant. They’re running out of power, they’re running out of water, and then social pressures, both willingness to operate, where they’re allowed to develop, and I think also just competition for our time. I think people want to have digital be part of our lives and enrich our lives, but they don’t want it to become our lives. So I think that there’s pushback from an environmental standpoint, from a social standpoint, and there’s even been financial pressures on them in the last few years.
JG: So from that perspective, what role does the consumer play in driving all of this growth and demand?
JH: I think the consumer is still growing up with how much they want digital in their lives. I think we’ve all benefited—digital has made our jobs easier and our lives better, but there’s also a dark side to that, [like] the term doom-scrolling, people know now that we don’t want to be online, on-screen, all the time. It wants to help us do the things we enjoy, family, rewarding professional experiences, being out in the world, hiking, it can help all that, but it doesn’t want to become the only experience. So I think consumers are starting to moderate their use and be more thoughtful. And increasingly, the tech companies have had an unlimited mindset in terms of let’s store everything, let’s compute everything, let’s not think about what makes more sense. With these constraints, the companies are being more thoughtful about how they’re going to run that and consumers are likewise thinking about what’s most valuable to them and what’s going to make their lives better.
JG: Recently we’ve seen the hearings in Congress where all the social media companies had to talk about how much damage they are doing to kids, so I think you’re right, there is this pushback, how much does it enhance our lives, how much does it make our lives more difficult today, and people are definitely wrestling with that. I grew up without internet, when I say that to my kids they’re like, “What? How did you grow up without internet? It seems crazy.” We’re also hearing conflicting stories within AI. Thomas Friedman said in his editorial in The New York Times a few months back, “The two biggest threats to humanity are AI and climate change. The one hope is that AI will solve climate change.” So in those conflicting narratives, we’re hearing, maybe AI will provide solutions and answers and digital infrastructure will help save us. At the same time, and you mentioned this in your remarks before, we’re worried about all the demand for water and energy that is being driven by digital. How do we balance these two stories?
JH: I think that neither extreme is right. AI is not going to solve everything, but it’s also not the case that it’s good for nothing. I think there are real applications where we’re going to find that it can help in particular with the grid and energy, and it’s an inherently complex system. And as we move towards a more dynamic model where it’s not just base load fossil fuels with peak natural gas, when we’re moving into a dynamic mix of resources with intermittency on renewables and solar and batteries mixed in, that level of complexity, machine learning is going to help, but, again, it’s not going to solve everything.
What we’ve seen is that over the last decade or so, technology companies have driven a significant portion of the greening of the grid. They’ve inked half, two thirds of the renewable energy that’s privately developed. So they’ve been a big part of the solution. The question is as we move forward into the next decade with more constraints, transmission constraints, constraints on where we can develop in available sites, can they continue that innovation, can they continue to be the leading companies helping the sustainability component be fully addressed? The worry is that they will pull back from those commitments and that innovation…
JG: In order to meet demand.
JH: In order to meet demand and move back to more traditional methods, whether that’s fossils or nuclear or whatever. There are two paths here. If they continue the leadership and innovation that they have, which I’m really hopeful for, they can drive those solutions through the rest of the economy. Or if they revert to some of the historical older methods, it could be the undoing.
JG: But you’re seeing even Microsoft now launch a whole nuclear division within Microsoft to look at that. How do you feel about nuclear as a potential solution for all of this increased demand from infrastructure?
JH: I’m conflicted on it a little bit. On the one hand, I think that nuclear can make sense in some limited situations and I think in particular when you have a building or a piece of digital infrastructure like a data center that uses a massive amount of power, having an on-site resource that is reliable and baseload could make a lot of sense, because if you don’t have that, then it’s going to put that much more burden on transmission and public resource constraints. So it could be a way to pull off the grid some of these significant loads. It could also maybe help provide that same level of predictability to the base of power. So I think it could be in a limited sense really a meaningful part of the solution, or at least a stepping stone for the next decade as we figure out how to get renewables and all this intermittency and affordable battery storage at different time scales integrated into the grid.
So I don’t think I want to see it everywhere. I don’t think it’s going to come back in the big power plant ways. I think most people are thinking about these smaller reactors, SMRs, that are self-limiting. I’d love not to have that be part of the solution, but I think in reality it could provide a real part of the solution at least for a decade or two.
JG: What does Brightworks see for the future? What are you most interested in from a company and investment standpoint going forward?
JH: The corporate sustainability work has always been present, but green building became the biggest driver for change for a long time, and that was a big part of our practice. In the last six or so years, it’s really diversified and spread out. We do a lot more work now on the corporate side, a lot more in supply chain, a lot more in embodied carbon of materials, a lot more in the health and social aspects. It’s not just an environmental thing.
All these materials and raw materials that go into servers and data centers come from all around the world, and they’re manufactured and mined in jobs that we probably wouldn’t enjoy. We want social to be a real important part of the solution. Sustainability is not a competitive advantage—it lifts everyone up. We need to think of it from an infinite mindset, and that means more collaboration, more sharing what’s working and what’s not working, so that we can help companies that are less far along figure it out quicker, and bring people together to work for the solutions that we need.
JG: Do you find that a lot of companies you’re working with are driving the demand for solving a lot of these issues? Or is it more consumer driven? Where are you seeing the push right now?
JH: Regulation has been a relatively small component of this. I think it’s starting to become a lot more real, not [so much] from the US perspective; more so from what’s happening in Europe. The spillover of that is driving multinationals: they may be based in the U.S. but they have European operations, they’re going to reform their sustainability and reporting programs globally to meet that regulatory scheme. So I think Europe is driving us more, but it seems like financial and investor pressure are some of the most significant things.
There were early movements years ago on insurance companies. The real risks and challenges are being realized in financial markets. I think there’s a lot more investor-driven and shareholder-driven pressure right now than there is regulatory pressure. There’s always been this morale driven [pressure], but, as we’ve always known, sustainability is good business. The morale factor has brought people to the table, but companies that have been successful with integrating sustainability have done so to help their businesses. So I think that there’s both the self-interest for the company, there’s the license to operate from investors in acknowledging risks that are real, and I think regulatory in some ways is catching up.
JG: Lastly, let’s just touch on the IRA bill a little bit. Do you think it is also fostering a demand from an investment standpoint? Are you seeing it unlock money and capital going into this area more quickly now?
JH: We don’t see it as much directly in our business, but it’s definitely pushing forward a lot of things like EV batteries. There’s a big need for infrastructure, so I hope that the IRA can drive some of the infrastructure investments that are needed from a public perspective. One of the limitations in getting to where we need to be—our entire grid powered by renewable energy—is the utilities and the transmission resources and these projects that take so long and require a agreement between public and private sector transmission lines. Nobody wants a transmission line near them, but at the end of the day we want power in our homes.
If we want to get to a green grid, we’ll need transmission lines that help better connect where renewables are strong and economical to develop and where power centers are. Digital infrastructure has an opportunity to locate where the renewables are. Can we make those investments to bring power lines there and internet lines there so that we can put things in the right place with less infrastructure rather than more? The public needs to lead in providing that network, they need to lead in helping develop the base to build on.
JG: What is Brightworks doing now to help drive this change and this move towards sustainability?
JH: We are doing a lot of work on individual client problems, helping them with their green building programs, helping them look into their supply chain and in embodied carbon, but some of the more interesting work is bringing those companies together. You’d be surprised to find out that often the three embodied carbon leads at three different technology companies aren’t already talking. We’re working with each of them and can help bring them together, and it’s really helpful for us to work with NGOs that are also in this space trying to do the same thing. So we’ve been hired by both the infrastructure iMasons Climate Accord, as well as the Sustainable Digital Infrastructure Alliance to help bring these companies together in a more powerful way so that they can leave their company mandates at the door and share solutions, and align on some of the outcomes that they’re going for.
One great example of that is we’re building buildings, we want low carbon concrete. Everyone’s asking the market at different times and in different ways and using different metrics. It’s really confusing to the market. If they all go together and say, “This is the common specification we’re going to go out to market with,” and they all start using it, that’s going to move construction and manufacturing more quickly. So we don’t want five different bespoke versions going to market. We want one powerful single message. And groups like Climate Accord and SDIA can help those companies come together, leave their self-interest at the door, work together for the common good so we can go faster. And that trickles to other industries as well. Leadership can help other industries follow.
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Customer expectations within the world of wealth management are constantly evolving. Today, investors demand personalization, instant service and a pleasant experience throughout. Institutions and challengers must cater to the modern client in digital landscapes.
Traditionally, the role of the wealth manager has focused on sales and managing conducive client relationships, all while maintaining a suitable level of financial literacy and clarity. Although this position hasn’t required the latest technology, its future sustainability will now revolve around ever-advancing products and services.
In the future, it’s not only inevitable that more digital elements will become intertwined with the wealth management landscape, but it will also become imperative for firms to incorporate digital transformation tools to outpace industry rivals.
The road to digital transformation may seem like a jarring concept for traditionally focused wealth management institutions, so let’s take a deeper look at what the future of digitally-driven wealth management solutions will look like:
Overcoming wealth segment saturation
Given the level of market saturation for UHNW (ultra-high net worth) and HNW (high net worth) individuals among traditional institutions, more key players in the wealth management sector are looking to win appeal among growing affluent and lower HNW clients.
While these segments refer to individuals with a net worth of between $300,000 and $5 million, research conducted by Oliver Wyman’s Wealth and Asset Management has determined that a potential revenue pool of $230 billion is accessible for firms, with just 15%-20% of this group being served by wealth managers at present.
The research suggests that these emerging segments can help generate $45 billion of new industry revenue while accounting for around 60% of the total wealth management revenue pool by 2026.
Crucially, this new competitive wealth segment is ripe for innovation, and the growing number of affluent individuals is generally more receptive to digital transformation tools. This opens the door to a high revenue pool for firms that have the ambition to modernize processes ahead of their competitors.
Measuring the impact of digital transformation
When it comes to wealth management digital transformation, there can be myriad challenges facing industry innovators that may not be as impactful in other industries like retail, manufacturing, and marketing.
Maintaining compliance in a dynamic regulatory environment can be challenging, and overcoming fierce competition from resourceful challenger banks may be a daunting prospect for smaller wealth management firms.
Today, digital transformation in wealth management relies on digital-first experiences and firms must discover solutions to allow clients to view and access portfolios online. Advisers should also become more accessible as a digital point of contact while offering more focused and personalized solutions.
How will true personalization be achieved? Digital transformation within financial services will be built on data analytics and artificial intelligence). By utilizing the right AI solutions and by maintaining a focus on harnessing the potential of generative AI, firms stand a better chance of competing against the threat of market saturation.
The race to harness the potential of AI
The recent rapid growth of generative AI has helped players in the asset and wealth management industry optimize their operations on an unprecedented scale.
The presence of AI is sure to be felt throughout the operational, financial, research and analytics, risk management, investment relations, and regulatory compliance departments of organizations, with significant potential for further innovation.
“We think that AI will only accelerate digital transformation,” explained Yoni Assia, founder and CEO of eToro. “Just as Uber took advantage of inefficiencies in travel and AirBnB in hotel stays, AI will squeeze out inefficiencies in investing, taking care of the elements that humans don’t (or are not perceived to) add value, such as in portfolio construction.”
When it comes to wealth management, generative AI has the potential to enhance the quality of data at the disposal of firms while optimizing the ability to mine structured financial data in a way that drives reliable results alongside unstructured data, such as investor documents.
The technology can also bolster the ability of firms to analyze a client’s portfolio and recommend investments based on metrics like risk tolerance, financial goals, personal circumstances and retirement horizons.
The arrival of personalized wealth management
The more advanced data analytics offered by next-generation AI solutions can help deliver unprecedented levels of personalization for clients.
Through these tools, it’s possible to create more tailored advice and customer support through digital platforms while leveraging AI and machine learning technologies for more responsive and bespoke decision-making.
This greater element of personalization will help businesses to unlock untapped potential throughout a range of high-net-worth clients and win the trust of younger individuals experiencing growing levels of wealth. Accompanied by personalized product recommendations, real-time fraud prevention and general process optimization, digital transformation will deliver a comprehensive experience for all industry participants.
The wealth revolution will be app-based
The digital transformation revolution will influence wealth management on an operational level in a number of ways. One thing we can be sure of is that these services will be app-based, rather than accessed in person at brick-and-mortar locations.
As for the financial world, digital transformation is accelerating the acceptance of finance-based apps. 2019 saw 1.2 billion downloads of finance-based apps; that figure grew to 2.7 billion by 2022. Expectations are that these astronomical figures will reach 3.9 billion by 2027.
For individuals in all wealth segments, the message is clear: digital transformation revolution is underway, and it’s more accessible than ever.
My name is Santia Deck, and I am grateful for the opportunity to be a contributor to this vibrant community of over 35,000 subscribers, and to share my journey as a woman professional athlete, entrepreneur, and vocal advocate for the contribution that women in sports are making. My journey in the sports and business world has been marked by groundbreaking achievements and a steadfast commitment to elevating women in sports.
I’m known for making history… twice: first, I was offered the largest contract ever for a woman in football, and second, I broke barriers as the first female athlete to own a shoe company, Tronus. I view these milestones as not only personal and professional achievements but most significantly, steps towards challenging the status quo for women in athletics and opening doors for women in sports and business. At the same time I was taking steps to build a framework for young women in sports, I was taking several of the opportunities presented to me and unifying them into a model for success as an athlete and financial success as a businesswoman. I was basically treating myself as the “test” to see if, and how, it can be done.
Like many, my journey has enjoyed—and endured—many pivots, twists and turns as I navigated an unforged path for young women to succeed and find financial rewards in an industry dominated by the well-deserved attention to men’s sports. Whereas women have long enjoyed recognition and rewards for their achievements in the sports women commonly compete in, such as tennis, golf, and soccer, there has not been as significant presence, participant or “player” in a sport like women’s football. I set out to change this.
Why football? Well, I love the game. I also love the game of rugby and successfully competed there as well. Playing in male-dominated and aggressive sports with my brothers and his friends growing up, it came relatively naturally as my successful track career was great training grounds to compete in the game. I went to college, Texas A&M – Kingsville, on a Track and Field scholarship. The life of an Olympic qualifying sprinter is intense; frequent injuries can easily end promising careers. I saw fairly early on that any success I may have pursued or achieved as a Track & Field athlete held limited financial prospects. Long before NIL (Name, Image and Likeness) opportunities elevated to where the industry is today, I knew I needed to set my sights elsewhere
I am also a fitness instructor and fitness model. I became known as the “Queen of Abs” on social media and rapidly grew a community of over 1 million followers. This community was not only interested in the workouts but also in following the journey to compete in the relatively unknown but growing sport of women’s flag football.
Yes, I secured a multi-million dollar contract to compete in women’s football, but I wasn’t one to settle for climbing just one summit. As I looked around for other mountains to conquer I asked, “why isn’t there a sports performance footwear company, designed and created, by a woman?” While I might not have known much about how to manufacture a shoe line, I did have several assets in my favor. I had me as the brand, and I had a community of over 1 million members. So I launched Tronus. This leads us to the second history-making, barrier-breaking milestone in my career—I was the first female athlete to own a shoe line. I’m happy to add that we also launched several lines of shoes and colors and eclipsed $1 million in sales.
My passion for sports and advocacy for gender equality has driven me to create “Winning Her Way,” a platform dedicated to profiling phenomenal female athletes. This platform is more than just a space for interviews; it’s a community where women can share their stories on their terms, celebrate their triumphs and address the challenges they face. By giving a voice to these incredible athletes, we not only acknowledge their contributions but also inspire the next generation to chase their dreams.
I am so encouraged by the growing attention that women in sports are attracting, the NIL opportunities to monetize their brands and the impact on the sports they play. It’s time to move the needle forward and create a more inclusive and equitable sports industry.
Over the coming months, I will share these experiences in more detail: how they have shaped who I am today and my ambitious plans for the future. I’ll keep you updated on my business endeavors, impact investing projects, advocacy efforts and the progress being made for women in sports. Additionally, I’ll bring to light the companies and brands that are making significant strides in investing in and supporting the advancement of women’s sports. These allies play a crucial role in shaping a more inclusive future, and it’s important to recognize and support their efforts. So, stay tuned to Equities News as my partner in sharing all that I’ve learned along the way.
Join me as we explore the intersections of sports, business, and gender equality. Let’s celebrate the achievements, address the challenges, and pave the way for a brighter, more equitable future in sports. I’m excited to embark on this journey with you.
Let’s champion the cause of women in sports together!
Companies, products and services are all transforming with 5G and AI
Artificial Intelligence and 5G wireless are changing everything. Not only are they transforming every wireless company in the industry, but also quite potentially every other company in every other industry as well. As investors, you must follow and understand the new directions that are being created. Going forward we face enormous new choices, challenges and opportunities.
Wireless has grown and changed many times over fifty years. However, as we move forward with 5G and AI, we must understand things are transforming more quickly and wider than ever before.
Understand what is happening. It is more than just a wireless upgrade like usual. This time it is impacting all industries. That means we need to know where to look for growth opportunities. And to understand whether these are short-term or long-term.
Pull the camera back and get a longer-term, historical perspective
So, let us first pull the camera back to get a longer-term, historical perspective on the changes which are creating new paths to follow with new technologies.
Whether we are creating new industries or just updating what we already have, everything will be fresh and new going forward.
That’s why every investor needs to understand where we are today and where we are heading in this new journey. We need to understand the changing growth curve.
Every company rides the ever-changing growth wave
Every industry, company, product and service, rides the growth wave. They are either on the way up, or they have crested, or they are on the way down.
Consider companies like Motorola and Blackberry. They were dominant leaders in their wireless handset space, until the marketplace changed directions and they did not.
They suddenly, they lost their way. Their growth wave quickly crested and collapsed. Suddenly they were sent to the bottom of the list of competitors.
They were warned that there was a cliff ahead. But they kept going, ultimately right off the edge.
Others like Facebook, Google with Android, Apple with iPhone, Samsung with Galaxy and others kept riding their growth wave and are still in the growth mode today.
However, even todays leaders need to strategize correctly for the changes that 5G and AI will bring to their space.
Technology is an industry which rewards the informed investor
That being said, technology has always been an industry which rewards the brave and informed investors. AI and 5G are the next, advanced version of the growth wave we have watched for quite a long time.
In fact, AI and 5G are not only transforming wireless, but they are also starting the same thing to every other industry as well. In fact, in coming years this will impact every area of our lives.
Are we ready? The good news is thanks to all this new technology, our world will be very unsettled for years to come.
That is a growth opportunity for every company, their customers and their investors.
AI and 5G are re-writing the rules we live by
Going forward, we should expect to see new ideas with new technology rewrite the rules, time and time again.
That is what AI and 5G are. Moving forward it will advance to other and newer artificial intelligence ideas and technology. It will also continue to move forward from 5G to 6G and beyond.
As AI continues to advance, it will ultimately start to write its own software. This is something we should keep an eye out.
Co-opetition is when companies both work together and compete
Remember, each of these separate technologies will be successful on their own and together.
We are going to experience a new world of co-opetition. A time when companies both compete with and work together or partner with competitors in different ways.
We’ve been through this before. It works, for a while anyway.
Think of it as planets in the solar system. There comes a time when things line up. This is when competitors become partners. Then, as they continue to move and go out-of-synch, it no longer makes sense.
Today, we are just in the early days of this revolution which will last for several years.
These are some of the reasons investors need to stay fully engaged in this transformation process which will continue moving forward.
Remember, while there are real growth opportunities, there are also real threats, risks and challenges we must all face.
That is why it is so important for every investor to get up to speed quickly and stay there. To understand and to be successful with wireless and AI as we go forward.
We must continue to expect new technology which will change continually everything we think we know about our world.
The Sustainable Finance Podcast is a weekly program featuring conversations with sustainability thought leaders such as cleantech entrepreneurs, VC investors, CEOs, NGO executives, and creators of the ESG indices and analytics platforms.
Marjella Lecourt-Alma is the CEO and co-founder at Datamaran, the only software analytics firm in the world that can monitor external risks and opportunities (including ESG) in real-time. Marjella and the Datamaran team believe that companies who care about their success — in an ever evolving world — incorporate material ESG risks and opportunities from the top down.
I interviewed Lecourt-Alma about the future of ESG reporting and the biggest challenges businesses and organizations face, and how ESG software and AI can accelerate the gathering and reporting of ESG data and set a business up for success.
Paul Ellis: Marjella, the regulatory pressure on ESG has increased dramatically with CSRD, CS3D, California bills, and the U.S. SEC climate disclosures. Are these regulations adding to the bureaucratic burden and getting in the way of achieving real world impact?
Marjella Lecourt-Alma: It’s a very good question, Paul, and I think initially a lot of folks working in the field of ESG were of the opinion that regulations wouldn’t be what we needed: as in regulations will lower the bar instead of making companies ambitious as it comes to their ESG strategies. Interestingly, I think the opposite is occurring. So I would say regulations are our unexpected best friend at the minute.
These regulations are actually pointing the finger not so much at compliance, but really in terms of government governance, in terms of ownership, in terms of leadership. So when you look at the regulatory developments, whether it is CSRD or CS3D or the U.S. SEC Climate Disclosure Act, all of it is about understanding when it comes to these new issues, these new business risks and opportunities, who’s actually in charge? Who’s driving this? How have you set up internally your governance system?
It’s asking questions about how companies are getting organized around this rather than, I think initially, the expected box ticking exercise. Once it gets to regulation, we get to the boundary of boredom and it gets to the check the box exercise and actually the opposite has occurred.
Marjella Lecourt-Alma
PE: Can you share an example at Datamaran without giving away any secrets about any of these regulatory platforms that you’ve encountered?
ML-A: Actually, a lot of our clients are new clients, coming to us because of the regulatory pressure. And what has happened within these companies is that new leaders are getting involved. We’re seeing the General Council or the CLO appear, we’re seeing the CFO appear. So there’s an interesting new collaboration happening at the C-suite level.
Also, in trying to answer to their board members and, of course, investors on what they’re doing in terms of ESG, the first question they have is: Datamaran team, how can you help us get set up for success? What do we need to do in terms of our governance? Who do we appoint?
And yes, we had a CSR team in the past, but this team was involved in our CSR report, and they were involved perhaps in philanthropy. But not so much in business strategy. So it’s C-Suite members realizing ESG is a governance issue, and it’s an opportunity that is being presented to ESG leaders or CSR leaders or sustainability experts that have been on this for many, many years to actually step up and take a strategic role. And I think that’s also very exciting.
PE: Thank you so much for sharing that. One of the complaints that we’ve been hearing for several years now as we have been anticipating this regulatory infrastructure development, is that the C-suite were not getting engaged and were handing it off to other parts of the business infrastructure. But what you’re saying, it sounds like just the opposite is starting to happen. That’s terrific and good news for Datamaran and lots of other companies as well, right?
ML-A: Right, finally. But it is happening.
PE: That’s great. Glad to hear it. Now, what other external pressures are business leaders facing regarding corporate sustainability and ESG and what internal obstacles businesses must overcome to build successful plans and achieve their goals?
ML-A: Thank you for your questions. I think in terms of the first one, the external pressures, I would say there are two main things. The first trend that we’re seeing is that everyone is asking, a lot more people want to understand what companies are doing in terms of ESG and how they define it.
You know, there is no ESG one size fits all, so it’s very much about companies getting ahead of it and trying to articulate what these issues mean to them and what are the issues that they are prioritizing. And they’re getting these questions across the board into multiple teams. Investor relations also being an obvious one today. And there’s also results in the ESG team, or the sustainability team needing to show up everywhere to help answer these questions that are, that are coming to companies in a much more frequent way. So we see clients talking about the need for becoming more agile when it comes to answering these questions around ESG issues.
Another external pressure I would say is around finding and keeping the right talent for companies. So of course, we all know that Gen Z is very different from previous generations, and more aware of what is happening in business, much more mindful of the environment and lifestyle and food, and also much more interested in getting this information straight away. So if you want to be attractive for new generations, the new talent that you want to attract to your companies, you have to have your story straight. It has to be compelling and it has to be up to date. You have to be in conversation with these new generations.
In terms of the internal obstacles you talked about, I think there’s really only one main internal obstacle that makes action on ESG difficult, and that is really about communication. So you might have your ESG team that has a very specific interpretation of what ESG disclosure and ESG strategy might look like. Now, what we’re seeing today is that this has become a matter of the C-suite. These people are getting involved, they are responsible, they have to take ownership.
And this is where we often find a literacy gap, not just with C-suite, but also with board members.
And this is where I think everyone is playing catch up: They’re thinking, What all this stuff is about: How do we make the first steps? And oftentimes what we see here is that before they make the first steps, they first have to pause because they have to learn, and they have to understand what they don’t know yet.
PE: That’s a very good place to enter the discussion of our next question. And that is, what role does technology play in overcoming these challenges at the C-suite level and all the way down to the folks who are doing things day in and day out to make sure that the company keeps running the same way and keeps making progress?
ML-A: Sure. I think the role of technology is pivotal here. On the one side, addressing of course the ESG skills gap and literacy gap, I think there is a role for technology companies to play to help scale expertise. And that’s how we’re looking at Datamaran. We’ve been building out use cases related to data-driven materiality, double materiality, and ESG risk monitoring that typically consultants would do, or an in-house team. So a technology player can help scale expertise that is currently not readily available in the market, and see how technology can be best tapped to do that.
So we use AI, generative AI, all the new technologies available to make that happen. Also, I think in general, every well-respected business function today should have a tech stack. And then, in terms of using technology, to get perhaps more confidence in your decision making around ESG when you use different technologies. And especially the ones that we use, you’re able to analyze more data faster in a more applicable way.
I think that one of the great benefits of leveraging technology for ESG decision making is that you can analyze thousands of regulations, thousands of reports, thousands of media analyses that would otherwise be humanly impossible. So lots of benefits.
PE: Now tell us a little bit about how businesses can leverage the advancements in artificial intelligence as well as your experience with your customers, because you work with many of the largest corporations in the world and they have large staffs that are focusing on these technology advancements. How is that going?
ML-A: A very specific example is businesses, oftentimes ESG leaders, trying to evidence to their C-suite teams or their boards why certain decisions are being proposed. And if they can do that on the basis of the fact that this is a data driven practice now, rather than someone’s opinion, or a bunch of people’s opinion, that really helps drive the change internally.
So if you have the evidence looking at the regulatory landscape, the media landscape, and let’s also say the reporting landscape as a proxy to industry trends, then you can present facts to stakeholders internally who otherwise might have said, that’s just your opinion. I think that’s where AI particularly is very powerful.
Another more recent example is that what we’re seeing, C-suite leaders especially would like to have more handholding and more contextualization of ESG trends. If, for instance, we’re seeing that business and human rights is becoming a very big theme in a particular country, they are not just interested in understanding that this is a trend, they want to understand why.
So gen AI in particular can be used to provide that narrative, that context. What am I actually looking at here? And I think for the longest time in our business, this is where we saw some limitations, and now with gen AI and those trends, we see an opportunity to press ahead and for gen AI to play more of the role of the consultant or the in-house experts that go beyond the graph or the table, or the data visualization into explaining what it means, and giving you the right context.
PE: So gen AI is now becoming an accepted part of business on a day-to-day basis is what I think you’re saying, even at the C-suite level, in many companies. And I’m very excited to hear that. I know I’m way behind the curve in terms of learning how to use it myself. So how does smart ESG help business leaders build trust with investors? Because now we’re getting into the, the, the part of our discussion where we’re starting to talk about capital deployment, and that is ultimately, as we all know, the bottom line.
ML-A: That’s a really good question. I think smart ESG also alludes to it being tech enabled. It would be obvious why Datamaran would say it should be tech enabled, but it’s even more so in the approach. If you are an investor, you very quickly understand that ESG is different from industry to industry, from country to country, and perhaps even very company specific.
So, when you do ESG, right, and we call that smart ESG, you decide to focus on a key set of, let’s call it material, or let’s call them priority ESG risks and opportunities. But also, you are able to explain why you are deprioritizing a lot of these issues. I think there’s been a lot of backlash on ESG also because everyone was trying to do everything, try to cover as many ESG talks as possible and then hopefully we’ll end up high in all these ratings.
And what we’re seeing now is with this focus on governance and ownership and leadership and making choices, that smart ESG is really about narrowing it down and then doing that part right. If that means for you that is climate risk, biodiversity, and talent retention, three issues, so be it.
If you can defend why that is, and you can also defend why you are deciding to leave others behind, then that is your ESG strategy.
Of course, one side note here is that there’s of course the regulatory aspect as well. So part of ESG is companies making judgements, and part of ESG is also regulations starting to mandate certain issues and, in terms of those issues, then they are of course material to all.
PE: There’s a whole population that we need to integrate into this discussion: investors and stakeholders. How does TSMART ESG support investor relations and stakeholder engagement?
ML-A: I think in terms of the investor and stakeholder engagement, smart ESG really helps business focus on the key issues that matter most. But also with SMART ESG, we’re essentially saying, take it in-house, make it your own. Do not outsource critical ESG matters outside of the business.
And once your investors and your key stakeholders understand that you have properly integrated ESG into the key functions from the top down, obviously that’s going to build a lot of trust because then there is an understanding on the other side that you have properly invested in getting the skills, getting the tools, and also getting the focus, making the choices that make your business successful. So, I think the biggest benefit of SMART ESG when it comes to investor relations and stakeholder management is the ability to insource it. And then, with a lot of confidence, being able to talk about it.
PE: We now know ESG teams need ESG software in the same way that finance teams need finance software. This all makes sense. Where should businesses start on this software adoption journey?
ML-A: We’re hearing that question a lot. I think the most important realization before buying anything is realizing that with ESG, you don’t need to do it all. And of course there’s going be stories out there in the public domain that are going to tell you that ESG is very complex and you probably need an army of people to help you with it.
So our advice here at Datamaran is you don’t need to do it all. Start with prioritizing the issues. When ESG is truly a strategy, you exclude stuff as much as you include it. So start with that and then afterwards invest in data collection software. Invest in reporting software that will help streamline it all. But if you get the beginning, right, if you get that focus right, you will not need to collect as much data and you will not need to report out as much. So never start with data collection.
PE: That’s great advice, Marjella. How can people reach you with questions about these topics?
ML-A: Our website has a lot of information. And we have a LinkedIn community led by Lottie Hawkins, so you can reach out to any of us on LinkedIn. We’d love to hear from you as we’re as we’re building our community.
