Welcome to ‘In the Hot Seat’, a fortnightly series where we tackle some of the biggest questions facing sustainability professionals across a range of industries. We’ll also explore what sustainability means and how it is interpreted across different sectors and geographies.
This week, Zara de Belder, Head of Maitland/AMO Sustain, caught up with Kensey Biggs, Senior Vice President, ESG and Corporate Social Responsibility at Truist, the sixth largest U.S. bank. Please note that the views below are Kensey’s own and do not reflect the views of her employer.
1. Over the past year, there have been so many significant developments related to ESG in the U.S. What do you consider to be the most important ones and why?
We are living in a historic era for ESG, so it often feels as though a significant ESG development materializes daily. In my opinion, one occurrence that can’t be overlooked is how the COVID-19 pandemic put a spotlight on ESG in capital allocation, a topic raised more frequently in recent years and also appearing in more ESG surveys. This subject has increasingly compelled some stakeholders to reframe corporate decisions historically viewed as solely economic through a social lens, prompting questions that corporations and C-suites must answer – and defend.
One notable example related to ESG in capital allocation occurred during the early months of the pandemic in 2020 when many U.S. corporations decided to pause share buybacks and reduce or suspend dividends. While some cases involved a company’s scramble for cash, other instances arose following bouts of intense scrutiny towards companies that were laying off employees while repurchasing shares, and consequently criticized for prioritizing investors over employees during a global health crisis. The critics argued that higher wages for employees, paid medical leave, and other actions benefiting employees were non-negotiable priorities when compared to buybacks and dividends, especially following the pledge many prominent U.S. CEOs took in 2019 to support stakeholder capitalism as part of the Business Roundtable Statement.
One of the reasons I think the conversation about ESG in capital allocation is so important is because I don’t think it will subside any time soon. My view is that in some ways, U.S. companies will slowly return to operating more like large corporations previously did for around 25 years in the mid-20th century – when large, high-functioning organizations were viewed as social
institutions, and Peter Drucker was emphasizing that employees were assets, not liabilities. This was also when millions of Americans dedicated their lives and their loyalty to working at the
same company – with the expectation that the company would demonstrate the same loyalty in turn and take care of its employees upon their retirement. While I do not anticipate employees
in the near future working at the same organization for life, I do envision employees increasingly expecting to be taken care of by the corporations for which they work – and companies adapting their capital allocation plans accordingly. In terms of allocating capital to M&A, I think in the future it will become standard for acquirers to conduct meticulous ESG analyses before approaching a target.
On the environmental side, a confluence of factors accelerated the focus on climate change in corporate America. Last year, BlackRock CEO Larry Fink declared his belief that we are on
the edge of a fundamental reshaping of finance, and that soon there would be a significant reallocation of capital in line with the transition to a lower carbon economy. Since then, there has been a proliferation of momentous developments initiated by the new Biden administration and influenced by the Fed’s statement that climate change is a stability risk.
In my view, last week’s SEC announcement was one of the most meaningful U.S. developments for ESG in recent years. Those who know me will laugh if they read this because over the past few years, I have babbled on about my personal belief that it would only be a matter of time before the SEC stepped into the ring on ESG. I think there will be more to come here, including the potential for the SEC to enact mandatory ESG disclosures. This development is especially notable because I think it will force more rigorous analysis and measurement of ESG data – and more fulsome disclosures – by public companies. It will also increase the number of U.S. corporations that get their ESG information verified or assured by a third party. To me, this brings us closer to SASB’s original aspiration for companies to report ESG information with the same level of rigor, validation, and internal controls akin to traditional financial reporting under IFRS or GAAP.
Most importantly, I’m confident that enhanced disclosure and reporting standards will prompt increased responsibility by corporations – even if it’s the tail wagging the dog, in this case.
2. You are a committee member of JUSTGen, a network of passionate professionals who support JUST Capital, a not-for-profit organisation which believes that business and markets can and must be a greater force for good. How would you define a ‘just’ company?
I think JUSTGen defines it best – they describe “just” companies as organizations that are advancing efforts to build an economy that works for all Americans.
For anyone who is not familiar with JUST Capital, I encourage you to look them up. I first heard about the organization through a former colleague, and I have followed it ever since. Expanding on what I referred to above, JUST’s official mission is defined as building a more just economy that works for all Americans by helping companies improve how they serve all their stakeholders
– workers, customers, communities, the environment, and shareholders. JUST’s research is always relevant because the organization’s teams poll the American public to identify what issues matter most. They then analyze the data to create rankings, indices, and other tools that help measure corporate performance in the stakeholder economy – with the goal of improving that performance.
Overall, we are living in an extremely exciting time in history, a period that has sparked fascinating and even existential debates on sustainability, social issues, the transition to a lower carbon economy – and the increasing expectation for corporate America to take steps to support an economy that works for all.
3. From a reporting and disclosure perspective, what guidance would you offer companies who are just starting to develop their ESG programme?
First, I would tell them not to be intimidated by all the acronyms involved in ESG reporting. Then I would strongly encourage them to make ESG a board-level priority that is embedded in the organization’s overall strategy, business, and operations – not dealt with in isolation. I would remind them that ESG requires time and resources, but that it also presents one of the most significant growth opportunities for corporations in our lifetime.
For reporting specifically, I would start by telling them some great news, which is that they likely already have some important ESG building blocks in place – they just don’t know it yet. In my last job, I did investor relations and ESG consulting for companies across sectors, and it was always very gratifying to reassure clients starting their ESG journeys that they probably had some governance items (“G”) covered already – a Code of Ethics, auditor independence, an anti-harassment and discrimination policy, and other basics. They just weren’t disclosing them
externally on their websites or in publicly available materials. Obviously, a company should first and foremost consult with legal counsel before publicly disclosing any corporate materials,
but after ensuring the proper legal approvals, making any related recommended changes, and thoroughly evaluating any perceived risks, most companies I worked with found they could check a lot of boxes related to ESG – especially on governance – in a short amount of time.
4. If you had one piece of advice for someone considering a career in responsible investment, what would it be?
Buckle up – and get excited – because as one of my mentors said, ESG will ultimately become ubiquitous, so my advice is that before it does, hang on tight. Be ready for changing regulation, shifting priorities, varying ESG data especially on climate, evolving accounting and valuation models, and other unpredictable twists and turns. I would emphasize that if they like predictability, they should reconsider a career in this area because the rules are still being written. I also would underscore that they need to have financial acumen first because it is the foundation, and ESG incorporation complements financial metrics with an additional layer of valuable, non-financial insights. If they were comfortable with all of those things, I would tell them that they are in a great place at the right time. Some reports estimate that total US-domiciled AUM using sustainable investing strategies grew 42% from 2018 to 2020. And in many ways, the US is just now getting started when compared to Europe.
To put this growth into context, I read a Financial Times “Moral Money” article about former US Treasury Secretary / former Goldman CEO Hank Paulson’s recent decision to return to the private sector to chair TPG’s new climate fund. One line in the interview analogizes the climate opportunity as “akin to the digital revolution” of forty years ago. That was the best description I’d read about the potential business opportunities and growth ahead in sustainability and responsible investment.
5. Finally, what does sustainability mean to you?
In my professional life, I view sustainability through the eyes of public companies, so it means – being responsible across environmental, social, and governance areas will result in better risk management and contribute to long-term value creation. I’m so incredibly interested in ESG data as a leading indicator that can provide some of the most valuable insights about a company.
In my personal life, sustainability takes on another meaning. I have a two-year old son, and I often think of the world I will be leaving him, and I wonder how much better – or worse – things will be then. If you watch the David Attenborough documentary A Life on Our Planet, I can promise that you will think about sustainability and the future of our planet a lot more, whether or not you have kids. My hope is that my efforts at work and at home will make a positive and meaningful impact – albeit very small – on the world my son will inherit. That is sustainability to me.
About the Author
Also by this Author
- Maitland/AMO Sustain – In the Hot Seat with Michele Giddens, Co-Founder and Co-CEO of Bridges Fund Management
- Maitland/AMO Sustain – In the Hot Seat with Jovana Stopic, ESG Manager at IK Investment Partners (‘IK’)
- Maitland/AMO Sustain – In the Hot Seat with James Alexander, Chief Executive at The UK Sustainable Investment and Finance Association (UKSIF)
- Maitland/AMO Sustain – In the Hot Seat with Kensey Biggs, Senior Vice President, ESG and Corporate Social Responsibility at Truist
- Maitland/AMO Sustain – In the Hot Seat with Lisa Beauvilain, Head of Sustainability & ESG at Impax Asset Management