Being Intentional
In this edition: the Salience of Sustainability, Green Bank Fees, Aramark CSR, and Materiality Assessments.
On behalf of everyone at Motive, I'd like to welcome you to the first edition of Being Intentional in 2022! We're excited for what the new year brings and look forward to seeing how this newsletter continues to evolve. We're delighted (and grateful) for your continued support and thrilled to see the readership grow with each new edition. If you're new to the newsletter, welcome!
At Motive, we believe that companies have an outsized impact on the world around us. No other entity in modern society can more positively or negatively shape our world, and it is our mission to help companies be part of a better world.
The Being Intentional newsletter began as an experiment that started as an internal investor update and morphed into what you see today. Over time this newsletter began to reflect Motive's increased focus on helping corporate ESG and Sustainability leaders directly, and we continue to march steadily down that path.
This newsletter aims to bring timely and helpful information to people building and leading ESG and Sustainability programs within their company.
We certainly know that not all of you are leaders in ESG or Sustainability programs at large companies. Some of you are involved in ESG and Sustainability in other capacities, and some of you are simply interested in this space (and some of you are just here to support us! Thank you 🙏). Whatever your reason for being here, we strive to provide content to help you.
Here's to a great 2022, and thank you all for being part of this grand experiment!
What We Are Seeing
If you've been following Sustainability and ESG, it would be nearly impossible to miss the fact that it has grown significantly in public and market interest throughout 2021. If you are new to Sustainability and ESG, don't think that you are late to the game as it seems there is plenty of growth yet to come!
We monitor news and social media throughout the world to measure the salience of different issues. Across 2021, we can see that interest in Sustainability has grown markedly. With the low-end of approximately 25,000 average mentions per day at the beginning of 2021 and closing at a high-end of approximately 38,000 average daily mentions at the end of 2021, Sustainability returned a daily average of 31,400 daily mentions throughout 2021.
Related to sustainability is the growth in interest in ESG. Sustainability and ESG are closely related but still distinct in certain key ways. One way to look at it is that sustainability is a cultural concept whereas ESG is a series of performance indicators reflective of corporate culture and structure including elements of sustainability. Even though ESG communicates to a narrower audience than does the concept of sustainability, the term still grew markedly in salience throughout 2021. With the low-end of approximately 7,000 average mentions per day at the beginning of 2021 and closing at a high-end of approximately 17,000 average daily mentions at the end of 2021, ESG returned a daily average of 11,600 daily mentions throughout 2021.
ESG is not only growing in salience with the public but also among boards of directors and investors. PIMCO, the global investment management company, has been measuring the use of the term ESG in corporate earning calls across 10,000 global companies since May 2005. From May 2005 to May 2018, ESG mentions stayed flat at 0%-1% of calls. By May 2019, ESG mentions took-off, hitting 5% of calls…and now into May 2021, ESG mentions rocketed to 19% of calls.
This is great news for those of us committed to sustainability and ESG, and the trends in the data demonstrate signs of continuing. Sustainability is now business strategy…and the world is taking note.
… Just for fun, and to add a touch of context, here is the graph from above with the salience trendlines for sustainability and ESG with an added trendline for self-driving cars.
If public and market attention are indicators, then I’d prefer to be in sustainability and ESG rather than in self-driving cars!
The Business of Sustainability
Bloomberg Article: Bank Fees for Green Debt Surpass Fossil-Fuel Financing
This was big news that may have been swept away in the torrent on New Year’s retrospectives and forecasts. In short, 2021 was the first year that banks earned more fees arranging sustainability-related bond sales and loans (i.e. green bonds) than they did arranging financing for fossil-fuel companies.
Banks collected $3.4 billion in fees arranging green debt in 2021, compared to $3.3 billion in fees arranging fossil-fuel debt. In shocking context, fees collected in 2020 were $1.9 billion from green debt and $3.7 billion from fossil-fuel debt. The story is not that fossil fuels have become too risky, but rather that interest in sustainability has grown exponentially.
In an earlier newsletter, we discussed how important it was to the broader sustainability transition when Maersk Shipping offered a green bond which was immediately over-subscribed and closed at a lower interest rate than its previous traditional (non-green) bond. This news that banks are now profiting more on green bonds than on fossil-fuel financing is even bigger news supporting the broader sustainability transition.
Looking at the list of banks profiting the most from green debt and from fossil-fuel financing (listed in the original linked article) would suggest that these banks are not necessarily motivated by a moral commitment to sustainability but rather have identified that green debt is a market that they most certainly cannot afford to miss out on.
Capital has acknowledged that sustainability matters and change is accelerating. Analysts at Bloomberg now predict that $2.5 trillion of debt identified as green or ESG-oriented will be issued in 2022, up from $1.5 trillion in 2021. At this rate, bank profits should be quite secure.
Sustainability is no longer a fringe concern, it is business strategy.
CSR Spotlight: Aramark
(PDF Report) Link Here
(web) Link Here
Chances are you engaged with Aramark in some way recently even if you were not aware of it. With over 247,000 employees, the company is a keystone partner in service networks, including food, facilities, and uniform services. Schools, colleges, sports venues, workplaces, healthcare settings--wherever food and hospitality show up there is a strong chance Aramark is involved.
We were eager to dig into their newest sustainability report, but unfortunately, it wasn’t really worth the wait.
What We Liked:
Sustainability at Aramark is framed against the UN Sustainable Development Goals (SDGs). This helps provide parameters to understanding Aramark’s efforts and context to how these efforts are communicated. The SDGs are not the only framework, nor necessarily the most appropriate for all companies, but nonetheless, it is nice to see Aramark working within a clear framework.
What’s Missing:
Just about everything…
No clear materiality assessment: The company is taking steps toward sustainability, but we are not sure exactly why they are doing what it is they are doing. When we think of the sectors and markets they are active in so many possible issues of consequence come to mind but yet remain absent in the company’s reporting.
Lack of Depth: The efforts and outcomes that are reported are what we refer to as light-touch sustainability. It’s not greenwashing--the company is taking real steps--but it is all so little compared to what they could be doing. If you had a group of friends all talking about how they were switching into electric vehicles, installing solar panels, and shifting their purchasing to local farm-based outlets, Aramark would be the friend mentioning they were thinking about maybe changing over to CFL light bulbs in their reading lamps. Sure it’s a start, but advances over the last decade make it possible and reasonable to expect so much more. Not every company needs to be a sustainability leader, but they also can’t pretend that there aren’t decades of progress to build upon.
Missed Potential: Aramark may not be a household name, but it is a keystone actor in global supply and service networks. Very few companies have as much leverage and connection with suppliers, regulators, clients, and individual customers as does Aramark. This positions the company to be a market-maker in any area it wants to focus on…but it certainly is not acting like it. It’s possible the company is building up to stronger actions in the near future, but for now, it seems like Aramark is not willing to put its weight behind its sustainability efforts. We can’t help but feel that sustainability is not a business strategy at Aramark.
What We Are Saying
Blog Link: It’s All Material…Unless It Isn’t
Materiality assessments are key components for corporate sustainability teams in developing meaningful programs and policies. Sustainability is a remarkably vague concept and materiality assessments are a great resource to start establishing actionable parameters…but many assessments, as currently performed, don’t really help in the ways we would hope. The priority of the assessment should be to inform your strategic planning and not simply to assist as PR collateral.