Entrepreneurship in Sustainable Value Chains Summary

Gold Medal Symposium Hosted with 2022 Winner, AB InBev

The World Environment Center along with 2022 Gold Medal Winner AB InBev hosted the Gold Medal Symposium on Entrepreneurship in Sustainable Value Chains. Speakers included sustainability executives from AB InBev, Mastercard, Inter-American Development Bank, and Colgate-Palmolive.

Read the summary of the discussion below.

Join our next Gold Medal Symposium by becoming a WEC Member today: https://www.wec.org/membership

Join our next Gold Medal Symposium by becoming a WEC Member today: https://www.wec.org/membership

October 2022 – Message from the President and CEO

October 26, 2022

We are thrilled to share our latest update on the work of the World Environment Center.

Our mission, to advance sustainable development through corporate business practices, has never been more urgent. Last month, the UN reported that the Human Development Index, which measures the health, education, and living standards of nations, fell globally for the second year in a row—the first time in 32 years of measurement. The combined effects of pandemic, war in Ukraine, and climate change caused 90 percent of countries to lose ground in one or both of the last two years.

That’s the sobering part of this message. The exciting part is how businesses around the world are rising to the challenges of climate action and sustainable development.

You’ll see in these pages how WEC is helping our member companies strengthen their value chains with sustainability innovation and entrepreneurship through Executive Roundtables.

New members Suzano and Wells Fargo enhance our diversity of experience and perspective. New partnerships with the U.S. Department of State and the Walmart Foundation allow us to support more small businesses in Latin America, especially women entrepreneurs.

New leaders on our Gold Medal Jury will make WEC’s 2023 Gold Medal Award even more prestigious and inspiring, as we continue to celebrate the impact of 2022 Gold Medalist AB InBev.

We are proud to support you in your important work to accelerate sustainable business. Please let us know how we can do even better!

Glenn Prickett is the President and CEO of the World Environment Center. He has spent three decades leading international environmental, natural resource and climate change policy in some of the world’s preeminent NGO’s.

WECosystem Action Forum Summary

U.S. Inflation Reduction Act and Implications for Sustainable Business

IRA Event Image WECosystem Action Forum

WEC hosted a virtual member discussion on Thursday, October 6th @ 12pm EST. Speakers Carla Frisch from the US Department of Energy and Grace Van Horn – Principal Consultant at ERM joined WEC along with members from 15 different companies for a conversation on the implications and business opportunities in response to the recent passage of the US inflation and Reduction Act.  Read the summary of the discussion below.

Join our next WECosystem Action Forum by becoming a WEC Member today: https://www.wec.org/membership

Join our next WECosystem Action Forum by becoming a WEC Member today: https://www.wec.org/membership

The World Environment Center Presents The Clean Tech Fair

Clean Tech Fair graphic

The World Environment Center (WEC) and its international partners are excited to present the Clean Tech Fair this November 3rd, 7th, and 14th from 9AM to 12PM ET. 

Our partners for this event include The Royal Scientific Society (RSS) in Jordan, La Confédération Générale des Entreprises du Maroc, (CGEM), Bank of Africa (BMCE Group) and EDIC Consulting in Morocco. 

Topics on the agenda include Solid Waste, Water and Wastewater, and Energy and Air Emissions. 

Presenters from these organizations will speak on strategies and solutions within these domains for how companies can improve their environmental performance, implement current technological solutions and increase sustainable practices within their operations. 

This free Virtual Fair is open to all and is designed to connect international experts and key stakeholders of the industrial sector with current technological solutions for their business challenges. 

Learn more and register via the Eventbrite link: https://bit.ly/3BYula8  

About the Project 

The United States Department of State’s Bureau of Oceans and International Environmental and Scientific Affairs has funded the World Environment Center to promote environmental governance through improved practices and technologies in Morocco and Jordan. The purpose of this initiative is to strengthen environmental governance that will lead to the adoption of improved environmental practices, technologies, and services, particularly in addressing air pollution, water and waste management challenges. WEC has partnered with EDI Consulting in Morocco and Water and Environment Center/Cleaner Production Unit at the Royal Scientific Society in Jordan to provide their on-the-ground knowledge and support to achieve project objectives. 

WEC and its local partners will create public-private partnerships involving priority sectors to address those environmental challenges, while fostering the use of U.S. environmental technologies. 

About World Environment Center 

WEC is an independent, global non-profit, non-advocacy organization that advances sustainable development through the business practices and operations of its member companies and in partnership with governments, multi-lateral organizations, non-governmental organizations, universities and other stakeholders. WEC’s mission is to promote business and societal value by advancing solutions to sustainable development-related problems. It manages projects for companies across their global operations, builds executive level learning and competency in incorporating sustainable development principles across a number of business sectors, and recognizes performance excellence through an annual awards program. WEC is headquartered in Washington, D.C., with regional offices in China, El Salvador and Germany. 

World Environment Center Welcomes New Gold Medal Jury Members 

The World Environment Center’s (WEC) is honored to have three new members join this unique group of sustainability leaders, which independently selects the recipient of the annual WEC Gold Medal Award for International Achievement in Sustainable Development winner each year. The jury represents leaders from academia, civil society, and the private sector. .  

The new WEC Jury Members: 

  • Olufunmilayo “Funmi” Arewa – Shusterman Professor of Business and Transactional Law at Temple University – James E. Beasley School of Law, Philadelphia, USA Olufunmilayo (Funmi) Arewa’s major areas of scholarly research include business law, music, entrepreneurship, technology, copyright, film, and Africana studies.  Prior to becoming a law professor, Professor Arewa practiced law for nearly a decade, working in legal and business positions primarily in the entrepreneurial and technology startup arena, including law firms and companies in the Silicon Valley and New York. She also served as Chief Financial Officer and General Counsel of a venture capital firm in Boston. Before becoming a lawyer, she was a Visiting Lecturer at the Center for Afroamerican and African Studies (CAAS) at the University of Michigan and served as a Foreign Service Officer in the U.S. Department of State in Washington, D.C. and Montevideo, Uruguay. She received an M.A. and Ph.D. (Anthropology) from the University of California, Berkeley, an A.M. (Applied Economics) from the University of Michigan, a J.D. from Harvard Law School, and an A.B. from Harvard College. In addition to writing about music, Professor Arewa has studied classical voice for many years.
  • Karen Fawcett – formerly Global CEO Retail, and Global Head Brand and Marketing for Standard Chartered Bank, Singapore  Karen Fawcett was formerly CEO Retail, Brand and Marketing for Standard Chartered Bank, which focused primarily on Asia, Africa, and the Middle East. Her broad career across complex global businesses covers wholesale and retail banking, global strategy, technology transformation, and brand & marketing. Ms. Fawcett holds several non-executive director positions, with a portfolio across financial services & digital transformation, education, and climate change mitigation. These positions are with the following entities: the LGT Private Bank Foundation Board; INSEAD; Temus Pte. Ltd.; Global Evergreening Alliance; and BetterTradeOff Pte. Ltd. And and Aegon’s Supervisory Board. Prior to her career in banking, Ms. Fawcett was a Partner at global management and information technology consultancy firm Booz, Allen & Hamilton, where she advised insurers, banks, and asset managers on a wide range of strategic, technological, and operational transformations. 
  • Tim Mohin, Experienced Sustainability Leader, PA, USA    Tim Mohin is a globally recognized sustainability leader. He served as chief executive of the Global Reporting Initiative; he also held sustainability leadership roles with Intel, Apple, and AMD and worked on environmental policy within the U.S. Senate and Environmental Protection Agency. He is the author of Changing Business from the Inside Out: A Treehugger’s Guide to Working in Corporations and a founder and former Chairman of the Responsible Business Alliance (formerly the Electronic Industry Citizenship Coalition). Currently, he is living in Pittsburgh, PA where he bikes with the N+1 cycling team and spends time with his grandchildren. Glenn Prickett, WEC’s President & CEO shared, “WEC is truly delighted to have access to such a well-respected group of leaders to help support our efforts as we work to advance sustainable development.”

  • About the World Environment Center WEC is an independent, global non-profit, non-advocacy organization that advances sustainable development through the business practices and operations of its member companies and in partnership with governments, multi-lateral organizations, non-governmental organizations, universities and other stakeholders. WEC’s mission is to promote business and societal value by advancing solutions to sustainable development-related problems. It manages projects for companies across their global operations, builds executive level learning and competency in incorporating sustainable development principles across a number of business sectors, and recognizes performance excellence through an annual awards program. WEC is headquartered in Washington, D.C., with regional offices in China, El Salvador and Germany

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If you would like more information on the Gold Medal Award or the nomination process, please contact Smitha Konduri at info@wec.org

Call for Nominations for the WEC 2023 Gold Medal Award are now OPEN!

As the world moves to rebuild our economies and to tackle climate change and systemic injustices, corporate leadership on sustainable development is more important than ever.  The Gold Medal Award recognizes excellence and provides inspiration to other companies worldwide. Nominations are now being accepted for the World Environment Center’s (WEC) 2023 Gold Medal for International Corporate Achievement in Sustainable Development. The Gold Medal Award is presented annually to a global company that demonstrates deep, organization-wide commitment to sustainability in its business practice and beyond. Learn more about the WEC Gold Medal Award here.

Submissions of the 2022 WEC Gold Medal Award Nomination Form must be received by Friday October 21, 2022. Self-nominations are welcome. WEC membership is not required as a criterion for submitting a nomination nor for receiving the award. 

Now in its 39th year, the WEC Gold Medal Award is the most prestigious recognition of a global company’s contributions to sustainability, as embodied by the winning company’s global engagement and ongoing commitment to sustainable development. An independent jury of international experts in business and sustainability selects the Gold Medal awardee. 

In 2022, the independent Gold Medal Jury selected AB InBev’s application in recognition of the company’s strong sustainability track record, ambitious commitments, and its focused ESG strategy aimed at creating shared prosperity across its value chain. The Jury recognized AB InBev for catalyzing impact beyond its own operations through its 2025 Sustainability Goals and ambition to achieve net zero across its value chain by 2040; its engagement with suppliers, business partners and consumers to scale impact; and its commitment to innovation through the award-winning 100+ Accelerator Program. 

Previous recent recipients of the WEC Gold Medal Award include AB InBev (2022), Microsoft (2021), The Ford Motor Company (2020), Ingersoll Rand (now Trane Technologies, 2019) Ecolab (2018), HP (2017), CH2M (now Jacobs, 2016), SC Johnson (2015), Unilever (2013), IBM (2012), Nestlé (2011), Walmart (2010), The Coca-Cola Company (2009), and Marks & Spencer (2008). 

About the World Environment Center 

WEC is an independent, global non-profit, non-advocacy organization that advances sustainable development through the business practices and operations of its member companies and in partnership with governments, multi-lateral organizations, non-governmental organizations, universities and other stakeholders. WEC’s mission is to promote business and societal value by advancing solutions to sustainable development-related problems. It manages projects for companies across their global operations, builds executive level learning and competency in incorporating sustainable development principles across a number of business sectors, and recognizes performance excellence through an annual awards program. WEC is headquartered in Washington, D.C., with regional offices in China, El Salvador and Germany. 

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If you would like more information on the Gold Medal Award or the nomination process, please contact Smitha Konduri at info@wec.org

WEC Executive Roundtable “Advancing Climate Justice” Summary

The confluence of the climate crisis with urgent demands for social justice has elevated the principle of climate justice to the center of public debate around climate action by governments and the private sector. Advocates for decarbonization, sustainable development, and human rights agree that a just transition to a low-carbon future is essential so that its benefits and burdens are shared equitably. What is climate justice and how should business respond to the obligations and opportunities that a just transition will create?

The World Environment Center, in collaboration with Dow and Ecolab, convened a two-day Executive Roundtable to help WEC members and other global companies develop effective policies and practices to put justice at the center of their climate strategies. Twenty-five leaders from business and NGOs participated in the roundtable . The report below is a summary of its key insights.

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

WEC Executive Roundtable “Greening the Grid in Europe: Accelerating Access to Green Electricity for the Industrial Centers” Summary

Download full summary in English here

During discussions at COP26 and in the aftermath, the business community made clear that companies want to become carbon neutral at least by 2050 or earlier. Many companies have set ambitious carbon abatement goals by 2030 that rely on access to energy and power from renewable sources. However, with the vast quantities of renewables being produced in large windfarms far away from the industrial centers, these companies rely on an adequate transmission infrastructure to bring the renewable power to their sites.

This Executive Roundtable has been developed to assist decision-makers in understanding at what time and to what extent zero-carbon electricity may be fully accessible for their company’s use – and how reliable it will be. The energy system of the future depends on a strong transmission backbone, distributed generation, smart demand management and storage opportunities across the continent. At the same time, processes to build the green grid are often held up by political disagreements, civil society campaigns, and unreliable value chains. Practical solutions must be found.

The Roundtable brought together 29 senior sustainability and grid-infrastructure experts from 7 countries – with 83% from large companies of various industries and 17% from academia/NGO/associations.

To read the full summary, key point details and additional information, click HERE.

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

2022 WEC Gold Medal Symposium “Leadership for a Sustainable Future: Building a Next Generation Business Today” Summary

Download full summary in English here

On the occasion of awarding the 2022 Gold Medal for International Corporate Achievement in Sustainable Development to AB InBev, the World Environment Center (WEC) convened a Symposium for business executives to discuss with thought leaders and practitioners how to navigate the business risks (and opportunities) from a more unpredictable global economy than any time in recent memory. The war in Europe, the COVID-19 pandemic, and the catastrophic climate crisis are changing the world like nothing else in the past 80 years. Business leaders must assure business continuity in the near term while taking action to build a resilient, next-generation business. Held under the Chatham House Rule, this Symposium was a dialogue designed to share goals, strategies, and practical solutions, and to lead the global transformation towards resilience and sustainability.

To read the full summary, key point details and additional information, click HERE.

Note:  WEC Executive Roundtables are conducted under the Chatham House Rule.

Daniel Klier, CEO of ESG Book, Talks with WEC President & CEO Glenn Prickett About the New ESG Book Platform

Daniel Klier, ESG Book CEO, joined WEC President & CEO Glenn Prickett to talk ESG Book – a new open-source platform that promises to make sustainability data available and comparable for all stakeholders. Watch or read the transcript to hear what ESG Book is and how it creates an impact.  

Note: Daniel Klier’s title has been changed since the recording of this interview.

Prickett: Hello members and friends of World Environment Center; this is Glenn Prickett, WEC’s President and CEO, and I am very pleased to be here today with Daniel Klier, the Chief Executive Officer of Arabesque S-Ray. Arabesque is one of WEC’s member companies—very interesting company with an exciting new product they have launched that’s very relevant to some of the challenges that our members and other companies are facing in sustainability. So Daniel, thank you for taking some time to tell us about ESG Book, the new product that you’re launching now; and before we dive into that, maybe tell us a little bit about the company, about Arabesque, the role you play in the sustainability arena, and also tell us  a bit about yourself, your career before this and how you came to be CEO at Arabesque S-Ray.

Klier: Glenn, thank you for having me on this program today. So, Arabesque S-Ray is a company that is trying to fix one very fundamental problem. We know capital markets need good ESG data to allocate capital efficiently to more sustainable outcomes, but we also know that what we have at the moment is not good enough. We don’t have enough transparency; we don’t have enough data, and many investors don’t have the tools to really assess how sustainable a company is—how much of it is true versus story, how much is good on the top level, but when you look into the details, you may find a different story. And that’s really what our Arabesque S-Ray does; we provide ESG data and tools to investors to make the right capital allocation choices. We use people and technology to get that through our data, and I think that’s what, also for, probably for this group or the members, is interesting. We’re doing it in an incredibly transparent way, because we believe sustainability would only be successful if we all sort of trust the data and the underlying metrics.

I came to this because I spent the last ten years at one of the largest banks in the world, at HSBC I’ve built HSBC sustainable finance offerings—I wrote my own job profile many, many years ago when this was a very, very young topic. Now it’s everywhere, and frankly, I found myself on too many panel discussions, complaining about the lack of data. You would always say, “We could do so much more if we had better data.” And it was just very, very clear to me, there is space to improve; there is space to make a contribution. And so I joined Arabesque, as the CEO, middle of last year to help the company grow. We are a three and a half year old company, have a hundred and fifty people around the world, dedicated to, to do this topic.

Prickett: Great, thanks Daniel. And Arabesque last year, and WEC together put on a roundtable on the rise of ESG investing, what it means for companies, and it’s certainly, then, one of the big stories of business, in general, and finance, in general, of the last several years. And as you just described, ESG Book may solve or help to solve two big problems we identified in that round table. One, the companies themselves are overwhelmed with a lot of competing requests for information, from investors and analysts. And number two, that a lot of the analysis that comes out of that is maybe not so useful to investors, because it’s not very transparent, the underlying methods aren’t very clear, and in many cases there are still data gaps. So I think, from what I understand, ESG Book is trying to deal with both of those problems. So, let’s make it a little more practical. Let’s first think from the perspective of the companies; so I’m a sustainability executive at a company that is trying to provide data on my company’s performance to the markets. How will ESG Book help me in that role?

Klier: Yeah, so I think that both observations are absolutely right. We have quite opaque ESG metrics that tell you, frankly, not enough. And second, if you’re the chief sustainability officer, and increasingly, the CFO, Head of Investor Relations of a company, you get bombarded with forty, fifty different Excel questionnaires. You also get bombarded with a new acronym everyday, right, because the moment, the solution to a problem is to create a new coalition to create the new standard. The good news in all of this is, everybody is asking you for the same information, maybe slightly different terminology, maybe slightly different way of presenting, but we’re all interested in the carbon footprint. We’re all interested in the measures companies are taking to achievement zero. We’re all interested in how diverse management teams are and how diverse boards are. We’re all interested in how companies deal with human rights issues—whether the chairman is an independent chairman or not because it’s a good sign of good governance.

And so what we do, we collect a fairly large number of ESG raw data points, and we also enable companies to disclose relevant ESG, we call it raw data, so the real underlying drivers of environmental, social, and governance performance. And then we allow companies to express it in different standards. There’s obviously SASB, there’s GRI, and then the WEF metrics, and the, the UN Global Compact assessments, but all they are asking you is a slightly different type of the same questions. And so the way to think about ESG Book for a company is: it replaces forty different Excel questionnaires; it puts in place a central data architecture for ESG information, where you host essentially your ESG data; and then it allows you to present your data in all the different frameworks. We’ve integrated something called the reporting exchange; it was developed by the World Business Council for Sustainable Development, and essentially, it’s a unique piece of IP because it has mapped all the different KPIs. So, when you’ve filled SASB, you’ve answered ninety percent of the WEF metrics, and if you’ve filled GRI, you have most of what you need for TCFD. It’s just not presented in that way, and that’s what ESG Book allows you to do.

The other thing that ESG Book then allows you to do is you can share it. You can share it with the stakeholders that need it, those are sometimes investors, that are increasingly banks that are often now your customers because if you are in a supply chain, you’ll become part of a bigger net zero commitment of somebody that you work with. And so, instead of answering forty different Excel questionnaires, it’s like, let’s call it the LinkedIn profile of a company, and you can share it with the relevant stakeholders that you deal with.

Prickett: Terrific, and now let’s go to the other side of the table. I’m an investor. How will ESG Book help me as an investor?

Klier: Yeah, so investors at the moment have been through a journey of, let’s call it ESG integration, ESG commitments. And in the first instance, it’s very often meant using a single ESG metric, an ESG score, and ESG rating to integrate it into your investment process. And while there was a really nice logic following sort of the idea of a credit rating, it has quite a few downfalls. The biggest downfall is that a credit rating essentially has a single purpose. A credit rating wants to tell you how likely is it that you will ever get your money back. An ESG rating doesn’t have that single purpose because people use ESG date for very different use cases.

Some people want to use ESG information to identify the next up-performer, the next company that’s just really good in managing non-financial metrics, and that’s actually, that actually is a good manager. Other people want to use ESG data to identify risks. Where’s the next corruption problem? Where’s the next human rights scandal? Where’s the next environmental damage that I would want to avoid? Other people will want to use ESG data to deliver outcomes—net zero is an example, right? “How do I construct a portfolio that aligns with the Glasgow commitments, with COP26, the Paris goals?” And very other people want to use ESG information to measure impact. “What’s the carbon reduction I’ve achieved?” “How many jobs have I created?” And so you see the four very, very different use cases that want to use the same data but in very different ways, and trying to put that all into a single score that you can’t untangle is really not very useful.

And so, what ESG Book allows you to do, is you get to see your score, but you can double-click and double-click and you get to your actual raw data items. So, you go from ESG to environmental social governance, you go to what we call twenty-six drivers of ESG performance, and then you get to four hundred and fifty ESG raw data points. And that’s, I think, what most investors really appreciate. You’re not stuck with something that is hard to explain, hard to understand, and you always get into discussions: “Is this now greenwashing?” or “Is it real?” You actually see the carbon emissions, the number of women on the board, the human rights profile of your portfolio, and you can double-click in the underlying drivers. And that’s the beauty of ESG Book, and modern technology makes it possible. Because you can put it on the cloud; you make it available for everyone. It’s a resource that is free and everybody can sign up to it.

Prickett: Great, so you’re opening up the black box that many have complained about in terms of ESG ratings. You know, Daniel, one thing that struck me when I saw the announcement of ESG Book was that you were partnering not only with private financial institutions but with some public agencies, like the World Bank’s International Finance Corporation. At WEC, our mission is to advance sustainable development through corporate business practices. So, we’re very mindful of the global development picture. Tell us why you partnered with public agencies, in what would seem to be of, kind of a strictly commercial undertaking. What’s going on there?

Klier: Yeah, brilliant. I have to give a lot of the credit of ESG Book to the World Bank and the IFC. They were really sort of the core, founding fathers of the platform. And, why? Because if you’re the World Bank or the IFC, your main exposure sits in emerging markets. You give money to companies in the emerging markets. And frankly, if you look at ESG information and even the awareness for these topics in emerging markets, it is quite limited. You also see a very significant correlation between ESG ratings and the state of development of a nation. And sometimes that is driven by companies in more developed markets just pay more attention to this, but frankly, often though, it’s just companies in more developed markets do better disclosure, provide more information. And so, if you’re the World Bank, your main worry actually is that with ESG integration, if we don’t do it well, capital moves away from emerging markets. Because capital over-indices companies that disclose really good stuff.

And so the idea of ESG Book was initially, “How do I create a platform when companies that currently don’t provide enough information, companies that don’t understand what all the acronyms mean—How do I encourage them, and help them to be part of the international financial system? And therefore, attract money probably in the geographies that need it most.” So that whole history that was the original spirit of ESG Book, we then meet as a much broader initiative with about twenty-five very large institutions, the United Nations, Swiss Re, HSBC, Bridgewater. They all came together to create this, but all the credit goes really to the World Bank.

Prickett: I love that. Democratizing ESG investing and making it more accessible to companies in emerging markets which is where a lot of the effort is going to be needed in the future. So, let’s talk a little about where this sits within Arabesque’s business. As I understand Arabesque’s business model, you both provide data, freely and publicly, but you also do your own proprietary analysis for paying customers. If I’m a user of ESG Book, how can I be confident that this isn’t skewed to benefit your own advisory business? And vice versa. If I’m a customer of your advisory business, why are you better than others in terms of having ESG Book at your disposal?

Klier: So, the reason why we’re pushing ESG Book as a free resource of ESG data, is because we have the very strong belief that at the moment everybody argues that there isn’t enough ESG data, very soon, we’ll be in a world where people have too much data. ESG data essentially is any non-financial data. It’s what’s in the news, in social media, in NGO datas, in satellite information, and what companies disclose themselves. And so the challenge that we see, is that most investors, but also companies that want to understand their supply chains actually face the problem, there’s way too much information. You can drown yourself in data, and you’ll still have no idea of what you’re looking at. And so our philosophy is, you make the data available for free, but commercialize the analytics that you put on top of data. So, in sort of our technology analogy mindset, we wanted to create a Spotify of ESG data. Why? The music is free, but if you want to create your own playlist, then we would like to have a contribution. But the idea is that the data should be free, because that’s the only way to create transparency, to create trust in this whole ESG topic, and we will help people that make the right investment choices.

Prickett: Very good, very good. So, Daniel, I have one more question for you, and that’s to, you know, put on your futurist glasses and tell us, this ESG investing movement came very quickly to the mainstream; it’s very dynamic. Where do you see it heading? And what does the world of ESG investing look like five years from now?

Klier: Yeah, for me there are two very important trends. The first one is we’re moving from what I would call ESG 1.0 to ESG 2.0. We spent the last five to ten years in building awareness for the importance of environmental, social and governance issues, but we put it in as sort of one umbrella of ESG, alright. So, a lot of people have launched products, have launched commitments, that essentially brand everything ESG. As we mentioned a little bit before, I think that next phase is a lot more nuanced because what investors really want is understand this: “Is my portfolio actually aligned with net zero? How is the diversity and inclusion policy across my portfolios? What’s my exposure to human rights? And so, I think we see a lot more themetatic fragmentation of the topic, which makes it a lot more relevant to actual investment choices because you can actually relate to each of these topics. I think that’s one big trend.

A second big trend, and that’s true for companies and financial markets is that regulation plays a much bigger role. The increase in regulatory intervention on this topic is very, very significant, both on the side of companies and what kind of information they need to provide. And in terms of financial markets, what is required to integrate ESG information into risk management, into investment choices, into the advisory processes. So, in Europe you now need to evidence that you actually ask your customers how sustainable their portfolio is supposed to be, rather than just ask them for their risk appetite. So, I think it clearly, this is becoming a license to operate. This is no longer a, just positive differentiator; it is also a minimum hurdle you need to jump over.

So, I think the next two to three years will be quite exciting, because it is moving from the few that believed in this early to a topic that everybody has to comply with. And it also moves into an area where I think investments become a lot more emotional, suddenly. Because you can actually put your own values and your own beliefs into a portfolio construction, something that we haven’t seen for a very long time. And I think that’s actually a quite exciting development for the next few years. Companies will need to answer, suddenly, very different questions, right. Because people go beyond traditional financial analysis, there’s an element of climate, and many other non-financial metrics. Your members notice, but this is becoming our global, a global license to operate.

Prickett: Fascinating. It’ll be interesting to see how it plays out in the role technology, and your technology in particular will play. So, Daniel, I’m gonna let you get back to your business at Arabesque S-Ray. Let me add for WEC members, you’ve been invited to a webinar coming up on March 23rd, so that you can dig in a little deeper into ESG Book with Daniel and his colleagues. Later in the year, Arabesque will sponsor a roundtable on ESG investing more generally, where it is today and where it is going. You’ll hear more on that soon. Thank you so much, Daniel, for your time today and for bringing us all ESG Book. We wish you very well.

Klier: Thank you very much.

Prickett: Okay, take care.

WEC President & CEO Glenn Prickett Interview with Peter Schnurrenberger, Chief SHE Officer at Roche

WEC President & CEO Glenn Prickett spoke with Peter Schnurrenberger, Chief SHE Officer at Roche, on the eve of his retirement to discuss his work at Roche and his vision for the future. In the interview, Peter shares insights on how sustainability became a priority for Roche, how businesses can create impact, and the value WEC has for members.

Note: Daniel Klier’s title has been changed since the recording of this interview.

Prickett: Hello members and friends of World Environment Center; this is Glenn Prickett, WEC’s President and CEO, and I am very pleased to be here today with Daniel Klier, the Chief Executive Officer of Arabesque S-Ray. Arabesque is one of WEC’s member companies—very interesting company with an exciting new product they have launched that’s very relevant to some of the challenges that our members and other companies are facing in sustainability. So Daniel, thank you for taking some time to tell us about ESG Book, the new product that you’re launching now; and before we dive into that, maybe tell us a little bit about the company, about Arabesque, the role you play in the sustainability arena, and also tell us  a bit about yourself, your career before this and how you came to be CEO at Arabesque S-Ray.

Klier: Glenn, thank you for having me on this program today. So, Arabesque S-Ray is a company that is trying to fix one very fundamental problem. We know capital markets need good ESG data to allocate capital efficiently to more sustainable outcomes, but we also know that what we have at the moment is not good enough. We don’t have enough transparency; we don’t have enough data, and many investors don’t have the tools to really assess how sustainable a company is—how much of it is true versus story, how much is good on the top level, but when you look into the details, you may find a different story. And that’s really what our Arabesque S-Ray does; we provide ESG data and tools to investors to make the right capital allocation choices. We use people and technology to get that through our data, and I think that’s what, also for, probably for this group or the members, is interesting. We’re doing it in an incredibly transparent way, because we believe sustainability would only be successful if we all sort of trust the data and the underlying metrics.

I came to this because I spent the last ten years at one of the largest banks in the world, at HSBC I’ve built HSBC sustainable finance offerings—I wrote my own job profile many, many years ago when this was a very, very young topic. Now it’s everywhere, and frankly, I found myself on too many panel discussions, complaining about the lack of data. You would always say, “We could do so much more if we had better data.” And it was just very, very clear to me, there is space to improve; there is space to make a contribution. And so I joined Arabesque, as the CEO, middle of last year to help the company grow. We are a three and a half year old company, have a hundred and fifty people around the world, dedicated to, to do this topic.

Prickett: Great, thanks Daniel. And Arabesque last year, and WEC together put on a roundtable on the rise of ESG investing, what it means for companies, and it’s certainly, then, one of the big stories of business, in general, and finance, in general, of the last several years. And as you just described, ESG Book may solve or help to solve two big problems we identified in that round table. One, the companies themselves are overwhelmed with a lot of competing requests for information, from investors and analysts. And number two, that a lot of the analysis that comes out of that is maybe not so useful to investors, because it’s not very transparent, the underlying methods aren’t very clear, and in many cases there are still data gaps. So I think, from what I understand, ESG Book is trying to deal with both of those problems. So, let’s make it a little more practical. Let’s first think from the perspective of the companies; so I’m a sustainability executive at a company that is trying to provide data on my company’s performance to the markets. How will ESG Book help me in that role?

Klier: Yeah, so I think that both observations are absolutely right. We have quite opaque ESG metrics that tell you, frankly, not enough. And second, if you’re the chief sustainability officer, and increasingly, the CFO, Head of Investor Relations of a company, you get bombarded with forty, fifty different Excel questionnaires. You also get bombarded with a new acronym everyday, right, because the moment, the solution to a problem is to create a new coalition to create the new standard. The good news in all of this is, everybody is asking you for the same information, maybe slightly different terminology, maybe slightly different way of presenting, but we’re all interested in the carbon footprint. We’re all interested in the measures companies are taking to achievement zero. We’re all interested in how diverse management teams are and how diverse boards are. We’re all interested in how companies deal with human rights issues—whether the chairman is an independent chairman or not because it’s a good sign of good governance.

And so what we do, we collect a fairly large number of ESG raw data points, and we also enable companies to disclose relevant ESG, we call it raw data, so the real underlying drivers of environmental, social, and governance performance. And then we allow companies to express it in different standards. There’s obviously SASB, there’s GRI, and then the WEF metrics, and the, the UN Global Compact assessments, but all they are asking you is a slightly different type of the same questions. And so the way to think about ESG Book for a company is: it replaces forty different Excel questionnaires; it puts in place a central data architecture for ESG information, where you host essentially your ESG data; and then it allows you to present your data in all the different frameworks. We’ve integrated something called the reporting exchange; it was developed by the World Business Council for Sustainable Development, and essentially, it’s a unique piece of IP because it has mapped all the different KPIs. So, when you’ve filled SASB, you’ve answered ninety percent of the WEF metrics, and if you’ve filled GRI, you have most of what you need for TCFD. It’s just not presented in that way, and that’s what ESG Book allows you to do.

The other thing that ESG Book then allows you to do is you can share it. You can share it with the stakeholders that need it, those are sometimes investors, that are increasingly banks that are often now your customers because if you are in a supply chain, you’ll become part of a bigger net zero commitment of somebody that you work with. And so, instead of answering forty different Excel questionnaires, it’s like, let’s call it the LinkedIn profile of a company, and you can share it with the relevant stakeholders that you deal with.

Prickett: Terrific, and now let’s go to the other side of the table. I’m an investor. How will ESG Book help me as an investor?

Klier: Yeah, so investors at the moment have been through a journey of, let’s call it ESG integration, ESG commitments. And in the first instance, it’s very often meant using a single ESG metric, an ESG score, and ESG rating to integrate it into your investment process. And while there was a really nice logic following sort of the idea of a credit rating, it has quite a few downfalls. The biggest downfall is that a credit rating essentially has a single purpose. A credit rating wants to tell you how likely is it that you will ever get your money back. An ESG rating doesn’t have that single purpose because people use ESG date for very different use cases.

Some people want to use ESG information to identify the next up-performer, the next company that’s just really good in managing non-financial metrics, and that’s actually, that actually is a good manager. Other people want to use ESG data to identify risks. Where’s the next corruption problem? Where’s the next human rights scandal? Where’s the next environmental damage that I would want to avoid? Other people will want to use ESG data to deliver outcomes—net zero is an example, right? “How do I construct a portfolio that aligns with the Glasgow commitments, with COP26, the Paris goals?” And very other people want to use ESG information to measure impact. “What’s the carbon reduction I’ve achieved?” “How many jobs have I created?” And so you see the four very, very different use cases that want to use the same data but in very different ways, and trying to put that all into a single score that you can’t untangle is really not very useful.

And so, what ESG Book allows you to do, is you get to see your score, but you can double-click and double-click and you get to your actual raw data items. So, you go from ESG to environmental social governance, you go to what we call twenty-six drivers of ESG performance, and then you get to four hundred and fifty ESG raw data points. And that’s, I think, what most investors really appreciate. You’re not stuck with something that is hard to explain, hard to understand, and you always get into discussions: “Is this now greenwashing?” or “Is it real?” You actually see the carbon emissions, the number of women on the board, the human rights profile of your portfolio, and you can double-click in the underlying drivers. And that’s the beauty of ESG Book, and modern technology makes it possible. Because you can put it on the cloud; you make it available for everyone. It’s a resource that is free and everybody can sign up to it.

Prickett: Great, so you’re opening up the black box that many have complained about in terms of ESG ratings. You know, Daniel, one thing that struck me when I saw the announcement of ESG Book was that you were partnering not only with private financial institutions but with some public agencies, like the World Bank’s International Finance Corporation. At WEC, our mission is to advance sustainable development through corporate business practices. So, we’re very mindful of the global development picture. Tell us why you partnered with public agencies, in what would seem to be of, kind of a strictly commercial undertaking. What’s going on there?

Klier: Yeah, brilliant. I have to give a lot of the credit of ESG Book to the World Bank and the IFC. They were really sort of the core, founding fathers of the platform. And, why? Because if you’re the World Bank or the IFC, your main exposure sits in emerging markets. You give money to companies in the emerging markets. And frankly, if you look at ESG information and even the awareness for these topics in emerging markets, it is quite limited. You also see a very significant correlation between ESG ratings and the state of development of a nation. And sometimes that is driven by companies in more developed markets just pay more attention to this, but frankly, often though, it’s just companies in more developed markets do better disclosure, provide more information. And so, if you’re the World Bank, your main worry actually is that with ESG integration, if we don’t do it well, capital moves away from emerging markets. Because capital over-indices companies that disclose really good stuff.

And so the idea of ESG Book was initially, “How do I create a platform when companies that currently don’t provide enough information, companies that don’t understand what all the acronyms mean—How do I encourage them, and help them to be part of the international financial system? And therefore, attract money probably in the geographies that need it most.” So that whole history that was the original spirit of ESG Book, we then meet as a much broader initiative with about twenty-five very large institutions, the United Nations, Swiss Re, HSBC, Bridgewater. They all came together to create this, but all the credit goes really to the World Bank.

Prickett: I love that. Democratizing ESG investing and making it more accessible to companies in emerging markets which is where a lot of the effort is going to be needed in the future. So, let’s talk a little about where this sits within Arabesque’s business. As I understand Arabesque’s business model, you both provide data, freely and publicly, but you also do your own proprietary analysis for paying customers. If I’m a user of ESG Book, how can I be confident that this isn’t skewed to benefit your own advisory business? And vice versa. If I’m a customer of your advisory business, why are you better than others in terms of having ESG Book at your disposal?

Klier: So, the reason why we’re pushing ESG Book as a free resource of ESG data, is because we have the very strong belief that at the moment everybody argues that there isn’t enough ESG data, very soon, we’ll be in a world where people have too much data. ESG data essentially is any non-financial data. It’s what’s in the news, in social media, in NGO datas, in satellite information, and what companies disclose themselves. And so the challenge that we see, is that most investors, but also companies that want to understand their supply chains actually face the problem, there’s way too much information. You can drown yourself in data, and you’ll still have no idea of what you’re looking at. And so our philosophy is, you make the data available for free, but commercialize the analytics that you put on top of data. So, in sort of our technology analogy mindset, we wanted to create a Spotify of ESG data. Why? The music is free, but if you want to create your own playlist, then we would like to have a contribution. But the idea is that the data should be free, because that’s the only way to create transparency, to create trust in this whole ESG topic, and we will help people that make the right investment choices.

Prickett: Very good, very good. So, Daniel, I have one more question for you, and that’s to, you know, put on your futurist glasses and tell us, this ESG investing movement came very quickly to the mainstream; it’s very dynamic. Where do you see it heading? And what does the world of ESG investing look like five years from now?

Klier: Yeah, for me there are two very important trends. The first one is we’re moving from what I would call ESG 1.0 to ESG 2.0. We spent the last five to ten years in building awareness for the importance of environmental, social and governance issues, but we put it in as sort of one umbrella of ESG, alright. So, a lot of people have launched products, have launched commitments, that essentially brand everything ESG. As we mentioned a little bit before, I think that next phase is a lot more nuanced because what investors really want is understand this: “Is my portfolio actually aligned with net zero? How is the diversity and inclusion policy across my portfolios? What’s my exposure to human rights? And so, I think we see a lot more themetatic fragmentation of the topic, which makes it a lot more relevant to actual investment choices because you can actually relate to each of these topics. I think that’s one big trend.

A second big trend, and that’s true for companies and financial markets is that regulation plays a much bigger role. The increase in regulatory intervention on this topic is very, very significant, both on the side of companies and what kind of information they need to provide. And in terms of financial markets, what is required to integrate ESG information into risk management, into investment choices, into the advisory processes. So, in Europe you now need to evidence that you actually ask your customers how sustainable their portfolio is supposed to be, rather than just ask them for their risk appetite. So, I think it clearly, this is becoming a license to operate. This is no longer a, just positive differentiator; it is also a minimum hurdle you need to jump over.

So, I think the next two to three years will be quite exciting, because it is moving from the few that believed in this early to a topic that everybody has to comply with. And it also moves into an area where I think investments become a lot more emotional, suddenly. Because you can actually put your own values and your own beliefs into a portfolio construction, something that we haven’t seen for a very long time. And I think that’s actually a quite exciting development for the next few years. Companies will need to answer, suddenly, very different questions, right. Because people go beyond traditional financial analysis, there’s an element of climate, and many other non-financial metrics. Your members notice, but this is becoming our global, a global license to operate.

Prickett: Fascinating. It’ll be interesting to see how it plays out in the role technology, and your technology in particular will play. So, Daniel, I’m gonna let you get back to your business at Arabesque S-Ray. Let me add for WEC members, you’ve been invited to a webinar coming up on March 23rd, so that you can dig in a little deeper into ESG Book with Daniel and his colleagues. Later in the year, Arabesque will sponsor a roundtable on ESG investing more generally, where it is today and where it is going. You’ll hear more on that soon. Thank you so much, Daniel, for your time today and for bringing us all ESG Book. We wish you very well.

Klier: Thank you very much.

Prickett: Okay, take care.

What Next After COP26? Be the Ball.

December 2, 2021

Before, during, and after COP26, I could not stop thinking about the final scene in the movie Caddyshack. In the film, young Danny Noonan vies to win a golf match to fund his college tuition. His winning putt teeters on the edge of the 18th hole when suddenly the golf course explodes. Bedlam ensues, with people running in all directions. But caddy manager Lou Loomis keeps a steady eye on the ball. As the tremors build, the ball wiggles and drops into the hole. Victory! 

COP26 had a similar dynamic. Climate chaos drove unprecedented calls for action by young people and communities harmed by climate change. The private sector showed up in force with pledges to decarbonize. I tried to keep my eye on the ball. Would there be enough pressure to force the world’s governments to “ratchet up” their commitments to prevent catastrophic climate change? 

In Glasgow, sadly, life did not imitate art.  

Governments did make new commitments, including pledges to cut methane emissions and end deforestation, but the net result will not be enough to limit climate change to the needed goal of 1.5 degrees. And questions remain about governments’ ability to deliver on the commitments they made.  

Why this failure of political will in the face of unprecedented global pressure? 

Call it the “plus one” problem. The strength of a government’s commitment in international negotiations depends on its ability to enact policies back home to cut emissions, most importantly to switch to non-fossil energy. As any politico will remind you, enacting policy in a democracy requires 50 percent of the votes in the legislature “plus one”—even more when a supermajority is required, as in the United States Senate.  

According to the International Energy Agency, all but two of the G20 countries responsible for 80 percent of global emissions rely on coal, oil, and natural gas for over 70 percent of their energy (France has nuclear power and Brazil has bioenergy). Switching to non-fossil energy at the scale required will hurt states and provinces that produce the coal, oil, and gas, at least in the near term. The legislators who represent those jurisdictions will be skeptical at best.  

In the United States, the Biden administration and Democratic leaders in Congress are trying to pass legislation to implement the U.S. pledge to cut emissions 50 percent by 2030. Using budget legislation, they need only 51 votes in the Senate, which they can reach with only Democrats. The “plus one” is West Virginia Democratic Senator Joe Manchin, who rejected the administration’s preferred approach, a clean energy standard for electric utilities. Why? Mining, oil, and gas made up 17 percent of West Virginia’s economic output in 2019—a major source of jobs, livelihoods, and funding for schools, hospitals, roads, police, and other services for Senator Manchin’s constituents. West Virginia is not alone. One in five U.S. states depend on mining, oil, and gas for 5 percent or more of their economic output, some as much as 20-30 percent, based on data from the Commerce Department’s Bureau of Economic Analysis.

At COP26, in the most consequential mulligan of all time, governments agreed to revisit their commitments a year from now at COP27. With the political situation in G20 capitals dominated by the ongoing pandemic and its economic impact, deeper pledges are unlikely, especially from China, India, Indonesia, Australia, Russia, and South Africa who with the U.S. are the world’s leading coal producers. 

I do not elaborate this point to excuse inaction. I have dedicated my 30-year professional career to climate action, and I am as angry as anyone that we have allowed climate change to become the deadly threat that we predicted it would be decades ago. But I think any progress going forward demands brutal honesty, and the truth is that the move away from fossil fuels will not be immediate. Political reality, as much as technical and economic feasibility, means that the global energy transition will take decades. Yet science tells us we must act urgently in this decade to cut emissions at least 50 percent to avoid catastrophe. 

What do we do now? I see four immediate priorities: 

First, the private sector must implement its decarbonization commitments, even where policy signals are not sufficient. While voluntary action is not enough to solve the problem, it is an immediate source of incentives for emissions reductions throughout the global economy. The growing demand from investors and financial regulators for climate action and disclosure may become the most consequential driver of emissions reductions in the near term. The good thing is that many companies see the Race to Zero as a business opportunity. 

Second, companies and governments need to collaborate on carbon removal. The global economy is unlikely to decarbonize fast enough to meet the 1.5-degree target. Carbon must be removed from the atmosphere. Natural climate solutions such as regenerative agriculture and habitat restoration are available immediately at scale and provide economic benefits to local communities while they sequester carbon. Human engineered technologies for carbon capture, utilization, and storage will be needed to decarbonize the fossil energy production that we cannot eliminate.  

Third, companies and governments need to invest in resilience with the same urgency as decarbonization. Climate advocates once considered adaptation a distraction from mitigation. We no longer have that luxury. Communities are suffering climate-induced floods, storms, droughts, heatwaves, and pandemics today, and it only gets worse from here. Infrastructure and public services need new thinking and investment for climate resilience. This cannot come at the expense of decarbonization, as more emissions today means more expensive adaptation in the future.  

Fourth, companies need to help build political constituencies to deliver the “plus one” votes for climate policy, especially in districts that produce fossil energy and agriculture, which tend to view climate action as a threat to their livelihoods. Investments in clean energy, carbon capture, natural climate solutions, resilience, and new employment for energy workers can address these concerns by showing that climate action delivers economic benefits. 

COP26 did not put us on track to a safe climate. But the forces it unleashed among young activists demanding a better future, communities facing climate chaos, and business leaders banking on the transition are unstoppable. Which reminds me of another scene from Caddyshack. Danny asks the club’s top player for tips, and Ty Webb replies, “There’s a force in the universe that makes things happen. All you have to do is get in touch with it…and be the ball.”   

It is time for all of us to be the ball. 

Glenn Prickett is the President and CEO of the World Environment Center. He has spent three decades leading international environmental, natural resource and climate change policy in some of the world’s preeminent NGO’s.

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