Mar 01 2020 15 mins
Contact Mike: https://www.linkedin.com/in/mikewallace/
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FULL EPISODE TRANSCRIPT
Mitch: (00:05)
Thanks for coming back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. This is Mitch Roshong and I'll be bringing you to episode 52 of our series. My cohost Adam Larson, had a great conversation about various reporting expectations with Mike Wallace. Mike is partner at erm environmental resources management and is an internationally recognized expert in sustainability, ESG and human capital. He explains the recent changes since the global reporting initiative, measuring data for the expectations of different sectors and all things accounting and finance professionals should pay attention to regarding ESG. Keep listening to hear about how you can measure your company's reporting and performance with all the tools and resources available.
Adam: (00:55)
So we first met, uh, almost a decade ago when you were working for the GRI or the global reporting initiative and a lot's happened since then. And can you let us know what changes you've seen most since then?
Mike: (01:08)
Yeah, sure. The I mean I think, you know, the GRI is an interesting one where we met because the GRI itself is an entity but also the world's leading provider of our sustainability reporting framework, which has now become a standard. But that year I was created literally almost 20 years ago and was developed by a group of stakeholders that got together and said, you know, it's really fantastic what all these companies are doing about their environmental reporting and voluntary sustainability reporting, but they're not doing it in a very standardized manner. Let's create a framework by which companies can, how used to guide how they disclose this type of information. And that was the birth of the GRI literally 20 years ago. At about the same time a similar group of companies and stakeholders got together and they were talking about of all things greenhouse gas emissions disclosure and how those disclosures weren't consistent either. And that was the beginning of the greenhouse gas protocol. So today the GRI is the most widely used reporting framework out there. If you Google any company and and the word GRI after it, you're very likely to find it. The GRI report for the company so you know that they've done it according to a recognized global. My standard and the greenhouse gas protocol underlies all of the ways that we measure and manage and disclose carbon emissions today. So it feels like there's a sudden flood of all these things but it's actually been growing for the last, you know, 20 years or so. Probably the biggest things that have happened to the most significant changes that more and more people have grabbed onto the GRI's approach and enhanced it and tweaked it in ways to help focus it into certain areas or directions. For instance, the CDP is very focused on greenhouse gas disclosures and it's backed up by lot of investors who were saying, we want this type of information. There is, there are things that are specific to health and safety and how you treat your people or your human capital one in particular. It's called the workforce disclosure initiative and they've taken the ball and run with it around disclosures that companies should make about how they treat their people. And that can be gender and diversity issues or it could be right down to health and safety policy. And probably the biggest, most influential is, is the TCFD cause it's, it's the biggest one out there with the most players around it. And in essence the entire global market. The financial community, it's gotten together under this entity called the task force on climate related financial disclosures. Long name, but just think about it from the name of the standpoint of TCFD. You look up the signatories on that and you're going to see stock exchanges, the major rating agencies, insurance companies, lenders, asset management firms, commercial banks, private banks. And you'll see a lot of companies names on it and essence. They all got together and said to each other through this platform, the TCFD, we've got some issues here related to climate change risk and we all want to do business together. But it's in all of our best interest. If we figure out how we as individual companies and within our industries should measure, manage and report on the risks we face. I want to list, you says stock exchange, who's part of TCFD? But I want to know that you're going to be around for the future. I want to ensure you says insurance company, but I want to see your TCFD disclosures. I want to rate you says one of the ratings firms, but I want to see your TCFD disclosures and the companies are turning around and doing this because they want that finance financing. They want those business partners and they realize that these risks are true and real to their business. That's probably the biggest thing I've seen in the last decades, the TCFD emergence. But then this week we just last week we just had Davos and the world economic forum throughout all sorts of new news for us to digest. And yeah, it might feel overwhelming for companies, but it's actually pretty consistent with the pattern that we've been monitoring for the last 20 years.
Adam: (05:09)
So thanks for those points, Mike. One of the things we noticed that um, black rock released their letter in January. You know, how was this shaking out in the marketplace?
Mike: (05:21)
Yeah. It's interesting, Adam, because we've seen the letter come out for the last few years from Larry think and it's increasingly evolve to include more and more discussion about environmental, social and governance topics. And it's just put yourself in the driver's seat. There. World's largest asset manager. They have a lot of customers, asset owners like the big public pension funds and sovereign wealth funds as well as other institutions who say to black rock, we want to be responsible investors too. Can you make sure that you're managing our money in this way? So black rock and Larry Fink are responding to their customer demand and ramping up their ESG services offerings. They've got a growing team of engagement specialists. And third, is it this latest letter from Larry Fink, not only spells out why and what they're doing in their ESG area of work, they're talk about their own sustainability performance as an institution. And they own their own policies. They have a pretty big footprint, right? They fly people all over the world. They have data centers, they have a footprint themselves and they want to walk the talk. So that's in this letter, this time, hyperlinks to other things. There's an entire FAQ this year, so if you're a client or a customer or just a curious competitor, you can see how seriously black rock has taken this by looking at the FAQ and then to make the case for why they're doing it. They've got a letter that they've seen that right written in. It's in this document that explains how they're responding to their own clients. You asked for us to manage your money...