INTEGRATED FINANCIAL AND SUSTAINABILITY REPORTING IN THE UNITED STATES FRIDAY, MAY 3, 2013, 2:00-3:00PM EST

Transcription

1 INTEGRATED FINANCIAL AND SUSTAINABILITY REPORTING IN THE UNITED STATES FRIDAY, MAY 3, 2013, 2:00-3:00PM EST 1

2 TODAY S WEBINAR Presenters: Jon Lukomnik Investor Responsibility Research Center Institute (IRRCI) Peter DeSimone Sustainable Investments Institute (Si2) Facilitator: Kelly Kenneally, IRRCI Agenda: 1. About IRRCI and SI2 2. Report Findings 3. IRRCI Viewpoints 4. Q&A 2

3 ABOUT IRRCI Not-for-profit organization established in 2005, HQ in NYC. Fund, disseminates research at intersection of corporate responsibility and informational needs of investors. Examines capital market context that impacts how investors, companies make decisions. All research available at no charge at 3

4 ABOUT SI2 Supported by largest asset owners, university and college endowments, as well as foundations and sustainable and responsible investment funds. Impartial proxy research and analysis of U.S. environmental and social policy shareholder resolutions. Empirical research on emerging investor and corporate responsibility issues. More information at 4

5 PRESENT U.S. REGULATION Environmental Liabilities Contingencies Fines (100K) Climate Change Social Conflict Minerals Mine Safety Payments to Governments Governance Structure Committees CD&A Board Diversity Pay Disparity MATERIALITY 5

6 MOVEMENTS SEC Petitions/Letters NRDC Environmental NRDC-Ceres Climate Change US SIF Sustainability Reporting Corporate Reform Coalition Political Spending Asset Owners Integrated Reporting Sustainability Reporting GRI More than 1,800 reporters G4, May 22 CDP 5,000 companies Water, Forests and Supply Chain Programs Integrated Reporting IIRC Consultation Draft Comment from April 16 until July 15, 2013 International Framework Version 1.0 in December SASB Sector Sustainability Accounting Standards now through Q Ceres-INCR Major stock exchange listing requirements 6

7 APPROACH Universe S&P 500 Documents Form 10-K (Also Mine Safety, Conflict Minerals, Payments) Annual Report Proxy Statement (Board Diversity and Pay Links) Sustainability Report (or Portion of Website) Issues Environmental Management Climate Change Water Use Hazardous Waste Waste Management Product Formulations Employment Human Rights Ethics 7

8 HEADLINES The number of companies making a sustainability disclosure in a financial filing or otherwise linking financial performance to a sustainability initiative The percentage of companies placing a dollar figure on a sustainabilityrelated topic Number of companies with an integrated financial and sustainability report AEP (GRI 3.1, A, GRI Checked) Clorox (GRI 3.1, B+, GRI Checked) Dow Chemical (GRI 3.0, A+, GRI Checked) Eaton (GRI 3.0, C+, Self-Declared) Ingersoll Rand (GRI 3.1, B, Self-Declared) Pfizer (GRI 3.0, B, Self-Declared) Southwest Airlines (GRI 3.0, B+, GRI Checked) 8

9 ENVIRONMENTAL MANAGEMENT Overall By Document Risk Opportunity 68% Form 10-K 48.7% 9.1% Annual Report 41.9% 14.7% Sustainability Report 44.1% 42.3% Monetary Value 9.9% Top Industries 1. Utilities 2. Materials 3. Transportation 9

10 EMPLOYMENT Overall By Document Risk Opportunity 67% Form 10-K 47.9% 16.3% Annual Report 44.7% 20.7% Sustainability Report 46.5% 45.7% Monetary Value 1.2% Top Industries 1. Transportation 2. Utilities 3. Materials 10

11 CLIMATE CHANGE Overall By Document Risk Opportunity 66% Form 10-K 49.5% 11.7% Annual Report 44.9% 17.9% Sustainability Report 45.9% 43.1% Monetary Value 3.0% Top Industries 1. Utilities 2. Transportation 3. Materials 11

12 HAZARDOUS WASTE Overall By Document Risk Opportunity 63% Form 10-K 57.7% 4.2% Annual Report 47.5% 6.2% Sustainability Report 21.1% 14.1% Monetary Value 11.1% Top Industries 1. Utilities 2. Materials 3. Energy 12

13 PRODUCT FORMULATIONS Overall By Document Risk Opportunity 54% Form 10-K 26.6% 13.1% Annual Report 30.2% 19.5% Sustainability Report 46.9% 46.9% Monetary Value 1.0% Top Industries 1. Transportation 2. Utilities 3. Materials 13

14 WASTE MANAGEMENT Overall By Document Risk Opportunity 49% Form 10-K 25.2% 6.0% Annual Report 23.1% 9.9% Sustainability Report 34.6% 34.0% Monetary Value 3.8% Top Industries 1. Transportation 2. Commercial Services 3. Materials 14

15 WATER USE Overall By Document Risk Opportunity 39% Form 10-K 21.5% 4.6% Annual Report 19.5% 7.8% Sustainability Report 27.0% 23.1% Monetary Value 2.2% Top Industries 1. Utilities 2. Energy 3. Materials 15

16 ETHICS Overall By Document Risk Opportunity 21% Form 10-K 26.4% 0.8% Annual Report 22.5% 3.4% Sustainability Report 23.5% 16.5% Monetary Value 1.0% Top Industries 1. Pharmaceuticals & Biotechnology 2. Transportation 3. Industrial Machinery 16

17 HUMAN RIGHTS Overall By Document Risk Opportunity 15% Form 10-K 26.4% 0.8% Annual Report 22.5% 3.4% Sustainability Report 23.5% 16.5% Monetary Value 0.2% Top Industries 1. Consumer Durables 2. Retail 3. Technology Hardware 17

18 MINE SAFETY Overall Form 10-K Top Three Industries Risk Opportunity 5% Materials 33.3% 6.7% Energy 23.8% 0.0% Commercial Services 11.1% 11.1% Monetary Value 3.0% Dodd-Frank Mandate Based on Federal Mine Safety and Health Act of 1977 Final Rule: December 21, 2011 Full Force: January 27,

19 CONFLICT MINERALS Overall Form 10-K Top Three Industries Risk Opportunity 4% Technology Hardware 32.6% 2.3% Communications 11.1% 0.0% Consumer Durables 5.9% 0.0% Monetary Value 0.0% Dodd-Frank Mandate Final Rule: August 22, 2012 Full Force: November 13, 2012 NAM/Chamber Court Challenge 19

20 PAYMENTS TO GOVERNMENTS Overall Form 10-K Top Two Industries Risk Opportunity 3% Energy 28.6% 0.0% Materials 6.7% 3.3% Monetary Value 0.4% Dodd-Frank Mandate Reporting Threshold = 100K Final Rule: August 22, 2012 Full Force: November 13,

21 PAY LINKS 43% Top Industries Environment Utilities (53.3%) Energy (45.2 %) Materials (26.7%) 6% 6% 6% 3% 2% Environmental, Social and Ethics Environmental and Social Environmental and Ethics Social and Ethics Social Utilities (76.7%) Energy (61.9%) Materials (50.0%) 57% 2% 19% Environmental Only Social Only Ethics Only None Governance Utilities (30.0%) Energy (26.2%) Real Estate (18.8%) 21

22 BOARD DIVERSITY 43% Transportation Healthcare Utilities Industrial Machinery Materials Media Insurance Commercial Services Consumer Staples Retail Pharmaceuticals and Biotechnology S&P 500 Energy Technology Services Banking and Investments Restaurants, Hotels and Consumer Services Real Estate Consumer Durables Technology Hardware Medical Devices Communications

23 SUSTAINABILITY REPORTING GRI Report (3.0 or 3.1) Transportation Utilities % 31.2% GRI Other Consumer Staples Commercial Services Real Estate % 4.8% 17.9% Other Sustainability Reports with Date Boundaries Website Disclosures without Boundaries None Materials Technology Hardware Industrial Machinery Energy Medical Devices Consumer Durables S&P Pharmaceuticals and Biotechnology 70 Technology Services % 23.6% Consolidated or Full Financials General Economic Discussion No Financials Insurance Retail Healthcare Restaurants, Hotels and Consumer Media Banking and Investments % Communications

24 SCORES AND PROFILES Sector Company Score/113 Energy CONSOL Energy 42 Materials Newmont Mining 54 Industrial Machinery Eaton 44 Commercial Services Waste Management 57 Transportation Southwest Airlines 47 Consumer Durables Ford Motor 43 Consumer Services Marriott International 45 Media CBS 24 Retail Best Buy 50 Consumer Staples Coca-Cola 37 Medical Devices Covidien 27 Healthcare Humana 37 Pharmaceuticals and Biotechnology Banking and Investments Insurance Amgen 35 Morgan Stanley 33 American International Group Real Estate Equity Residential 21 Technology Services Computer Sciences 33 Technology Hardware Intel 52 Communications Sprint Nextel 27 Utilities American Electric Power Utilities Materials Transportation Energy Consumer Staples Industrial Machinery Technology Hardware Commercial Services Pharmaceuticals and Biotechnology S&P 500 Retail Consumer Durables Insurance Restaurants, Hotels and Consumer Real Estate Media Banking and Investments Communications Healthcare Technology Services Medical Devices

25 FUTURE RESEARCH Expand universe beyond S&P 500 Collect multiple years of data Parse out monetary values, aggregate and analyze Reevaluate risks and opportunities by sector based on further analysis of monetary values and relative importance Drill down on links to executive pay to evaluate significance of ties Study board oversight of these issues 25

26 IRRCI VIEWPOINT Absolutely key issue for future of capitalism Traditional accounting designed by Brother Luca Bartolomeo Pacioli 500 years ago Designed for merchants to understand their assets and liabilities Today s managers and investors ask accounting to do things it was never intended to do Search for value accounting has been ongoing for decades Reflects changes in economic drivers 26

27 IRRCI VIEWPOINT Goals: Measure extra financial inputs, externalities, value creation Link human, environmental, other capitals to bottom line effects Give insight to future value creation/degradation Efforts to date have been on what integrated reporting Should be Should look like Should report This report first to benchmark What is 27

28 IRRCI VIEWPOINT Implications Baseline analysis for IIRC, SASB, GRI Encourages race to the top for issuers Reporting Managing intangible assets/liabilities See how peers define linkages to bottom line Information for investors Facilitates ESG integration 28

29 Q&A Phones and online question box now open. Contacts: IRRCI SI2 Jon Lukomnik Peter DeSimone Executive Director Deputy Director