Understanding Sustainability in the Era of Shareholder Engagement

Nasdaq corporate sustainability

Whether referred to as ESG or SRI, the corporate sustainability “trend” is here to stay. Too often relegated to the board’s peripheral list of social causes, Environmental, Social and corporate Governance (ESG) and Socially Responsible Investing (SRI) are gaining significant footing in the investing world, yet their relevance to boards today is often misunderstood.

Today’s corporate directors generally associate sustainability with little more than “emissions and political spending,” as our recent episode with Nasdaq’s Evan Harvey (Director of Corporate Responsibility) revealed. Boards must open their eyes to a growing social consciousness, which now underpins a remarkable share of asset management, both here and abroad.

Romantic Ideals to Investment Metrics

In a two-year timespan (2012 to 2014), total U.S.-domiciled assets under management using SRI strategies expanded from $3.74 trillion to $6.57 trillion (via Nasdaq’s white paper, below). Sustainability has become a metrical and data-driven effort, said Harvey in his episode. With investors now making decisions based on ESG and SRI metrics, boards would be wise to do the same—particularly in an era where shareholder engagement is fast-becoming more frequent and detail-oriented.

Shareholders want boards to demonstrate that they understand ESG issues, specifically as they relate to the board’s businesses, and that they are on the board’s agenda with a strategy for tracking and measuring their performance in these areas.
— Janine Guillot, Sustainability Accounting Standards Board (via Nasdaq’s recent white paper)

Recognizing a need for both education and action items, Nasdaq Corporate Solutions & Leadership Board recently co-authored a white paper with MeetX and Directors Desk, which provides boards with a solid foundation in ESG and SRI. Not only does the report clarify basic terminology, but it provides context for the proliferation of sustainable investment strategies. With SRI assets now accounting for one out of every six dollars under professional management in the U.S., corporate responsibility has become a permanent fixture in the arena of the shareholder engagement.

Don’t miss additional resources from our episode with Evan Harvey, as Nasdaq’s Director of Corporate Responsibility outlines 3 Ways Boards Can Begin Monitoring Sustainability.

DOWNLOAD: “Do Well. Do Good. Do Both.”

Nasdaq white paper on sustainability

What strategic questions should board members be asking about ESG and SRI? How should they engage with shareholders on these issues? Nasdaq also offers action items on how directors can effectively execute the board’s duties related to ESG and SRI.

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