Can investment decisions and net zero strategies live in separate silos?

Putting investment decisions and sustainability assessment in separate 'silos' is outright damaging to businesses in the long run, the net zero community was told during an industry event in London.

According to Paul Druckman, chairman of the World Benchmarking Alliance, “the risk is that we see things in separate silos. Until we start to understand how everything fits together in the new world of business, we're going to really struggle to get to the right level.

“I really do believe that we're going into a transformation of businesses for stakeholders and investors, as well as large corporates. But the risk is that that this doesn't come through at the at the board level.”

Amelia Pan, managing director in the Strategic Advisory Group at PJT Partners, also spoke of how the sustainability conversation is “bifurcated” between reporting requirements and the responsibilities of a chief sustainability officer.

The remarks were made during software firm Workiva’s Accelerate Conference at a ”fireside chat” of ESG experts, held at the iconic Gherkin building in London's financial district.

Paul Dickinson, founder of disclosure platform CDP, spoke of a concept of “triple materiality”, while insisting that the key point as always “is to make money” from business.

“I know double materiality is kind of annoying, but I'm going to introduce triple materiality. I'm sorry. First one is how the world impacts the firm. Second one is how the firm impacts the world. The third materiality is how the firm fits in to the world," he told delegates.

“Many large companies have science based targets. Many large investors some in this room, are also committed to net zero through GFANZ, but achieving the emissions reductions of science based targets, or meeting net zero is going to require a science based policy”, he said.

Dickinson also criticised perceived slow moves from legislature to pass laws mandating reductions in climate emissions across the corporate and individual space, claiming that “governments do not know what to do.”

ESG controller

Earlier discussions at the Workiva event related to a number of mandatory disclosure requirements currently in the works, and the potential need for the appointments of “ESG Controllers” to adapt to the requirements. 

This role could be seen as an increasingly necessary risk management position, overseeing oversight of ESG-related disclosures in financial and reporting processes.

However, Druckman was more cautious about the new role: “ESG controllers are not some sort of white knight that's going to come in and solve all the problems that we might have. I don't disagree that we need them, but we need to figure out their remit and be really careful that this isn't the solution we dream about rather than a reality.”

He specified his thoughts that current rhetoric around the issue needed to be broadened to ensure that when ESG reporting is considered, its foremost concern should be how to influence corporate behaviour.

Dickinson also expressed frustration that overtly climate conscious and 'pure play' firms in areas such as renewables were also finding themselves worrying about incoming reporting standards.

“I was talking to a friend who works in a renewable energy company. He was worried about, what should I be reporting, what frameworks should I be using, and I was scratching my head," he said.

“You're saving the world, you need to just focus on making a case and going to the pension funds and getting billions of dollars and learn how to sell with the genius inside your company”, Dickinson concluded.

Last month, Net Zero Investor looked into a new dawn for renewable energy as institutional investors embrace wind, water and sunlight.

However, Druckman was more cautious about the new role: “ESG controllers are not some sort of white knight that's going to come in and solve all the problems that we might have. I don't disagree that we need them, but we need to figure out their remit and be really careful that this isn't the solution we dream about rather than a reality.”

He specified his thoughts that current rhetoric around the issue needed to be broadened to ensure that when ESG reporting is considered, its foremost concern should be how to influence corporate behaviour.

Dickinson also expressed frustration that overtly climate conscious and 'pure play' firms in areas such as renewables were also finding themselves worrying about incoming reporting standards.

“I was talking to a friend who works in a renewable energy company. He was worried about, what should I be reporting, what frameworks should I be using, and I was scratching my head," he said.

“You're saving the world, you need to just focus on making a case and going to the pension funds and getting billions of dollars and learn how to sell with the genius inside your company”, Dickinson concluded.

Last month, Net Zero Investor looked into a new dawn for renewable energy as institutional investors embrace wind, water and sunlight.