BlackRock Wants to Know your Sustainability Story

For over 20 years, I have been waiting for this moment: the time when the largest mainstream investors actually say that “sustainability matters.” It happened at a recent Conference Board meeting I ran of about 90 chief sustainability officers (or equivalent) of leading Fortune 500 companies.

First, in a nutshell, here is the situation today:

  • Companies complain that Wall Street analysts, in their quarterly presentations, never ask about sustainability.
  • Wall Street analysts complain (at least those focused on long-term investment returns) that company CEOs never tell their sustainability story.

Daniel Oh (Vice President, Corporate Governance & Responsible Investment at Blackrock) set the record straight. He started by saying, “we own about five percent of almost every company in the room. That got people’s attention!

The goal of long-term investors (who manage a lot of companies’ pensions) is to achieve sustainable, long-term growth/returns. As such, sustainability is one of the core subject matters BlackRock discusses when they engage with companies.

Danile Oh stated, “Many people think ESG is risk management. That is so 1990s! As investors, we want to know how companies view ESG as creating shareholder value. We want to see how much value corporations can create from ESG! We want to see how corporations are quantifying the benefits of ESG.”

BlackRock looks for indicators like these:

  • CEO compensation tied to long-term performance – not only operating metrics like EPS, but also financial long-term focused metrics like ROIC, ROA, and ROE
  • C-suite incentive compensation tied to ESG factors if ESG issues are core issues or key factors potentially impacting the shareholder/company’s value.
  • Bold long-term goals: footprint reduction and revenue enhancement – how to create shareholder value from ESG practices
  • Development Stage: Policy in Place -> Good Disclosure -> Transforming Non-financial Information to Financial-Information
  • Green / sustainable product portfolio growth as a clear market trend (ex. Green bonds)

Following the meeting, Daniel suggested that our members look here for ESG investment information: