Where is the ‘S’ of ESG and what is needed?

In April 2020, I was interviewed for an article in the Financial Times entitled ‘Coronavirus forces investor rethink on social issues’, in which I shared that the “S has definitely been the poor relation of environmental and governance issues” and “There has been real resistance from some asset managers to taking meaningful action.”

It is a theme I explored in a Charity Finance magazine feature around the same time, asking the question “where is the ‘S’ of ESG?”. The article, ‘Charities establishing new best practice with the ‘ESG investing Olympics’, reflected upon some of the trends and gaps we identified from assessing dozens of asset manager proposals.

Most ESG funds tend to invest in sectors like tech, media, consumer, utilities, manufacturing, and retail. Many of the companies are high risk from a social perspective, but integration and engagement by asset managers is obviously far less developed.

A common reason given for this is the lack of consistent comparable data on many social issues.

A major step forward – Equality Trust ‘Fair Pay FTSE’

This should help get the ball rolling; a very welcome and key output from the Equality Trust ‘Fair Pay FTSE’ project, which we were pleased to grant fund.

The Equality Trust has assessed the FTSE 100 in terms of pay inequalities and has just launched the ‘FTSE 100 Data Dashboard’. Click on the link to find out the CEO pay gap, gender pay gap and gender bonus gap at every FTSE 100 company, as well as whether the companies recognise trade unions and are signed up as a Living Wage employer.

This easy to use tool, will assist stakeholders from investors assessing company ESG claims to prospective employees looking to work for a responsible business.

Comprehensive data – ShareAction ‘Workforce Disclosure Initiative’

To help drive better integration of the ‘S of ESG’, we are also a member of the Workforce Disclosure Initiative (WDI), which aims to improve corporate transparency and accountability on workforce issues.

The WDI investor coalition is made up of 49 institutions, with $6.5 trillion in assets under management. Through its annual survey and engagement programmeme, it is making steady progress on securing disclosure from the world’s largest companies and establishing the comprehensive and comparable data-set needed to help investors address salient workforce issues as part of ESG integration and engagement.

Benchmarks that are available

Whilst comprehensive and consistent data may not yet be readily available across a very wide range of social and workforce issues, there are benchmarks available on specific issues with which to assess companies. One of which is real Living Wage accreditation.

We are pleased to be a member of the ShareAction ‘Good Work Coalition’, which has been engaging on this issue. In November, we signed a letter to 15 companies requesting they become Living Wage accredited, and in December signed a letter asking the Royal Mail to pay the real Living Wage to all their staff, including tens of thousands of temporary workers.

You can add your voice to the call here.