Robert Dornau has spent the last 18 years working on sustainability-related topics in a diverse set of roles. He joined RobecoSAM in February 2014 as Senior Manager in the Sustainability Services Business, and now serves as Director at RobecoSAM. In this role he has benchmarked the sustainability performance of hundreds of large multinational companies and helped leading companies understand the requirements of sustainability from an investor perspective. Before joining RobecoSAM, Robert worked in different roles in climate change and sustainability, including Vice President, Global Head Climate Change Service at technical verification and inspection firm SGS, Deputy to the CEO of the International Emissions Trading Association, Consultant to the World Bank and Conference Director for world renowned Carbon Expo.
Louis Coppola is EVP and a co-founder of Governance & Accountability Institute and serves on the board of directors for The Global Sourcing Council. Coppola provides advice to corporate and investor clients on sustainability strategy, disclosure/reporting, investment and performance. Coppola is the Chair of the US SIF’s Company Calls Committee which provides a point of engagement for companies with the sustainable investment analyst community. He is an active steering member of the CFA Society of NY’s Sustainable Investing Committee. He coordinates the Institute’s data partner relationship with GRI and coordinates various public research projects on topics such as sustainability reporting trends, sector materiality, and external assurance practices. Coppola is also a member of the Skytop Strategies Advisory Board.
Christopher P. Skroupa: The RobecoSAM Corporate Sustainability Assessment is about to hit the desks in many publicly traded companies. Are executives aware and what are they doing to prepare?
Louis Coppola: In our conversations with managers at publicly-traded companies, we increasingly hear about the executive team’s intent to have their company seriously considered for inclusion in the Dow Jones Sustainability Indexes (DJSI). Yes, there is much greater awareness of this critical benchmark. And, if the company is included in one or more of the DJSI, the firm typically strives to maintain that treasured status. Corporate execs. are aware that their peer group companies are also striving to be included in, or to remain in the DJSI – so there is very spirited competition within industries and sectors.
In this context, the springtime arrival of the comprehensive questionnaire from RobecoSAM, the Corporate Sustainability Assessment or “CSA,” has been taking on greater importance in the U.S. corporate sector. There are considerable internal discussions, and more intensive scouring for data sets and other information to have a more fulsome and meaningful response to the CSA.
The scoring of companies by the RobecoSAM team takes place over the summer months and by September the results are known, including who is in the DJSI and who is not. At this time we usually conduct a formal gap analysis with our corporate clients that respond each year to identify their strengths, weaknesses and gaps – especially in the context of their industry peers.
The formal gap analysis helps managers and the C-suite to understand what external stakeholders, especially investors, are thinking [or not] in terms of their disclosure of material ESG (environmental, social and governance) performance metrics, where the company is positioned vis-à-vis the competition, and what has to be addressed before the next CSA questionnaire is being prepared.
By doing this immediately after the benchmark scores are back from RobecoSAM in September, they are able to maximize the amount of time available to put the resources and strategies in motion to prepare for a better response next year. For first-time responders, we work with clients to complete a mock response during this time period, which helps to facilitate the same process of identifying information gaps and strategizing for the next year’s first response.
Companies learn a great deal from the gap analysis and peer benchmarking processes. They help managers to understand where their efforts need to be focused for ESG strategy-setting on material issues, and to identify key action steps, leading to year over year improvements and building stronger stakeholder relations.
Skroupa: What is the timing of the 2018 RobecoSAM CSA process?
Robert Dornau: The CSA is conducted online and the 2018 questionnaire will be accessible as of April 5. All invited companies will receive an email from RobecoSAM with the registration information. Companies will have until the end of May to provide their responses. If necessary, a deadline extension can be requested by first time participants. We did run a number of webinars already in March to explain the CSA process and recent methodology changes; made available for replay through the CSA webcasts page. The CSA can be described as a ‘living document’ – meaning that changes to the questions can be expected each year, as RobecoSAM responds to investor and other stakeholder expectations, a growing understanding of material ESG issues, better overall disclosure availability and demands for greater transparency in ESG strategies and performance results.
Coppola: There are a few important ESG events that are taking place in NYC that happen to coincide with the timing of the release of the 2018 RobecoSAM CSA. The first is the Skytop Strategies “ESG4 Summit,” an annual gathering of thought leaders in both sustainable investment and corporate sustainability which takes place on April 5 in New York City. There will be a considerable amount of discussion around issues and topics that relate to the CSA content, which will help to expand the understanding of the CSA process and the importance of the DJSI as a premier sustainable investment benchmark.
Later that same week on Friday, April 6, G&A Institute – in collaboration with RobecoSAM – will present, “DJSI – How Insights Inspire Action – Leveraging the Value of the Corporate Sustainability Assessment,” an in-depth workshop, at Baruch College/CUNY for corporate managers to further their understanding of the CSA process. This will be a small intimate event with the opportunity to interact with industry peers, and representatives from RobecoSAM and G&A.
As part of the session, participants will be granted complimentary access to the RobecoSAM benchmarking reports and leading practices database, both of which are usually only available for a fee. There will also be discussions about best practices for responders, and a sharing of value-adding tools, processes, templates and resources for first time as well as veteran corporate responders.
The closed-door discussions will include the rationale, business case, performance attributes and results of last year’s CSA assessments. Challenges that companies faced in addressing the CSA questions will also be discussed and explored. Updates in 2018 to the CSA include important and emerging sustainability topics, which will be discussed at both the events on April 5 and 6.
Skroupa: You mentioned that the CSA is a “living document.” What were key changes in 2018?
Dornau: It is important for us to ask questions that matter, both from an investor and from a company perspective. Therefore, every year, we have hundreds of discussions with participating companies and collect their input on the questionnaire. In addition, we conduct statistical analysis and backtesting to refine the financial materiality of each topic and with that the weight that is assigned to the related questions and criteria. This year, one focus was on reducing the reporting burden for companies. One way we did this is by removing questions that no longer differentiate companies on their sustainability performance. This led to a deletion of 5-10 questions per industry-specific questionnaire.
Another effort to reduce the reporting requirement for companies, is to align with other reporting standards. For years we aligned our climate strategy questions with CDP and have updated this year’s questionnaire to reflect the recommendations of the Task Force on Climate Related Disclosure (TCFD), including questions on scenario analysis, internal carbon pricing and the application of science-based targets.
For many questions we also increased the disclosure requirements to receive full points in our assessment. This means that only if the respective issues are reported by the company in the public domain will they receive points in the assessment, or in some cases, increased transparency will allow a company to secure additional points.
The questionnaire also changes as new questions are introduced, like the ones related to TCFD this year. When introducing new questions we take current market trends into account. Companies value that participation in the CSA prepares them for future investor questions. A good example of a recent topic we took up in the CSA is policy influence.
We felt this has not fully been captured in other ESG assessment frameworks and poses long-term threats to companies and the achievement of global sustainability goals. That is why we decided to address it in more detail in the CSA starting last year. It is no wonder to us that it has now become a top shareholder proposal topic for 2018 – a recent announcement from AFSCME and Walden Asset Management reported that coalition of at least 74 investors have filed proposals at 50 companies asking for detailed lobbying reports.
Skroupa: So the CSA is also an engagement tool, that prepares companies for questions other investors might raise with them. What are other benefits that companies see in a CSA participation?
Dornau: We frequently engage with participating companies to understand how the CSA adds value for them, what their needs are and what additional features and functionalities we can provide to best meet them.
What companies frequently tell us is that the CSA has helped them in a number of different ways:
1) Adds visibility and credibility to their sustainability. CSA results are not only used to select companies for dozens of different S&P indices, not just DJSI, and they are available to over 300,000 subscribers to the Bloomberg Professional platform;
2) Helps drive strategic decisions within the company by identifying gaps and areas for improvement. In combination with leading practice examples from company peers, as available in RobecoSAM’s leading practice database, this becomes a powerful tool for targeted improvements;
3) Drives internal employee engagement – giving employees a sense of pride and achievement. The CSA is typically driven by an internal champion who collects information from different departments. As RobecoSAM provides benchmarking results down to criteria level, this information should also be fed back to the participating departments. We hear from leading companies that this type of benchmarking creates strong employee engagement;
4) Makes stakeholder dialogues easier, for example with critical NGOs. The CSA is regarded as one of the most credible sustainability rankings and the one with the longest history. Ranking highly overall or in certain topic areas can be used as an external seal of approval in discussions with critical stakeholders;
5) Finally, companies that participate for many years see their CSA participation as a management tool, helping to measure and manage sustainability topics and their performance on these topics.
Louis Coppola will be a moderator for the panel Reporting Standards: The Importance of Disclosing Accurate/Assured ESG Performance, and Robert Dornau will be a panelist on a discussion Paving the Path: Institutional Investors, ESG Methodologies and the Drive Toward ESG Integration; both to be held at the ESG4 Summit in New York, NY on April 5.
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