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In order to create long-term profit, companies must record as much data as possible to show investors

Evan Harvey is the Global Head of Sustainability for Nasdaq. He manages all corporate sustainability (environmental, social and governance strategy) and most corporate responsibility (philanthropy, volunteerism and community engagement) efforts for the exchange. Evan currently serves on the Network USA Board of the United Nations Global Compact and the GRI Global Sustainability Standards Board, and previously chaired the WFE Sustainability Working Group. His work has been published in Forbes and the Sustainable Accounting Review, and he is a regular contributor to Capital Finance International. Prior to joining Nasdaq in 2004, Evan worked at Southwestern Bell, Nextel, and The Diversity Channel. He holds a B.A. and an M.A. from the University of Texas, and is based in Washington DC.


Christopher P. Skroupa: Tell us how the role of exchanges in ESG reporting has come about?

Evan Harvey: Some stock exchanges — in Johannesburg and Brazil, most notably — have long understood the market value of ESG performance data, and actually required their listed companies to publicly report it. But the rise of exchange interest in ESG reporting en masse really coincides with the rise in mainstream investor interest in the same topic. In order to engage with a growing number of vocal investors, and advocate on behalf of their listed companies, exchanges began to work together in unprecedented ways. The Sustainable Stock Exchanges Initiative was formed by the UN in 2009 with just a handful of members, and there are now more than 60 participants in that group. The WFE Sustainability Working Group, an exchange-focused project designed to find a smart balance between investor demand, company capability and market efficiency, began in 2013 and has reached into every part of the globe, including China, the Middle East and sub-Saharan Africa. We work together to set best practices and better understand the impacts of sustainability on long-term value creation.

 

Skroupa: Can you provide us with an overview of the ESG reporting guide?

Harvey: Nasdaq published an ESG Reporting Guide for our European markets in March, 2017. The Guide is meant to provide an overview of the “business case” for sustainability strategy, management and performance disclosure. We identify 33 different metrics across the ESG space — the common denominators in global reporting frameworks, the most revealing and insightful measurements of company vitality — and make the justification for each. Reaction has been almost uniformly positive, and many investors have thanked us for helping to declutter a crowded data landscape.

Skroupa: What benefit is there for a company to report ESG performance?

Harvey: As we state in the ESG Reporting Guide, there are many more value drivers here than most people think. You can lower capital costs, operational costs, investor turnover and staff turnover. You can raise revenues, investor returns, operational efficiencies and RFP wins. Whether you focus on risk oversight or intangible valuation or product innovation, better ESG almost always means better performance.

 

Skroupa: How will it serve the interests of institutional investors?

Harvey: Anything companies can do to create a more nuanced and long-term conversation with investors would seem to benefit both parties. And exchanges tend to think that efficient data flow between companies and investors tends to produce efficient capital flow in our markets. On the other hand, investors are always looking for an edge: More data means more analytical fuel, more ways to discern value that other investors may have overlooked. Exchanges must advocate for their listed companies; the investor data requests and inbound questionnaires would overwhelm them otherwise. That’s why we also work with the global sustainability standards-setters, GRI, CDP and so on, to drive reporting norms that are both actionable and achievable.

 

Skroupa: To what extent will transparency in ESG reporting allow companies to compete for capital?

Harvey: If companies are tracking and reporting sustainability performance in similar ways, and investors are able to truly make apples-to-apples comparisons between companies on that basis — as they have done for years on the more traditional financial data — then competition is not only inevitable, it’s healthy. Companies that manage their business efficiently, transparently and sustainably should be rewarded by investors with capital and by customers with their trust, and those companies should win out over the long term. And if that comes to pass, then we can really facilitate positive market outcomes that transcend reporting. Then the markets become, as our CEO Adena Friedman has said, “a global force for good.”

 

Harvey will be presenting a topic called ESG Reporting Guide: Select Highlights, as well speaking as an interviewer for Sustainable Development Goals: The Establishment of an International Standard at the ESG Integration Summit on Aug. 29 at Nasdaq in Stockholm, Sweden.