We spoke with David Mordy, Director of Investor Relations for CenterPoint Energy (CenterPoint) for his perspective on how corporate Investor Relations Officers (IROs) are viewing the shift to Socially Responsible Investing (SRI).
CenterPoint Energy, Inc., headquartered in Houston, Texas, is a domestic energy delivery company that includes electric transmission & distribution, natural gas distribution and energy services operations. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas. The company also owns 54.1 percent of the common units representing limited partner interests in Enable Midstream Partners, a publicly traded master limited partnership it jointly controls with OGE Energy Corp. Enable Midstream Partners owns, operates and develops natural gas and crude oil infrastructure assets. With nearly 8,000 employees, CenterPoint Energy and its predecessor companies have been in business for more than 150 years.
CenterPoint recently released its 2017 Corporate Responsibility Report using the Global Reporting Initiative (GRI) standards. The report can be found on its Investor Relations site.
Christopher P. Skroupa: Investors are increasingly considering Environmental, Social and Governance (ESG) factors in their decision-making process. What do you think they are looking for from companies?
David Mordy: There is tremendous range in what investors want. Some investors are merely looking to cross off companies that conflict with the investor’s ESG investment philosophy. From my perspective, however, investors are looking for companies to provide common metrics such as CO2 emissions and detail on environmental stewardship, social policies and contributions. They also want to invest with companies that are transparent, have solid business practices and are committed to doing the right things for their stakeholders.
Skroupa: Is this a fad that’s likely to burn out within a few years?
Mordy: I remember preparing for Y2K at my previous company, which burned out at the stroke of midnight. This is absolutely the opposite. At the heart is the millennial generation exercising their voice and making the world a better place. Don’t mistake me, this is much broader than the millennial generation now, but I think they’re the core of Socially Responsible Investing. In tandem, the rise of passive investing means we now have an investor base that never walks away from a company. Engagement from Vanguard, Blackrock and State Street is on the rise as they shoulder the responsibility of owning a huge percentage of corporations. Some of the evidence points to passive funds becoming increasingly mindful of that responsibility, which is evident in Larry Fink’s letter to CEOs earlier this year. Ultimately, ESG performance and reporting is based on what stakeholders want and expect from companies.
Skroupa: How long have ESG considerations been part of your Investor Relations role at CenterPoint?
Mordy: I started in this role in late 2014 and it wasn’t yet part of the conversation with investors. While CenterPoint Energy has long been committed to conducting its business in a safe, environmentally responsible manner, our reporting was primarily limited to SEC filing obligations. This is understandable as investors rarely initiated discussions on the topic then. Now, we regularly see ESG topics as being important considerations to our company’s stakeholders, which are discussed in roughly half of our European investor meetings and about 20 percent of U.S. investor meetings.
Skroupa: What challenges has CenterPoint had in terms of deciding what ESG information and format to release?
Mordy: If I am driving a car with 800 metrics displayed on the dashboard, I probably can’t see where I’m going. However, investors understandably want to make apples-to-apples comparisons of companies, which increases the number of metrics to be monitored. Accordingly, a natural conflict arises in terms of the breadth and scope of reporting metrics. So, from a corporate perspective, we try to focus on fewer, potentially more relevant metrics.
In addition, the desire to hold companies to a common set of metrics leads to providing information that may not be applicable to certain companies. For example, CenterPoint does not generate electricity, and therefore, water usage is not a principal component of its operations. Nevertheless, many third-party templates require water disclosures (and score according to that disclosure), so we have included information because of its importance to some stakeholders.
The company’s public disclosure and filings typically adhere to the format prescribed by the SEC. CenterPoint supplemented its SEC filings to provide additional information through its recently published Corporate Responsibility Report by following the GRI standards, a format that is valued by stakeholders. By utilizing this format, CenterPoint is providing information that may be helpful to investors. We also intend to publish the Edison Electric Institute’s (EEI) ESG template later in 2018 – which I will discuss later on.
Skroupa: So how does CenterPoint stack up in terms of ESG strategy?
Mordy: There are two areas that come to mind where I think CenterPoint truly shines: the first is our employees’ commitment to the communities in which they live and work and the second is our use of technology to benefit our customers and the environment. Both are part of our culture, and it was evident during Hurricane Harvey in 2017. On the job, CenterPoint employees came together with local public officials, emergency responders and mutual assistance crews to safely restore electric and natural gas services to our customers after Hurricane Harvey dropped 52 inches of rain across Southeast Texas and caused record-setting flooding. Off the job, our employees gave generously, helping their neighbors and broader communities in various ways. In 2017, our employees donated approximately 146,000 volunteer hours to numerous charitable and community efforts.
A number of technologies were instrumental during Hurricane Harvey and its aftermath. The first was automation, including intelligent grid switches, which helped avoid nearly 41 million outage minutes for our customers. Smart meters, which we deployed across our territory, helped identify outages and increased our efficiency. We also utilized drones to identify locations with electric issues and to direct crews as well as in our gas operations to check methane levels. Finally, our Power Alert Service, which automatically notifies enrolled customers about power outages (including the cause, estimated time for repairs and resolution) enabled us to communicate directly with affected customers. We’re leading the utility industry in the way we utilize technology and that translates into lower emissions, fewer disruptions for our customers and improves safety for our employees.
Skroupa: So, I would assume CenterPoint is leading its peers on ESG reporting?
Mordy: I think we’re a peer-leading utility in terms of culture and actions. From a reporting standpoint, the utility sector is very engaged, in large part due to the initiative taken by EEI. In an effort to navigate some of the aforementioned challenges, EEI created an ESG/Sustainability Steering Committee comprised of member companies and an ESG Sustainability Investor group using a diverse group of investors. Together, they advised on the creation of an ESG template designed to provide consistent information including ESG/Sustainability data, clarity on risks and overall insight into company strategy. Currently, 36 member companies have released or plan to release information utilizing the EEI template. I think this effort represents voluntary action that has been applauded by a number of investors and third-party organizations. Other industries could and should look to replicate this effort.
Skroupa: What does the future hold in terms of ESG Reporting and SRI?
Mordy: I hope the tilt moves from checking of boxes to discussing company strategy. Providing information is an important first step in setting up the dialogue, but the next step is for companies across the country to meaningfully consider societal changes in determining their strategy. The challenge is that media often falls short in explaining the complexity for any given industry, whether that’s healthcare, utilities or the financial sector, so education and engagement need to be part of the solution. Socially Responsible Investors should use a company’s disclosures and regularly interact with IROs to truly understand a business so that they can have a substantive conversation regarding strategy and advocate complementary changes for that strategy.
David Mordy is giving a presentation at the ESG4 Summit, as well as speaking on a panel entitled The ESG Roadshow: How to Brief Investor Relations on the ESG Value Proposition.
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