Skroupa: How can private companies maintain their drive and sense of character post-IPO, when they are subjected to shareholder scrutiny and regulatory burdens? Does this keep good companies from going public?

Harvey: It might inhibit some companies from going public as quickly, or add to their anxiety as they go through that transformation. But that doesn’t mean that the scrutiny is unnecessary or unwarranted. The great sense of shared purpose that organizes a functioning company around an entrepreneur, an idea, or a product has to be leveraged. That is their sustainable energy source; it creates the competitive edge that attracts investors, employees, and customers. Nasdaq wants to help nurture that as well; our new Entrepreneurial Center in San Francisco will provide the training and expertise to do so. Smart business practices (material data analysis, holistic strategy, integrated thinking) help small companies grow into big ones. If a private company thinks through their ESG strategy and masters it on a small scale, it is much better prepared to deal with it on a larger scale. It is also better positioned to attract the kinds of investors that will grow that company to greatness.

Skroupa: When it comes to ESG disclosures, why do we hear so much about the E and the G, but so little about the S?

Harvey: Social performance is much harder to quantify. We have had many years of environmental data in the mix—emissions, reduction targets, carbon mitigation, energy intensity—so, in a sense, those are more mature and mainstream corporate performance metrics. This is perhaps even more true for governance metrics. Most companies regularly disclose their board practices, ERM strategy, ethical oversight, and even executive compensation. But very few tend to talk about social performance. Some may defer because they have a terrible track record to defend, but I think most simply don’t know how to talk about it. How can you put a number on human rights? On diversity and inclusion? On indigenous impact?

But I think we’re getting there. More and more companies are examining their impacts in these areas, and creating policies or statements that specifically address these issues. The mere presence of a policy may not provide much insight on performance, but it’s a start. It took years to sort out the kinds of environmental performance metrics that we now take for granted, and the same will be true for social metrics. In the meantime, I would defer to the GRI standard. It still provides the most comprehensive and rigorously researched framework for social disclosures.

Skroupa: What levers are not being pulled right now? Where are the pressures to get better, more consistent ESG data into the mix not being applied?

Harvey: Regulatory engagement on this issue tends to vary from market to market. The recent European Commission directive on environmental performance reporting certainly merits some attention. Investors are now turning to industry-specific institutions, such as FINRA and IOSCO, for more guidance and support. Researchers and academics have started to model the data in provocative ways, looking at the correlation between high-performing ESG companies and financial outperformance, but more is needed. And the frameworks themselves could do a better job of harmonizing. I know that GRI, SASB, and the IIRC are working under an MOU right now to get that done, but it has been a slow process. The more clarity we can bring to our expectations, the sooner we can expect companies to deliver.


On June 19th, 2015, Skytop Strategies  will present, “ESG Summit,” hosted at Nasdaq’s MarketSite in Times Square, New York. Continue the discussion with Evan Harvey and 150 institutional shareholders, public company managers and capital markets experts at this full-day conference, designed to explore new ways of factoring ESG performance into cost of capital and company ratings. To inquire about attending, contact Victoria Billman at