MSCI, Manifest, The Investment Integration Project, Carbon Tracker, and
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Dear Fellow Supporters of Integrated Reporting,

This e-mail contains information on a recent report by MSCI on ESG trends, a report by Manifest on sustainability reporting by companies, The Investment Integration Project (TIIP), a recent report by Carbon Tracker, and my latest blog on my column.
Last month MSCI published a very interesting report “2016 ESG Trends to Watch” written by Linda-Eling Lee, Matt Moscardi, Laura Nishikawa, and Ric Marshall. The five trends are:
  • Tide Turns on Credit?: In 2016, we anticipate that if credit spreads widen, identifying ESG-related exposures and potential governance failures will play a bigger role as bond investors reprice underlying risks.
  • Divide and Conquer: In 2016, we may see utilities increasingly split their assets in order to separate renewable assets from legacy generation assets as investors seek allocation to other asset classes that could provide them the exposure to low-carbon energy assets of the future.
  • Wealth of Data: In 2016, wealth managers may seek to differentiate themselves by offering new insight at the fund level, enabling advisers to more closely align products to their clients’ individual values and philosophies. Such information might tilt toward ESG data, including values-based judgments, impact-based preferences, or risk-based convictions for long-horizon investors.
  • Power in Numbers: In 2016, we expect that the power of “beta engagement” could expand beyond areas such as declassification and proxy access to include board diversity and refreshment of long-tenured boards.
  • Mind the Pay Gap: In 2016, we may be near a tipping point as companies start to release pay-ratio data and wage shocks occur. As a result, we expect that investor and academic focus could shift to how intra-company pay structures are linked to economic growth from sector- and country-level impacts of income inequality.
You will find this an interesting and informative report. MSCI also hosted a webinar and it is available as an audio recording.
Also in January, Manifest, a U.K.-based proxy voting agency, published its “Say on Sustainability” report under the direction of Rosie Clark. Here is a summary of the major findings:
What do Companies Say on Sustainability?
A surprising amount. Yes, it is true, many companies use a great deal of boiler plate and greenwash to describe their sustainability governance. Promising signs of better integrated reporting are on the horizon, however, despite many positive developments, Manifest’s third annual analysis of the world’s leading sustainability disclosures shows:
  • 62% of independent sustainability reports were not up to date with the financial year assessed
  • Worrying, 11% of those were two or more years out of date – with six years being the most tardy example
  • Only 32% of companies dedicate responsibility for sustainability to a board leader or specific committee
  • Just 8% of the US companies analysed were able to meet the quality of reporting achieved by their peers in the UK, EU or Oceania
  • Only half of the companies surveyed were linking some form of sustainability metrics to variable pay
A free copy of this report is available by writing to
The Manifest Say on Sustainability framework was developed from a wide-ranging review of leading academic papers and 42 legal, regulatory and independent sustainability disclosure initiatives.  The six areas of focus in the framework look at:

Disclosure & Transparency What and where are companies disclosing information? Is there risk recognition, socio-environmental performance data or target-setting? Is the data timely?
Management Processes Who owns sustainability in the firm, who is responsible, how senior?
Are management systems disclosed &/or certified?
Risk Management Policies, performance, targets, linkage to executive pay
Stakeholder Relations Suppliers, value perception, staff rewards, charity, political donations
Audit & Verification Assessment standards used, external verification
Public Participation Recognition of initiatives including  CDP, UN Global Compact, GRI, SASB etc.

The Manifest Say on Sustainability framework gives pension funds, asset managers and other interested stakeholders accessible reports and data tools to understand how investee companies do (or do not) embed sustainability in their governance systems.
Rather than resorting to divestment or boycott campaigns, giving shareholders a Say on Sustainability enables them to incorporate new themes and concepts into their AGM voting and stewardship activities, just like a Say on Pay.
In an e-mail from Sarah Wilson, Chief Executive of Manifest, she told me that “’Say on Sustainability’ gives investors a practical, evidence-based approach to incorporating sustainability themes into the annual proxy and governance process. It focuses on the issues which mounting academic evidence demonstrates can have a material impact on board thinking and ultimately firm performance. The debate around voice or exit has never been so crucial for capital markets; sustainable companies need sustainable governance. Investors can now take an integrated approach to sustainability and voting across all their portfolio companies.”
The Investment Integration Project
The Investment Integration Project (TIIP) is a new initiative started by Steve Lydenberg (Founder and CEO) and William “Bill” Burckart (President) whose aim “is to help asset owners and managers better understand how systemic frameworks can be enhanced in order to fortify investments; communicate with corporations and other entities providing investment opportunities to further align their policies and practices with the maintenance of healthy systems; and work with peers to enhance the integrity of the financial community and encourage disclosure of social and environmental data relevant to investment issues.”
Towards that aim “We're building a base of knowledge and evidence that helps prove empirically that portfolio level decisions can have systemic consequences and vice versa; and a network of asset owners and mangers, systems thinkers, and analysts that can share best practices, insights, and data on investment integration research, strategies, and tactics.” If this is of interest to you, you can contact them on their website. You can also read the November 16, 2015 Exposure draft of their paper “Portfolios and Systemic Framework Integration: Towards a Theory and Practice.”
This is a very ambitious undertaking, but Steve has been a visionary in the sustainable investing world for decades (e.g., a co-founder of KLD Research & Analytics, a founding board member of the Sustainability Accounting Standards Board, and a co-founder of the Domini 400 Social Index, the first index to utilize social and environmental standards). Bill is leveraging his particular background in field building, having advised major fund managers and associations like the Money Management Institute and global initiatives like the Johns Hopkins New Frontiers of Philanthropy Project, and helping to write the “Status of the Social impact investing Market: A Primer” that was distributed to policymakers at the inaugural G8-level forum on impact investing. Their respective track records suggest that they will do something important and meaningful in bringing system level integration for environmental, social, and governance topics.
Carbon Tracker
In partnership with Ceres, CDP and CDSB, Carbon Tracker has assessed the responses from over 80 fossil fuel companies to a questionnaire sent to over 200 listed entities, looking at how they report on climate risk. The results are reported in “Recognising Risk, Perpetuating Uncertainty.”
From the Executive Summary:
  • Insufficient climate-related risk reporting
  • Climate-related risks threaten investors
  • 99% of sampled fossil fuel companies recognize its risky business…
  • …But perpetuate uncertainty with lack of implementation
  • The occurrence of reporting inconsistencies remains a concern
  • Investors need to call for more
For regulating the capital markets to manage climate-related risks, the report makes recommendations for actions to by taken by companies in their disclosures, by securities regulators ad financial reporting standard setters, and by voluntary reporting guideline setters.
My latest post on is “Where Does the Carbon Come From?” In it I analyze some interesting data made available to me by the Boston Consulting Group. I do so in the context of two conferences held in New York last week: (1) the “Investor Summit on Climate Risk: Advancing the Clean Trillion,” held at the UN Headquarters on January 27, 2016 and hosted by Ceres and the United Nations Foundation and (2) noted at a conference on stranded assets co-hosted by with Ceres and the  Stranded Assets Programme at Oxford University’s Smith School of Enterprise and the Environment,

Kind regards,


Robert G. Eccles | Professor of Management Practice | Harvard Business School
Phone: 617.495.8585

 Movement: Meaning, Momentum, Motives, and Materiality