What does ESG mean? How are ESG performance measurement standards changing?
Environmental, Social and Governance (ESG) Standards Investing Definition
News stories have been circulating around the coming together of Canada’s eight largest pension funds (responsible for over $1.5bn in assets) to call for better environmental, social and governance (ESG) standards. It’s a move that’s long overdue.
In doing so, investors will better understand the societal impact of their money, and businesses will be more transparent in whether they’re delivering on their social promises. This societal impact could fall into a number of categories spanning environmental commitment, social issues like diversity in the workplace, or ethical corporate governance like anti-corruption.
The impact of this year, culturally, politically and socially, has thrust businesses under the spotlight. It has highlighted their successes and failures when it comes to diversity, fighting prejudice and protecting the environment, calling everything they do into question.
It runs in parallel with the fact that the current system is highly inequitable. Just last week, BlackRock and Vanguard, two of the world’s biggest money managers, showed little support for shareholder ESG votes. Whether it’s through direct shareholdings, our index and mutual funds, or our pension plans, we own corporations. Despite that, our voices are rarely heard. The mechanism to enable our voice is through a proxy vote, but most end up in the recycling bin and not at a ballot box. As a result, the actions of corporations are directed by institutional shareholders and the result is a system where our financial and social values are disconnected.
ESG Standards and the Founding of 5&Vine
It’s a belief of standing up for better that forms an integral part of 5&Vine’s current DNA. We’re in the business of alternative capitalism, and we help build brands that benefit people and the planet every day. But this collective call for greater ESG standards also speaks to 5&Vine’s past, and my history in co-founding and leading Share Impact in 2008.
Share Impact was created to change our inequitable system by putting the power and responsibility back into the hands of investors, and giving them a platform to identify social values and map them to their shareholdings. It aimed to change the face of the capital markets so it was reflective of not just an investor’s economic value but their social values too.
Along with other co-founders Aaron Peirera, Kevin Shnier, Jason King, Mike Branch, Tai Toh, Martin Ryan, and Paul Leishman, I created a platform that enabled the average retail investor to register all their shareholdings, identify their social values, and electronically vote their proxy.
The idea itself had so much promise and momentum that it received seed funding from Al Gore and Generation Capital and won approval from global pension plans worth over $3 trillion who agreed to publicly vote their proxies to help bring out the vote.
Sadly the idea was halted as the capital markets collapsed in 2008, weeks before Share Impact was set to launch and the retail investor was focused on capital preservation. But the idea of putting power in the hands of the people still stands, and the news of Canadian pension funds calling for greater ESG standards is giving it the momentum it needs.
It’s another example of the effort of the Challenger and what runs through 5&Vine’s veins. For both Share Impact then and our work with clients now, it’s all about challenging power systems, and finding a better way to do business at the intersection where economics and social ethics meet.