ESG Advocate Wrapped 2024
A playlist for Governance, AI, Proxy Resolutions, and the evolution of the CSO
That’s a wrap for me until the new year! I’m planning on coming back on January 7th, 2025.
Thank you all for entertaining the sometimes rambling ESG insights of someone who sees the world differently. You might not know this, but I treat this newsletter as a way to think through the complexities and nuance of ESG and modern business and appreciate all of you who come along for the ride!
It has been quite the year. In April, I launched my first book, ESG Mindset, and tracked its progress, probably a little more obsessively than I should have. The book has been successful for the publisher, selling twice as many copies in the first five months as most titles sell in two years.
While the book’s success indicates ESG’s staying power, the US election in November shocked the ESG world, and the situation continues to play out here and globally. Meanwhile, this political pivot serves as an excellent reminder of what ESG is all about: outside forces pressuring the companies in material ways. If anything, I am convinced that this and building shareholder pressures will push Governance into the spotlight in 2025.
Many of the biggest stories of this past year, including Boeing, Elon Musk’s pay package, Exxon Mobil suing investors, rumors of OpenAI going for-profit, and the murder of Brian Thompson were all Governance stories.
At the risk of making more predictions, we are about to enter a period when the first CSRD reports are published. Germany is now pushing back on its complexity and there has been lingering low jurisdictional adoption across the EU. Phrases like ‘regulatory quagmire’ bounce around my head while we march to the beat of inaction and inertia, all for the sake of disclosures.
This week, I thought we’d have a little fun. In case you didn’t notice, I started creating newsletter titles that align with popular songs and lyrics. This was inspired by my good friend Barb Maclean, who publishes a weekly Fintech Playlist.
You can check out the entire ESG Advocate 2024 Playlist on Spotify. Here, let’s reorganize the newsetter by category and call out some key articles and their songs. Let’s get to it!
The ESG Advocate 2024 Playlist
Leadership Letters and Lyrics
The ESG Advocate’s Letter to CEOs - Since ‘that other guy’ releases his letter to CEOs later in the year, I decided to pre-empt the narrative with a letter to CEOs myself. The big takeaway was, “You cannot stop the work, regardless of what you call it or how others frame it.”
Rescue Me - By April, we had seen that Larry Fink had pivoted toward long-term retirement strategies and opportunities in the energy industry. In this read, I cover how both issues intersect with ESG. This song seems appropriate as the letter represented a hard pivot away from the acronym, but not what it means.
Unnaturally occurring skills - In April, we arrived at the book launch day for ESG Mindset. If you want to learn how I got on the journey to writing a book on this topic and the skills I leveraged, this is the one to read!
This was a time to catch my breath and reflect on how I got here.
Don't call it a comeback - Even in the pullback, companies used ESG in their latest reports, including Dell, Lenovo, and The Carlyle Group. As a reminder, Carlyle CEO Harvey M. Schwartz summarized ESG well: “We believe prioritizing resilient investment outcomes grounded in sustainable business models can produce more durable cashflows over the long term.”
Careers and the Evolution of the Sustainability Office
The Plagues of an ESG Career - My most popular article ever! This was a follow-up to the previous week’s post but addressed to sustainability and ESG professionals. It was informed by the feedback after reaching out to the community, confirming my suspicions: Disclosures are the focus, and little else.
The opportunity is ours, and no matter how thick your CSR report or how many disclosures you capture, it won’t shield you from ESG issues!
The one thing missing from ESG RFPs - Working on the commercial side of sustainability lends a front-row seat to a LOT of RFPs, and one thing I’ve observed is the revisiting of ESG RFPs because companies and the solutions they pick are misaligned. This one has a fun little story that received much sympathy.
ESG work is a hero's role - This was a deconstruction of a WSJ article that touted that better-managed companies have more climate-related jobs. I found it unsurprising and completely logical that an additional perspective on the business would benefit how it is run.
The CSO: A function under self-determined change - The sustainability office has been evolving and continues to. Two key reports from The Weinreb Group and BSR helped me think through how the sustainability office could leverage organizational influence to score budget and buy-in while leading the company on transformational change.
The Governance Tipping Point
Will new accountability drive change? - Even in January, I was thinking about the trend that will define 2025: Governance. Shareholders might just be coming around and ready to end the bad blood…on their terms. The status quo isn’t tenable for the board or management team because the world and its stakeholders have changed.
Governance must keep pace with innovation - Here, I build on two themes brewing throughout the year, governance and its intersection with innovation. I pull mostly from OpenAI and Generative AI examples here. Trust was a big theme for this one, but so was control. Technology isn’t in the company’s control, but its application and innovation can be.
Should I stay or should I go? - This was another governance-focused read on investors and their proxy resolutions, including how companies tend to favor the anti-ESG push and status quo over the transition and innovation. Whether divestment works or not might depend on whether you plan to stay engaged.
The ESG Advocate #100: Turn and face the strange - In August, I hit the 100th issue of the ESG Advocate. I took a new look at the ongoing debate about the state of ESG and the focus on companies on disclosures rather than business value. This was the first time I wrote about the lack of organizational influence of the sustainability office and started playing with what could be done.
The governance tipping point is here - This was perhaps the key conclusion I came to this year. We’ve seen the environmental and social tipping points around 2020, and while there have always been governance issues, the attention to governance will be the next big movement in ESG.
For boards, it's back to black - Building on the governance tipping point, I predict that the SEC staff bulletin that opens up ESG (and anti-ESG) proxy filings may end. If this happens, there are only two means shareholders can enact change: material proxy filings and targeting directors.
ESG, Data, AI, and Organizational Influence
Parallel Paths: ESG and Generative AI - Again, this was some early thinking about the commonalities between ESG and Generative AI centered on talent, data, and leadership. I refined this idea later in the year but put data at the center.
For me, this song is a personal throwback.
AI and ESG: Better Together - A follow-up to the parallel paths story of ESG and Generative, based on a talk track I put together for PracticalESG.com. This one covers the application of AI technology to ESG and introduces the importance of data in that opportunity.
Imitation of life in a world of AI - In this read, I tied together the massive and underappreciated benefits that Henrietta Lacks and her cells brought to modern medicine to how Large Language Models (LLMs) operate and the potential for future litigation.
Rolling in the deep with ESG - While I had been writing about ESG and AI all year, this was really where I nailed where sustainability professionals need to look deeper: the data. One of the key takeaways was that, like with ESG, the data is better through an interconnected lens.
Trust imagination: ESG data and setting a vision for change - Building on the next evolution for the sustainability office, I wrote more specifically about how to use organizational influence and the value of ESG data to help empower business units to understand new perspectives on the business. This one ended up being more popular than I thought it would be and continues to resonate!
Proxy Resolutions
Don't speak - During AGM season, I wrote about three specific proxy proposals at Jack in the Box, Starbucks, and Exxon Mobil to show how activist investors used their voices to bring these resolutions while others didn’t exercise their power to vote. Later in the year, I speculated on the future of the SEC Staff Legal Bulletin 14L, which opened up these floodgates.
There must be some misunderstanding - While ESG had brought proxy advisors and activist investors new opportunities, it also had the same effect on anti-ESG advisors and activists. Here, I covered a new ‘ESG Skeptic’ proxy advisory offering and found it was inconsistent with its claim to approach pecuniary measures.
Liner Notes
Comfortably numb on DEI - Even in April, it was clear that DEI would have a tough year. The further we get from the horrific murder of George Floyd, the more distant the memory becomes for companies and academia. What surprised me most about the DEI pushback in higher education is its stakeholder-centricity and the resulting juxtaposition to “abolish DEI statements.”
ESG is a dead man's party for investors, but... - It’s an old-fashioned whodunnit inspired by my daughter’s high school production of Clue.
Who killed the ESG party, and what will happen next?
Followers, Superheroes, and Pragmatists - Companies started pulling back or restating their ESG-related goals in late summer. When I started digging in, I found that there wasn’t only one reason for this movement. Over three weeks, I wrote about the different approaches that companies were taking.
Well, that’s it for me for 2024. Thanks for coming along on the ride and I’ll see you all next year!