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ESG

ESG refers to the environmental, social and governance information about a firm. There is growing evidence that companies that take their environmental and social responsibilities seriously perform better financially. This has naturally made investors sit up and take notice.

ESG investing, or sustainable responsible investing (SRI), uses this information about a company to inform investment decisions that prioritize all stakeholders.

Here's how the Forum's partners are leading the switch to stakeholder capitalism.

UL's Carbon Disclosure Project (CDP) for accountability, transparency and action

CDP, a globally recognized nonprofit, conducts environmental, social and governance (ESG) reporting with the goal of sustaining economies and the health of the globe. By disclosing ESG data, reporting to CDP helps companies increase their accountability and transparency. The organization emphasizes environmental leadership with a scoring system that ranks companies from D- to A. Each grade corresponds to the company’s level of progress, with the goal of improving toward leadership:

D score begins with disclosure.C score signals a move to awareness.B score suggests a transition to managing environmental impact.A score culminates in environmental leadership.

Read more here.

UL's Carbon Disclosure Project

International Business Council welcomes the launch of the International Sustainability Standards Board

Today the members of the Executive Committee of the World Economic Forum's International Business Council published a joint statement to welcome the announcement on the establishment of the International Sustainability Standards Board (ISSB) under the governance of the International Financial Reporting Standards (IFRS) Foundation.

The ISSB will enable global financial markets to have high-quality and comparable disclosures on climate and other sustainability issues through a set of international standards. Public-private dialogue and cooperation, facilitated by the World Economic Forum and other convening bodies, have helped to build momentum for this historical milestone.

In the statement, the Executive Committee encourages regulators and policy makers to review and consider the global sustainability disclosure standards to be delivered by the ISSB as they are intended to provide a comprehensive global baseline for companies to report on and will be developed to facilitate compatibility with reporting requirements that are jurisdiction-specific or aimed at a wider group of stakeholders.

The Forum was part of the working group that was formed to undertake preparatory work to give the ISSB a running start and contributed its work from the cross-industry Stakeholder Capitalism Metrics, which were launched over a year ago and have been supported by over 100 global organizations worldwide. The metrics will provide a basis for the technical work of the new board, along with other major technical standards and frameworks.

More than 60 organizations release open letter for EU to act on ESG

Today, 60 organizations have released an open letter to the European Commission, the European Parliament and the Council of the European Union, encouraging them to be a key force behind alignment on a global baseline set of ESG disclosure standards.

As businesses still struggle with confusing and inconsistent ESG reporting frameworks, these signatory companies encourage the European Commission to promote a global baseline set of standards through supporting the IFRS Foundation on the launch of the International Sustainability Standards Board (ISSB). Close cooperation will be key to ensure future European sustainability standards complement the global baseline and are aligned and interoperable.

We believe these efforts and commitments need to be supported by globally consistent and comparable performance metrics and disclosures, to enhance decision-making, trust and accountability.

Signatories of the letter also re-affirm their support for the European Green Deal and for the aims of the proposed EU Corporate Sustainability Reporting Directive (CSRD). They commit to playing their role to build corporate resilience and enhance their license to operate through greater commitment to long-term, sustainable value creation as well as by considering the needs of all stakeholders.

Read the full letter and list of signatories here.

SEDCO Capital: Driving returns

SEDCO Capital has published its latest research report Climate Change Considerations in Portfolio Management - Not Just an Ethical Checkbox, but a Fundamental Driver of Returns”, authored by Chief Risk Officer, Christian Gueckel.

The company believes in the imperative for asset managers to integrate climate risk considerations into their asset allocation strategies - in terms of investment theses, geographies, and industries.

This paper explains the integration of climate considerations into investment decision making and risk management processes. It also includes insightful information on investment opportunities in carbon reduction, as well the benefits from the integration of blockchain into clean resources and energy technology.

Key sections include: (1) Climate-related risks, (2) Possible response scenarios for climate change, (3) Climate investment and risk analysis, and (4) Investment opportunities in carbon reduction.

New board signals convergence on sustainability reporting

Global data and analytics providers have released a joint statement today to endorse the establishment of a Sustainability Standards Board by the IFRS Foundation as a significant step towards global convergence on sustainability reporting.

The companies have been regularly convening over the past year at the invitation of the World Economic Forum and FCLTGlobal to share insights on how they may ensure the consistent flow of information to support the global economy’s transition to a more sustainable path.

"The issues of how companies deliver long-term value are critical to sustainable development. As global data and analytics providers, our goal is to ensure the consistent flow of information to support the global economy's transition to a more sustainable path."

Signatories are:

David Craig, Group Head, Data & Analytics, and CEO Refinitiv, LSEG

Henry Fernandez, Chairman and Chief Executive Officer, MSCI

Peter T. Grauer, Chairman, Bloomberg

Douglas L. Peterson, President and Chief Executive Officer, S&P Global

Philip Snow, Chief Executive Officer, FactSet

International Business Council: Stakeholder Capitalism Metrics

The Executive Committee of the World Economic Forum's International Business Council has released a statement this week, endorsing the possible establishment of a global Sustainability Standards Board by the International Financial Reporting Standards (IFRS) Foundation. Such a move would be crucial to promoting global consistency and comparability of the ESG information disclosed by issuers across capital markets.

The signatories include:

Brian T. Moynihan, Chairman and Chief Executive Officer, Bank of America, USA; Chairman, International Business Council, World Economic Forum

Ana Botfn, Group Executive Chairman, Banco Santander SA, Spain

Victor L. L. Chu, Chairman and Chief Executive Officer, First Eastern Investment Group, Hong Kong SAR, China

Lubna S. Olayan, Chair of the Executive Committee, Olayan Financing Company, Saudi Arabia

Klaus Schwab, Founder and Executive Chairman, World Economic Forum, Switzerland

Jim Hagemann Snabe, Chairman, Siemens, Germany; Chairman, AP. M0ller-Maersk, Denmark

Michael K. Wirth, Chairman of the Board and Chief Executive Officer, Chevron, USA

The members say, "We recognize that these commitments need to be supported by consistent and comparable metrics and disclosures, to enhance decision-making, trust and accountability."

Read the full statement here.

Trane Technologies: ESG tied to compensation

Trane Technologies (NYSE: TT), a global climate innovator, announced today that it has revised its executive and senior leader incentive plan to link directly to Environmental, Social and Governance (ESG) metrics that align with the company’s bold 2030 Sustainability Commitments.

The company’s revised annual incentive plan, which starts this year, holds top executives and approximately 2,300 company leaders accountable for meeting the company’s ambitious social and environmental sustainability goals. In addition to tying leaders’ annual cash incentives to ESG metrics, all salaried employee performance plans now must include at least one goal tied to the company’s 2030 sustainability commitments.

“We are leading with a bold purpose to challenge what’s possible for a sustainable world, and have embedded leading environmental, social and governance practices into our strategy and operations,” said Mike Lamach, Trane Technologies chairman and CEO. “Solving major global challenges like climate change and creating a more diverse and inclusive workplace requires courage, innovation, and accountability. Having everyone pull in the same direction toward our sustainability goals reinforces the right behaviors and decision-making to build a sustainable future for our customers, communities and the planet.”

McKinsey Global Survey: How much is sustainability worth?

Amid widening recognition of how environmental issues such as climate change create business opportunities and risks, results from a McKinsey Global Survey show that companies that generate value from their sustainability programmes follow a distinctive set of management practices.

Survey respondents say these companies are more likely than others to make sustainability a strategic priority and to set out specific aspirations and targets. Responses also suggest that value-creating companies are more likely than others to make sustainability an element of their corporate culture and train employees on how to integrate sustainability into their work.

Continue reading here.

Image: McKinsey & Company

EY's Carmine Di Sibio on ESG performance and stakeholder capitalism

Carmine Di Sibio talks to Fortune Magazine about stakeholder capitalism and ESG metrics.

"The COVID-19 pandemic has made very clear the importance of prioritizing the well-being of customers, communities, and workers. But this isn’t just a moral imperative. The truth is that it’s always made good business sense to have a stakeholder-focused long-term strategy. Companies that invest in their employees and communities are better able to weather crises, understand where their future success lies, and build in resilience.

Earlier this year, nearly 70 companies and global business leaders committed to disclose a set of universal metrics to measure their performance in terms of environmental, social, and governance (ESG) factors. It was the culmination of a years-long initiative led by EY and fellow Big Four organizations, in conjunction with our colleagues at Bank of America and the World Economic Forum’s International Business Council, to help businesses align their own strategic goals with society’s. EY works with companies to implement the principles of stakeholder capitalism in the workplace..."

Read the full article here.

JD.com releases first ESG report

JD.com has released its first ESG report, stemming from its mission of “Powered by Technology for a More Productive and Sustainable World".

The report highlights JD’s long-term approach to ESG initiatives. It captures the company's corporate social responsibility strategic framework, which is centered on using digitally intelligent supply chain to cover three pillars: boosting the real economy, improving social efficiency and enhancing environmental friendliness.

Areas addressed include: Green supply chain, green data centers, poverty alleviation and giving.

ESG investment that incorporates environmental and social factors into the overall risk assessment of enterprises, and pays more attention to long-term value creation, is becoming a mainstream trend of the global capital markets. In this context, the world’s leading companies have updated their sustainable development goals and strengthened their mission and commitment to the future. JD is one of these leading companies—in 2020, we released a new group mission—Powered by Technology for a More Productive and Sustainable World.

— Richard Liu, chairman and CEO of JD.com

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