Learning how to implement sustainable business practices can be challenging for companies in any industry, and boards may wonder how to integrate sustainability issues into discussions with management. NACD has compiled a set of resources offering practical information to help boards discuss climate-related risks, as well as opportunities associated with environmentally- and socially-sustainable business practices.
The first step is to assess why sustainability and social responsibility are such hot topics for the boardroom. Two important factors to consider are the political environment and shareholder expectations.
Signals From the Current Administration
President Donald J. Trump in June announced that the United States would be withdrawing from the Paris climate agreement, an international deal in which 191 countries have pledged to work toward goals to restrict the increase in temperatures globally to less than 2.0°C and reduce the amount of greenhouse gases being created.
The president in April also signed an executive order aimed at “promoting energy independence and economic growth,” curtailing federal environmental regulations. The order instructs the Department of the Interior to lift former President Obama’s ban on coal leasing activities on federal land.
Watchdog group Environmental Integrity Project recently reported that this year, the Trump administration, when compared to the prior three presidential administrations in the same period, has collected approximately 60 percent less in fines from companies’ violations of pollution-control regulations.
Opposing Pressure From Shareholders
Despite strong signals from the current administration that enforcement of environmental-related regulations will decrease over time, shareholders are applying an opposing pressure on corporations.
More than half (56%) of shareholder proposals introduced this year on proxy ballots related to social, environmental, or policy issues, and Proxy Monitor reports that this proportion is the highest it has seen since it began tracking such data in 2006.
Shareholder proposals relating to environmental and social issues 10 years ago sought fairly basic changes such as increased clarity into companies’ environmental policies. The proposals now seek, for example, enhanced disclosures around what the company is doing to manage climate risks and how executive pay links to sustainability initiatives, the Wall Street Journal reports.
Proposals about environmental issues received a record breaking average of 27 percent support this year, according to Proxy Monitor. That percentage was 21 percent last year and fell in the teens before that.
Meanwhile, State Street Corp., a global financial services and investment management firm with $2.47 trillion in assets under management, published a report earlier this year in which they found that traditional obstacles (like the lack of quality data about ESG) to investing more heavily in companies that prioritize ESG initiative are diminishing.
“Over the long-term, environmental, social and corporate governance issues can have a material impact on a company’s ability to generate returns,” Ron O’Hanley, president and CEO of State Street Global Advisors, said in a press release.
Resource centers are repositories for NACD content, services, and events related to top-of-mind issues for directors. In these resource centers, individuals can find practical guidance, tools, and analyses on subjects varying from board diversity to cyber-risk oversight. Below we have highlighted a sample of helpful materials from our new resource center on sustainability and social responsibility.
The handbook, produced in conjunction with EY, centers around four key recommendations:
Directors should understand the company’s definition of sustainability in the context of the company’s strategy and specific circumstances.
The board and management should align on the sustainability message and information the company chooses to report publicly.
Boards should clarify roles for oversight responsibility for sustainability activities, including external reporting.
Directors need to establish parameters for sustainability reporting to the board regarding the information required to support robust discussions with management.
A number of items included in the resource center provide expert commentary on myriad issues related to sustainability and social responsibility. A favorite of mine is “Living in a Material World,” an article written by Veena Ramani, program director of the Capital Markets Systems, at sustainability-focused nonprofit Ceres.
Ramani discusses the corporate director’s critical role in engaging with management over which sustainability issues are material for the enterprise. She offers four suggestions for board members who want to address the materiality of certain sustainability risks.
Boardroom Tools & Templates
The resource center houses several tools and templates to assist directors as they oversee sustainability-related risks and opportunities. One such tool is the “Self-Assessment: Is Your Board Sustainability-Ready?” evaluation. Directors can answer a set of questions to gauge their board’s level of engagement—or lack thereof—in sustainability oversight.
Videos and Webinars
The NACD BoardVision—Sustainability Oversight video in the resource center features a candid discussion by EY subject matter experts Brendan LeBlanc and Kellie Huennekens on how investors are engaging with boards around sustainability and social responsibility issues. (A transcript of the video is also available here.)
Our hope is that you find this resource center useful and visit it often. We will continue to update it regularly with new and interesting content. If you would like help finding resources on a specific subject matter, please let us know. We welcome the opportunity to engage with directors on pressing needs and concerns.
Anyone who has ever met Brad S. Karp knows first-hand that he is a man of distinction. Recently he was celebrated for still another outstanding trait: his commitment to lifting up the women around him and supporting their paths to business leadership. The chair of Paul, Weiss, Rifkind, Wharton & Garrison was honored for his prodigious part in championing the advancement of women at the 17th annual Legal Momentum Aiming High Awards.
The 47-year-old gender rights organization provides advocacy and legal reform services to ensure the personal rights and safety for women and girls. It has been giving its Aiming High award since 2001 to women in the legal profession who work to elevate and advance the work of their sisters.
Karp accepts the Man of Distinction Award.
Karp is only the second recipient of the “Man of Distinction” award. Beginning last year led by Legal Momentum President and CEO, Carol Robies-Román, the organization made the astute decision to include men among its honorees. J. Michael Cook, former chair and CEO of Deloitte & Touche, was the first man-of-distinction honoree at the 2016 luncheon.
In addition to Karp, this year’s Aiming High award recipients are: Stephanie Drescher, global head, business development & investor relationship management, Apollo Global Management; and Lisa Garcia Quiroz, who is now president of the Time Warner Foundation and the company’s first chief diversity officer.
Drescher was introduced by John J. Suydam, chief legal and compliance officer at Apollo, who extolled Drescher’s quiet confidence, unflappability, and superior listening skills. As a leader, Drescher has displayed an innate ability to build relationships with Apollo stakeholders including management, clients, and its 989 employees in 15 offices around the globe.
Garcia Quiroz (left) and Drescher received the Aiming High award from Legal Momentum in June.
Janet Murguía, president and CEO of the National Council of La Raza, introduced her colleague and friend, Garcia Quiroz. Prior to joining Time Warner, Quiroz was at Time Inc., where she founded People en Español and Time for Kids. Murguía praised Quiroz as a cultivator of talent, particularly of storytellers.
At Time Warner, Quiroz led the creation of a company-wide talent incubator called One Fifty to identify and develop stories that would resonate with younger and more diverse audiences. “Lisa understands in her heart that greater diversity builds strength across communities,” said Murguia. “She is tireless and fearless.”
Quiroz spoke of her decision to attend Harvard Business School—rather than the law school, which would have been her father’s preference. “The universe conspired to bring me into media with a social activist heart,” Quiroz said.
Karp was introduced by his colleague, Valerie E. Radwaner, vice chair of Paul Weiss. Radwaner lightheartedly extolled Karp as “a force for feminists.” “Brad believes in gender equality and social justice issues as shown by how he leads Paul Weiss. He understands that real change only happens by bringing dozens of different voices to the table,” Radwaner said.
Champions of business women have been honored each year since 2001 by the prominent civil rights organization Legal Momentum with its Aiming High Award. Stephanie Drescher, global head, business development and investor relationship management at Apollo Global Management, is one of three honorees this year.
The seventeenth annual Legal Momentum Aiming High Awards were presented at a luncheon on June 15 in New York City.
In addition to Drescher, this year’s award recipients are:
Brad S. Karp, chair, Paul, Weiss, Rifkind, Wharton & Garrison, and winner of the Man of Distinction honor
Lisa Garcia Quiroz, senior vice president, president of the Time Warner Foundation, and chief diversity officer of Time Warner
Economics and psychology might seem like an unlikely academic pairing for a Barnard College undergrad, but it was a natural combination for Stephanie Drescher—and one that helped inform her career. By applying the analytical aspects of economics with an understanding of what drives collaborative work environments, she developed a keen sense of how to achieve optimal results within complex organizations.
Drescher has since distinguished herself as one of the most successful women in the global private equity industry. After spending the first 10 years of her career at JPMorgan Chase & Co. in a variety of roles, including serving on the boards of the firm’s private equity and venture capital businesses, she joined Apollo Global Management in 2004, heading the firm’s business development and investor relationship operations.
Founded in 1990, Apollo currently has $197 billion in assets under management, and Drescher has played an influential role in building the firm into the financial powerhouse it is today. Drescher recently reflected on her career and role as a mentor in a telephone interview.
How did mentorship position you for success in the financial sector?
Early on in my career, I saw many examples of women who were in leadership positions, and they were great role models for me. That was certainly one element of being able to see a path forward. Equally as important were men who throughout my career have served as mentors and sponsors. These people came to know me quite well and were crucial in helping guide me as I developed professionally.
One key piece of advice I received early on: think of yourself as the CEO of your own career and have a board of directors you can reach out to for advice as you encounter new challenges. That framework is one that I often share with others as they set out in their careers.
How does Apollo cultivate a collaborative atmosphere?
The first thing that comes to mind is our investment committee. Everyone is invited to contribute. If you are the most recent addition to the investment team, or you’ve been there since day one, everyone sits around one—now very big—table to discuss the investments. It’s a very deliberate way to create an opportunity for everyone to learn from one another, and evaluate each opportunity from different perspectives.
I think it’s a testament to the strength of our firm that we’ve been able to maintain such a productive, collaborative atmosphere even amid our tremendous growth. When I joined, we had fewer than 100 people and managed around $15 billion. Roll forward to today, and we’re managing upwards of $200 billion with more than 1,000 people on staff. Our core culture remains the same, which enables us to deliver best-in-class performance to our global investor base.
In your experience, are investors pressing more on diversity and inclusion issues?
It’s certainly a topic of increasing interest and conversation with our institutional investors. They have many choices as to where they invest their capital, and ultimately, they want to work with firms that are focused on doing their part in terms of diversity and inclusion.
How is Apollo working to fortify talent pipelines internally and in its portfolio companies?
We are proud of a number of initiatives that we started at Apollo. In 2014, we launched our veteran’s initiative, which encourages Apollo and its portfolio companies to recruit, hire, and retain veterans and their spouses. That has been a great success.
We also recently launched the Apollo Women’s Empowerment initiative, which I co-chair with our global head of credit. We have spent a great amount of time developing a steering committee with a number of initiatives to allow for development of our women networking, and engagement with industry groups, external leaders, and the community.
How do you serve as a mentor to young women?
It starts with a commitment to engage with the wider community, which is very important for all of us at the firm. A specific area of interest for me has been my involvement with the Young Women’s Leadership Network. It’s a group of all-girls schools in underserved communities that prepare their students for college. I think it’s just another way of ensuring that as we rise in our own careers, we look to lift those around us by serving as mentors, sounding boards, and role models.