Reflecting on change

As mentioned previously, developments in the investment industry overtook my personal learning objective. To remedy the dearth of sell-side equity research incorporating sustainability in my country, I had wanted to create annual awards for the best ESG-related research. As my posts highlighted, after much engagement, it was clear that awards were unlikely to increase the focus on ESG.

Nonetheless, fund managers’ interest in environmental issues has increased sharply in the past year, from an unexpected quarter. Last year two NGOs and a shareholder activist used our Companies Act to force our two largest banks to include resolutions at their AGMs to disclose their exposure to climate-related risks and to publish their policies on financing coal mining and coal-fired power. As our country’s first climate-related resolutions, these created substantial awareness of the broader E in ESG among local investors. Consequently, they increasingly want companies to report on the risks and opportunities they see from climate change and to adopt TCFD over time. And more investors use ESG data from CDP, Sustainalytics, MSCI etc.

Rather than launching awards, I encouraged the sell-side to get experts on climate change to present at investor conferences. Their rather scary forecasts garnered a lot of attention from the market. Although ESG is still not embedded in most locals’ investment processes (even PRI signatories), there has been some progress. And certainly, awareness is considerably higher.  

Another development was becoming responsible for sustainability in our group, in addition to investor relations. This positions me ideally to embed sustainability into our group strategy, culture and operations, and to emphasize ESG in our investor interactions to cement its importance.

Reflecting on my PLO, there were four learnings. Firstly, that even ‘innocuous looking’ levers can have a large impact, if cleverly chosen. Small stakeholders were able to dramatically raise awareness of climate change in our market by forcing two banks to include it in their AGM resolutions. Even though the resolutions were defeated. Second, it’s amazing how quickly change can occur. Although there’s still a long way to go. Third, while we have made some progress in elevating ‘E’, there’s an opportunity to get experts to present to investors on ‘S’, probably using the SDGs in some form. And lastly, as Oliver noted, when your levers of change aren’t working, it’s important to be flexible and look for better ones!

2 thoughts on “Reflecting on change

  1. Alan,
    whenever I think of leverage points I remember DONELLA MEADOWS framework.
    It helped me a lot during some projects on identifying different leverage points and each ones effectiveness.
    It is always good to take a look at the framework again and again in search of new or different leverage points…

    PLACES TO INTERVENE IN A SYSTEM
    (in increasing order of effectiveness)

    12. Constants, parameters, numbers (such as subsidies, taxes, standards).
    11. The sizes of buffers and other stabilizing stocks, relative to their flows.
    10. The structure of material stocks and flows (such as transport networks, population age structures).
    9. The lengths of delays, relative to the rate of system change.
    8. The strength of negative feedback loops, relative to the impacts they are trying to correct against.
    7. The gain around driving positive feedback loops.
    6. The structure of information flows (who does and does not have access to information).
    5. The rules of the system (such as incentives, punishments, constraints).
    4. The power to add, change, evolve, or self-organize system structure.
    3. The goals of the system.
    2. The mindset or paradigm out of which the system — its goals, structure, rules, delays, parameters — arises.
    1. The power to transcend paradigms.

    The 6 on the top of the list are related to technological, productions, systems, standards leverage points. These are more rational leverage points and easily conceived within business arena, but are the most weak leverage point category of a system.

    The 6 on the bottom are human-related leverage points, which usually are more effective than the previous ones.

    And the last 3 at the very bottom of the list are value-based leverage points, which are those very small initiatives with a great deal of effectiveness on changing paradigms, rules of the game, and transforming systems.

    Congratulations for your tryings, learnings and experience!

    Like

  2. Thanks Alan for a thought provoking piece.

    As you allude to, it is remarkable how some forces can punch above their weight. It will be interesting to see how organisations like Shared Value help or hinder your role in promoting more shareholder value and a deeper consideration of sustainability issues in your organisation.

    Like

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