ESG Oversight Framework for Directors
Demystifying ESG for Board Members
January 27, 2020
In 2017, we called on boards to incorporate sustainability into long-term company strategy.
Over the past three years we have seen some progress, in that directors now acknowledge the importance of environmental, social and governance (ESG) issues to the business.
During engagements, however, we sense some ambivalence about the board’s role in overseeing ESG. Directors are seeking more guidance about what to focus on and what actions to take.
In response, we have developed guidance designed to help boards prioritize ESG within their organizations, including:
o State Street Global Advisors’ approach to contextualizing ESG issues within the current board oversight framework.
o R-Factor™, our transparent ESG score that measures the performance of your company’s business operations and governance as it relates to financially material ESG issues facing your industry.
o Our ESG oversight framework for directors that can serve as a road map for what actions are needed to further integrate sustainability into long-term strategy.
Board members have a critical role to play as catalysts for change on ESG issues. We look forward to engaging with you on this matter and partnering with you in the coming year to build stronger companies and capital markets
Over the past three years, there has been a noticeable change in directors’ recognition of the importance of sustainability or ESG issues to investors. When we first called on boards to incorporate sustainability into long-term strategy in 2017, only a few companies, mainly in Europe, could demonstrate that they had considered ESG in their strategy. A majority of companies were either not focused on ESG, or were considering it only in their communications with a broader set
Today, companies have begun to acknowledge the importance of ESG to their investors and boards are getting more involved in overseeing ESG. Meanwhile, directors continue to seek clarity on which issues are financially material to their business and want to understand investor expectations of the board’s role in overseeing ESG issues. Some of the reasons for these changes include:
Clearer understanding of climate change as a risk facing all companies globally
Growing awareness that intangible issues such as human capital and corporate culture are long-term value drivers that need to be managed
Growing customer and societal expectations for purpose-driven companies
The growth of ESG investing, which considers a company’s ESG profile in the investment process and allocates capital accordingly
ETFs trade like stocks, are subject to investment risk, fluctuate in market value and may trade at prices above or below the ETFs net asset value. Brokerage commissions and ETF expenses will reduce returns.
Standard & Poor's®, S&P® and SPDR® are registered trademarks of Standard & Poor's Financial Services LLC (S&P); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC (Dow Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (SPDJI) and sublicensed for certain purposes by State Street Corporation. State Street Corporation's financial products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and third party licensors and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability in relation thereto, including for any errors, omissions, or interruptions of any index.
Distributor: State Street Global Advisors Funds Distributors, LLC, member FINRA, SIPC, an indirect wholly owned subsidiary of State Street Corporation. References to State Street may include State Street Corporation and its affiliates. Certain State Street affiliates provide services and receive fees from the SPDR ETFs. ALPS Distributors, Inc., member FINRA, is the distributor for DIA, MDY and SPY, all unit investment trusts. ALPS Portfolio Solutions Distributor, Inc., member FINRA, is the distributor for Select Sector SPDRs. ALPS Distributors, Inc. and ALPS Portfolio Solutions Distributor, Inc. are not affiliated with State Street Global Advisors Funds Distributors, LLC.
THIS SITE IS INTENDED FOR QUALIFIED INVESTORS ONLY.
No Offer/Local Restrictions
Nothing contained in or on the Site should be construed as a solicitation of an offer to buy or offer, or recommendation, to acquire or dispose of any security, commodity, investment or to engage in any other transaction. SSGA Intermediary Business offers a number of products and services designed specifically for various categories of investors. Not all products will be available to all investors. The information provided on the Site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation.
All persons and entities accessing the Site do so on their own initiative and are responsible for compliance with applicable local laws and regulations. The Site is not directed to any person in any jurisdiction where the publication or availability of the Site is prohibited, by reason of that person's nationality, residence or otherwise. Persons under these restrictions must not access the Site.
Information for Non-U.S. Investors:
The products and services described on this web site are intended to be made available only to persons in the United States or as otherwise qualified and permissible under local law. The information on this web site is only for such persons. Nothing on this web site shall be considered a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction.
Before investing, consider the funds' investment objectives, risks, charges and expenses. To obtain a prospectus or summary prospectus which contains this and other information, call 1-866-787-2257, download a prospectus or summary prospectus now, or talk to your financial advisor. Read it carefully before investing.
Not FDIC Insured * No Bank Guarantee * May Lose Value