Goldman Sachs released a report this week on the environmental impact of green finance. It argues that more companies will disclose their emissions data if they feel supported by investors, but also points out that such disclosures are not yet widespread in the industry.
The “tcfd” is a new initiative by Goldman Sachs to encourage companies to disclose their emissions data. The goal of the program is to help investors make better investment decisions.
Leading up to proxy season, companies are facing increasingly onerous environmental, social, and governance standards.
The Securities and Exchange Commission has proposed new regulations requiring public corporations to disclose their exposure to risks connected to greenhouse gas emissions and other climate-change-related problems to investors. Institutional investors are increasingly requesting additional information, with some of these demands coming ahead of annual shareholder meetings, which are typically held in the spring.
If large investors vote in support of shareholder motions asking corporate reforms or against board members, as is increasingly the case when a firm fails to satisfy ESG-related regulations, they may have a significant influence.
Catherine Winner, global head of stewardship at Goldman Sachs GS -4.35 percent Asset Management, spoke with Emily Glazer of the Wall Street Journal about the SEC’s new proposed guidelines, Goldman’s proxy voting adjustments, and guidance for corporations in their sustainability reporting. The following are edited extracts from the interview.
WSJ: How did you react when the long-awaited regulations were released?
WINNER: MS. WINNER: MS. WINNER: MS. The SEC’s proposed climate-risk disclosure guidelines get strong support from our voting framework. The SEC and the TCFD [Task Force on Climate-Related Financial Reporting] are both pushing for more materiality-based emissions disclosures.
As we approach closer to the projected implementation date for the SEC’s regulation, our policy in the United States will assist progress on emissions reporting. We supervise $2.5 trillion in assets as one of the world’s biggest asset managers. This will be used to assist us promote good change on this issue both inside and beyond the United States.
WSJ: Were you startled by the ideas, or did you have an idea of what Goldman Sachs Asset Management would do?
Ms. Winner, Goldman’s global head of stewardship, discussed how significant investors may influence firms’ ESG standards at the WSJ Pro Sustainable Business Forum.
The Wall Street Journal provided this image.
WINNER: MS. WINNER: MS. WINNER: MS. Climate risk is, in our opinion, a significant investment factor. We’ve been working with businesses for some years on disclosure and promoting disclosure of greenhouse-gas emissions that are important to their operations.
Since 2020, we’ve worked with 271 businesses. We got involved to urge more openness. And, according to our research, 42% of the firms we contacted had improved their disclosures.
We intend to vote against chairs of committees with oversight of ESG risks at companies that are still not disclosing or have made no improvements on the disclosure of emissions data, as we believe this is a material investment consideration and boards should be held accountable for these climate risks and disclosure of climate-related data and reporting.
WSJ: How would you improve things?
MS. WINNER: When we engage with corporations to urge them to disclose, we utilize the materiality framework developed by the nonprofit Sustainability Accounting Standards Board [SASB]. Firms were characterized and classified as fully disclosing, partly disclosing, or nondisclosing companies. We worked with nondisclosure or partial-disclosure businesses. We are pleased to observe any improvements in that state. As a result, 42 percent of the firms with whom we spoke had improved their disclosures. There are still fewer than 100 firms in the world that have not made any development.
WSJ: What would you respond to such a corporation if there is a vote to replace someone on the audit committee or a director at the annual shareholder meeting?
WINNER: MS. WINNER: MS. WINNER: MS. Every year in March, we make our policy public. We hope this comes as no surprise, given that we’ve been discussing it with the chosen firms that are being considered for possible escalation of voting at the director level.
However, we do make our policy available on our website, and we strive to encourage firms to read it by alerting them to the policy’s annual upload, which serves to orient them and show them what we anticipate. It isn’t solely the job of audit committees.
WSJ: Institutional investors are increasingly saying, “If this doesn’t happen, we’ll vote against a director.” And this was not the case a few years ago.
MS. WINNER: It’s getting more and more prevalent. When it comes to how we update our policies over time, we adopt a very comprehensive and rigorous approach. We examine the landscape of how we voted in the previous year, what new initiatives are forming, and what our clients anticipate from us in terms of lobbying for good change with corporations.
What’s the best way to handle an acceptable escalation? We want to make sure that we’re communicating with businesses directly. We work as partners with the businesses we work with. We want to be proactive and focused on finding answers.
WSJ: Do you think certain types of data are more difficult for corporations to generate than others?
WINNER: MS. WINNER: MS. WINNER: MS. We don’t have any rules on where sustainability reporting should go. We recognize that there are a variety of methods to create this and make it accessible to your investors. However, we are aware that there are a variety of ramifications. As a result, material in a proxy may be scrutinized differently than information in an annual file such as a 10K or an 8K. We are aware of the difficulties. But, in terms of where that information is disseminated, we basically leave it up to the discretion of the corporations.
Here are two bits of advice:
—Keep your message constant. If a firm is talking climate during an investor day, for example, and you see slides with measurements and targets, I would recommend making that disclosure consistent in your sustainability report, for example.
—And make it simple to find. “How many clicks did it take you to discover that report on a website?” we often ask each other. That’s vital information since it’s not just us who are looking for it; a lot of stakeholders are as well.
WSJ: Do you have a significant preference for the TCFD framework over SASB? Or does it differ depending on the firm or industry?
MS. WINNER: With a climate emphasis lens, TCFD is more useful. SASB uses a materiality lens to look at climate change, but it also considers social and governance problems. So, if you’re looking for more climate-related disclosures, TCFD goes into a lot more detail on the environmental side, while SASB may discuss ESG, which is equally essential when analyzing a firm.
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The “goldman sachs tcfd report 2020” is a report that was released by Goldman Sachs. The report details how companies can disclose emissions data, and what the impacts of doing so will be.
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