EEI leads electric industry initiative to provide investors with more uniform sustainability reporting

Published on April 18, 2018 by Jean Gossman


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Over the past two years environmental, social, governance, and sustainability-related (ESG/sustainability) metric reporting has gone mainstream and for millennials in particular it’s a very important investment consideration, according to Richard McMahon, vice president of energy supply and finance at the Edison Electric Institute (EEI).

And given that electric utilities are now more than 70 percent institutionally owned, ESG/sustainability reporting is “a real positive and a net value” for both firms and investors as the electric industry transitions on the generation side to cleaner energy sources, McMahon added.

McMahon discussed the importance of ESG/sustainability issues as EEI released the first version of its voluntary ESG/sustainability reporting template on April 17 and hosted a roundtable in Washington, D.C. to highlight its implementation.

Aimed at providing electric industry investors with more standardized ESG/sustainability reporting metrics across the utilities sector, EEI first announced it was launching an innovative pilot reporting template in December 2017 as part of an effort for its member investor-owned electric companies to become a model industry for ESG/sustainability reporting.

The ESG reporting template illustrates that the electric industry is “a very good investment” as data shows the current generation stack is about two thirds low to no carbon compared with 2007, which McMahon called “a dramatic change in less than a decade.”

The electric industry continues to advance energy efficiency, reduce emissions and develop renewable energy. In 2017, CO2 emissions in the electric power sector dropped 27 percent from 2005 levels, according to EEI, a factor attributed in part to increased deployment of renewable generation.

Investors can use the reporting template to easily find information on capital expenditures that help facilitate the transformation to a low-carbon energy economy such as investment in smart grid technologies and cleaner energy sources.

The template also enables investors to examine companies’ gender diversity among leadership and employees. That metric is another increasingly important consideration for investors, one that represents a significant strength for the electric utility industry, McMahon said. He pointed out that women lead 22.2 percent of regulated utility companies, whereas just 6.4 percent of Fortune 500 companies are woman-led.

Meeting investors’ needs for such information in a concise and readily available format was the main focus in designing the comprehensive reporting template, which highlights the information investors want using qualitative as well as quantitative data, according to McMahon.

The template incorporates two qualitative metrics, including ESG/sustainability governance and strategy, and three quantitative metrics, which include portfolio, emissions, and resources.

Adding that the focus on investors’ needs was the driver in template development, McMahon said that emphasis is a positive factor that separates the electric industry from other reporting programs in different industries.

The template has seen “overwhelming member support,” McMahon said, with most EEI member companies expected to participate in the voluntary program by the end of the third quarter of 2018.

Ameren Corp. and Duke Energy are among the 15 companies that participated in the initiative and have released their pilot template using last year’s information.

Bruce Steinke, vice president of finance and chief accounting officer for Ameren, said in March when the company announced its participation in the industry-wide initiative that the ESG/sustainability reporting framework would complement Ameren’s current corporate social responsibility efforts.

“This voluntary effort will provide investors and stakeholders with ESG information that is more consistent across the electric utility sector in terms of accessibility, content and timing,” Steinke said in a written statement.

EEI conducted very broad outreach and worked with ESG activists and advocates, trade groups, ESG data providers, investors, and major financial institutions to design the template in a voluntary initiative, according to McMahon.

Through that initiative EEI learned that investors “are not necessarily looking for more and more and more information,” McMahon said. Although EEI member firms were releasing lengthy sustainability reports, investors “could not really cull out and target the information they were looking for,” he explained.

Val Smith, managing director and global head of corporate sustainability with Citi, said her firm has its own sustainable progress strategy, and as an ESG reporter itself, the template offers Citi “a real value add” to its current disclosure reporting.

The dashboard approach has seen huge proliferation during the last 10 years, especially as the number and type of indicators in standards reporting have increased, Smith added.

Citi uses ESG reporting data to apply its environmental and social risk management policy. ESG reporting data also can help the firm exercise due diligence, especially when the data is presented in a dashboard format that “highlights it in a useful way,” Smith said.

Smith added that she has found that investors are increasingly interested in firms’ ESG performance indicators, with varying focus on the “E” and the “G”. Moreover, companies themselves have shown growing interest in highlighting their ESG performance for a competitive advantage – “something they really want to get out in front.”

The reporting template offers “a good example of how companies are stepping forward to provide more and clearer ESG disclosure,” Smith said. She added that it also provides an interesting indicator of what direction other companies might take in their ESG reporting.

Concise and accessible ESG reporting also offers the electric industry “a great vehicle for proactive outreach.” McMahon added that it’s “good to be the first out of the gate” in electric industry ESG-reporting innovation.