Energy investors, customers seen driving importance of ESG/sustainability reporting

WASHINGTON – Environmental, social, governance (ESG) and sustainability reporting isn’t a requirement imposed by the investment community but an opportunity for companies to tell their story, Marisa Buchanan, executive director of sustainable finance at JPMorgan Chase & Co., said on Tuesday.

Buchanan and other executives spoke about the growing interest in ESG/sustainability reporting during a panel discussion at the National Association of Regulatory Utility Commissioners’ (NARUC) 2019 Winter Policy Summit held this week.

ESG refers to a set of non-financial performance indicators surrounding a company’s sustainability, ethics and corporate governance, which investors use to assess corporate behavior. According to a report from the Global Sustainable Investment Alliance, $22.89 trillion, or 26 percent, of assets under management in the United States, Asia, Australia, New Zealand, Canada and Europe are invested according to ESG principles.

Buchanan said that ESG has evolved into “a really smart long-term common sense investment strategy.”

ESG and sustainability reporting has gained prominence and mainstream acceptance within the last several years.

In August 2018, the Edison Electric Institute (EEI) launched an ESG and sustainability reporting template for its member electric companies to help provide the financial sector with more uniform and consistent ESG/sustainability data and information. In November 2018, EEI and the American Gas Association (AGA) announced that they collaborated to integrate ESG and sustainability reporting metrics relevant to to natural gas operations into the template.

The panelists explained that enhanced transparency is a benefit of ESG/sustainability reporting. ESG also relates to risks such as from climate impacts or legal action.

Interest from investors and customers, as well as policy, are driving the increasing importance of ESG, the panel said.

Willie Phillips, chair of the Public Service Commission of the District of Columbia, said that recent legislation changed the mandate of the commission to require it to consider global climate change and Washington, D.C.’s policy goals. In 2018, the district increased its Renewable Portfolio Standard to 100 percent by 2032. ESG and sustainability, he noted, can serve as an input the commission considers when deliberating on relevant issues.

Jerry Norcia, president and chief operating officer of DTE Energy, said DTE has observed a strong interest from customers in environmental responsibility in addition to attributes like reliability and affordability. He also said that DTE envisions it will someday use ESG data as a consideration in its purchasing decisions for natural gas.

Lisa Schroeer, senior director and sector leader at S&P Global, emphasized that while the phrase ESG is relatively new, the concepts behind it are not.

Paula Ciprich, senior vice president and general counsel for National Fuel, concurred, noting that utilities have been improving safety and reducing emissions for decades.

“A piece of this is telling the story that’s already there. We should take credit for what we’re already doing,” Cirprich said, adding that the industry should also seek continued improvement.