Sustainability: Managing sustainability goals for investors and corporates
SPEAKER 1: Welcome to WTW's ESG In Sight Spotlight Series.
MONIQUE MATHYS-GRAAFF: Welcome to our listeners. This section of the sustainability session will focus on how investors and corporates can manage sustainability goals. We are delighted to have with us today Andrea Webster from the World Benchmarking Alliance. She's the lead on the Finance System Transformation Benchmark. But Andrea, please, can you first share with us a bit more about WBA and the Finance Benchmark.
ANDREA WEBSTER: Wonderful to be here, Monique. Thank you so much for the invitation. I hope that most of your viewers are familiar already with the World Benchmarking Alliance. But for those that aren't, just by way of introduction, we are a non-profit organization founded in 2018. The basis of our formation is recognizing the role of the private sector in helping achieve the sustainable development goals.
We are benchmarking and assessing, essentially, 2000 keystone companies with their contribution to achieving those goals by way of benchmarking 2,000 keystone companies. And by keystone, we mean those companies that have a significant influence on society, either globally or regionally through their business or through their market share or the influence that they have on the system.
Now, in terms of achieving those goals, it's widely recognized that we need system-level change. So therefore, the approach that we've taken to benchmarking is to divide our ecosystem, for want of a better word, into seven systems. And those seven systems that we feel influence, either directly or indirectly, societal norms and behaviors.
One of those is the Finance Benchmark, which I own. Just to be transparent and to show my true colors, I have been in finance for 20 years. And my role, I hope, is to be a narrative and a bridge between finance and business and the societal expectations from civil service and policymakers of where we need to get to and collaborate together. So essentially, we are an accountability mechanism, a feedback mechanism, and we want to provide data and information to chart progress and also to help with decision-making going forward.
MONIQUE MATHYS-GRAAFF: Andrea, it feels like you're acting as the connective tissue.
ANDREA WEBSTER: Yes, a great way of describing it. We underpin and weave between all the other systems. Absolutely.
MONIQUE MATHYS-GRAAFF: And so to kick off with our first question, we have so many leadership challenges across corporates and investors and asset owners when it comes to sustainability. And it feels like WBA has a substantial relevance to assist in all of the sustainability-related leadership decisions that need to be made. How does WBA assist them?
ANDREA WEBSTER: I think if we take a step back, because the focus at the moment, with all the challenges that we've got, is obviously the interconnection between them. But ultimately, this is about decision making frameworks. And I'm going to talk, I think, about UNPRI and those that are familiar with the Impact Management Platform, the different levels that are needed from governance to strategy through to identifying, monitoring, and assessing impacts.
And when you look at that in the ring approach that they take, we have disclosure in their reporting. I think what's really important is that it doesn't end with disclosure and reporting. For me, it's about, actually, how do we use that? And how to empower that for decision-making and for all the different stakeholders that have an interest in it? And Benchmarking sits in that outer ring in terms of how we use, disclosure.
And basically, the words that I like to use is that we are holding up a mirror to corporates, to asset owners, asset managers, to show this is how you're doing. This is the progress you're making. These are how your peers are doing. And provide a feedback mechanism to, again, improve decision-making. So I think the idea is that we are charting progress. And we are making sure that we're on track to where we need to go. I think that, for me, that sums up in real terms.
MONIQUE MATHYS-GRAAFF: It's such an excellent description, that holding up the mirror, because I think, increasingly, the difficulty is that how do we assess the sustainability performance of a portfolio or of a corporate? And how do we ensure that we are benchmarked appropriately against our peers, but also against best practice standards as are evolving, not just for regulation, but against basic levels of practice?
So that is, for me, such an important moment I think in evolution of the capital market system that you keep providing that matter. And the second one around the decision-making is critical. Going beyond just reporting for reporting sake is really the moment in time where we consider the governance practices alongside the actual decision-making, investment strategy applications, and the monitoring of that performance on an ongoing basis.
And so WBA, and as you've described, the Impact Management Platform assists us in that. And for the listeners online, just to say, again-- online-- just under this recording, you'll see links that provide more information on that. And perhaps, Andrea, you could share a little bit more on the climate focus.
As you've indicated reportingly, recently has been a lot of the focus, particularly around the TCFD adoption by regulators globally. One client said to me, though, it feels like death by climate metrics. Can somebody help me see the wood from the trees? It feels like the financial system transformation benchmark can indeed help with this.
ANDREA WEBSTER: The short answer, obviously, is yes. So I absolutely do believe that we can help with that. But obviously, we need to unpack that and give some context as to why. And I think what screams out to me to everybody that I speak to in the finance system is like, what do we need to do? Because there is a lot of noise. And I'll be honest about that.
What I hope and what I believe that the Financial System Benchmark can do is be a guiding North Star. So climate, obviously, is high priority and we're seeing a lot of regulation come out pushed by TCFD and other agendas. But there are other issues as well that need prioritizing. There is more to follow.
I think it might be worth talking about the methodology that we've approached and why it's relevant to this audience. So the Finance System Benchmark is broad rather than deep. And by broad, I mean it covers the key issues that we have heard from various principles frameworks and stakeholders on what's important to them.
I think just to step back, this benchmark has been really nearly two years in the making. We had a multi-stakeholder consultation. I think, over 500 responses to it, numerous roundtables. And we wanted to pull in all geographies as well, because we do realize that different jurisdictions have different priorities from their financial system.
Also, it's worth noting that there are, I think, over 100 underlying principles and frameworks that we've looked at to create this methodology. So we are trying to make sense of all that noise and then create a line in the sand by which we are assessing banks, asset owners, asset managers, and insurers.
Now, by virtue of the fact that we're assessing those institutions that have an influence on the flow of money, by default, that also includes corporates. I think it's also worth putting into context here that our financial system benchmark is one of six that-- and are other benchmarks which cover all the other sectors across society and which a number of corporates on here will fall into. We are looking for alignment across our benchmarks as well.
I think on reporting, there are two key themes I hear, one is alignment and one is convergence. And we're getting there. It's improving. But as the expression that's used frequently by my colleagues, we're building the bridge as we cross it. But coming back in terms of relevance, we drilled our methodology down to three pillars-- governance and strategy because that underpins everything that flows in an organization. So that has a 40% weighting in our benchmark.
Then we have planetary boundaries, which obviously is climate-focused and we touch on nature and biodiversity and what's coming. And then the third is societal conventions, which cover a lot of the social issues. I think it's worth just also pointing out that it is a rapidly evolving backdrop at the moment.
And those that are responsible for decision-making are trying to decide how to allocate resources in a shape-shifting environment, for want of a better phrase. So we are aspirational with our methodology. We've taken the existing regulations. We've listened to civil society and various stakeholder groups in terms of where they want it to be, and also added in there what we know is coming in the pipeline.
So again, to give context, we're benchmarking alliance. We're a fairly big NGO and we feed into a lot of the frameworks and steering groups and bodies that are there setting these frameworks. So my message to you is that this is a two-way. We sit as a benchmarking. So we're benchmarking companies and asset owners. But equally, we are feeding in to frameworks and policy setters, agendas, so that they what the pulse check is, what's doable what needs more work.
And I think from that perspective, I really do hope that, for those that are looking at how they prioritize and the decisions they've got to make, first of all, look at the methodology because we've condensed a lot of the voices that are around pressuring you. And then secondly, obviously, when the results come out, which we can talk about, they'll be able to see how you're doing, how you're doing relative to your peers, where you need to catch up, and where the industry as a whole needs to move forward. So I think there's a lot of attention on this.
MONIQUE MATHYS-GRAAFF: That's wonderful. And to highlight, I think it is so significant and profound the fact that you've already considered over 100 global regulations as it pertains to sustainability across all of the relevant topics, across all of the standard sectors and provided a real succinct space, not just as a point in time, but as an ongoing benchmark, longer term, particularly for investors to look at, that provides consistency.
And as we've often discussed, Andrea, we don't want to sit back and just wait for regulation. We want to know that as asset owners, as investors, and as corporates, we are being proactive around ensuring the system continues to improve. And so thank you for that. And you've mentioned the social benchmarking context.
We know that is part of the overall methodology or at least I'm aware of it having been part in my previous roles of looking at the methodology behind it. And so can you expand a little bit about how the social benchmark is also factored in context, because I think that is quite important.
ANDREA WEBSTER: Yeah, absolutely. I think the social indicators and social benchmark is probably that in the DNA of World Benchmarking Alliance because some of the benchmark setting originally done was in the social indicators and it's evolving from gender social benchmarking 1,000 companies, and obviously into the importance of the just transition.
So we have a specialist team on social-- it's actually one of our seven systems, who pull together, again, through stakeholder and the roles that they have across numerous steering groups and committees and pushing the edge on operate identifying social issues. And actually, how do you operationalize them and turn them into a meaningful measurement and a benchmark. Not just a box ticker, but actually phrasing it in such a way that we are asking for particular policies or particular metrics, which will help actually move the dial on social issues.
So what's unique, I think, across World Benchmarking Alliance is that we have embedded in every benchmark social indicators and they are set by the social team. So I have 18 indicators in the financial benchmark which are common across the other benchmarks. I think there's a little bit of fine-tuning in the wording. But the idea is that the challenge obviously is hitting climate or planetary boundaries or governance, is making sure that no one is left behind. And that's the prominence of the social indicators and the benchmark.
I think what's also interesting in us as well across the other benchmarks, for example, we've got a food and agriculture benchmark. And obviously, that's crucial on social issues. But it's also very powerful, the overlap on the benchmarks into the finance system, because the finance system has an incredible role of making sure-- I want to say regulator, but it's probably the wrong word at the moment.
But just they have an influence on the flow of money and they can hold corporates to account. But equally, they have a role in championing-- put my teeth in-- industry to make sure that they are hitting the standards that expected of them. For example, with the ILO. So there's lots of various principles that we've pulled together on it.
What I'm also hearing as well, because as I move across different financial institutions and also geographically, it's just this need for alignment, because it's different standards and different bodies asking for different sets of information. And what we're really passionate about is the fact that, if I'm going to push an asset owner to report on a particular social metric or have a particular policy, then they need to ask that of the companies that they invest in.
And I think, for example, it's noticeable, I think, something like only 23 stock exchanges have mandatory sustainable investing requirements, which means that an awful lot of companies that don't have to is voluntary. And I think you touched on a really important point earlier on the role of regulation. The ideal scenario is that business and asset owners together work out the pathway forward and then regulation follows to create a level playing field.
And what we don't-- I think is much, it's easier then for regulators to follow. And it means that we rise above some of the polarizing political debates that we're hearing at the moment. So it's a long answer. But just the interconnectivity between them all, and we are trying to achieve that within our benchmarks at World Benchmarking Alliance, but also be consistent in what we ask across companies and the finance system given the connection across them.
MONIQUE MATHYS-GRAAFF: That's wonderful, Andrea. And across the 32 indicators in the finance benchmark, what's significant for me is that, although there are some 400 companies within scope of the finance benchmark, but for the overall system, equally, there's some 2,000 companies. It is the same grouping of social subset of indicators. And it just drives such consistency as you've indicated. We love the alignment point and we are so grateful for that too.
ANDREA WEBSTER: I think, and just to add to that. So we've got 2,000, as you say, 2,000 companies and institutions in this benchmark. But what we also see is the ripple effect that has because they're all typically market leaders and the rest of their industries follow, and that is the power of it.
MONIQUE MATHYS-GRAAFF: Andrea, as we conclude our session-- we could really go on. But I'd love for you just to share with our listeners, what can we expect from WBA? We've spoken a lot about the methodology and the way. For those interested to learn more, we've got a COP27 coming up, et cetera. Are there areas we can specifically look forward to seeing more results published, more news on the alignment work as we move forward into the year?
ANDREA WEBSTER: Gosh, it's intense at the moment. That's a big question. I can't give away what the results are at the moment. Forgive me, as much as I would love to share with you, Monique, as you mentioned. So we are at the moment gathering the results and assessing 400 institutions. So it is intense. And we can see some themes that are beginning to come out already.
There is an incredible anticipation for this benchmark. And just by way of reminder, obviously, because we've got private institutions in here. But we do also have state government sovereign wealth funds in here as well. The interconnection between the finance system is so important. I think it's another one of the points on this benchmark, is that it's broad in terms of the methodology. But in terms of reach, it's global and we want to touch on that interconnectivity across the system for alignment.
So I am contacted on a regular basis by those that are anticipating it, and not least regulators. Regulators and policy setters, we are right in this inflection point, I think, of change on regulation. And it's happening around us. And regulators want to know what's working and what isn't so that they can focus their attention as well. So we were going to launch the results at COP27, and looking forward to that. Hopefully, we'll have another conversation at some point.
But I think what I want to make-- the point I'd like to make to the listeners here is, for me, the benchmark is just the starting point. It's actually the work that comes out of it. So there will be a lot of engagement with all the different stakeholders. What is going to be key to us is going to be peer to peer learning to show, highlight where there are areas where we can identify those that are operationalizing issues very well, embedding into their processes. And we can spotlight on that and share that practice across the industry to show, I think, the art of the possible.
I think also, and what I'd ask, is this is a feedback mechanism. So use us. So those, as you're using the methodology, as the listeners and your clients through yourselves to us, tell us what you need changing. What works? What doesn't work? You have our ear. We want to be a valuable resource, and that the work that we've done creating this benchmark actually extends outwards.
So we are here for you. I know everybody at Well Benchmarking Alliance want you to succeed. And I can tell you from all the regulators and the other stakeholders who I have the privilege to speak to, are all really keen for the finance system and corporates to succeed in this.
MONIQUE MATHYS-GRAAFF: Excellent. Andrea, thank you so much for being with us today. The listeners, we hope you found this useful. And please do have a look at the other sessions where we will continue this discussion. Thank you both so much, all.
ANDREA WEBSTER: Thank you. Enjoyable as always, Monique.