“ESG ratings… it’s a bit of a zoo”

Podcast on ESG ratings: Peter Bakker, WBCSD’s President and CEO, talks with Euromoney

In its latest podcast series “Treasury & Turbulence”, Euromoney examines where sustainable finance in the supply chain holds up, and where it falls down. Along with other industry experts, WBCSD President & CEO Peter Bakker shared his views on what he described as the “zoo” of environmental, social and governance (ESG) rankings, ratings and key performance indicators.

While ESG has become a principal component of doing business, the concept is still evolving. In the first episode of the podcast “The best sources of ESG information are the workers”, the focus is on the garment industry and the disconnect between the factories where clothes are made and the biggest investment houses where those suits are worn. “The sustainability challenges are now so large and impactful that they are becoming part of the regular risk assessment of any business”, Peter Bakker stated.

Over USD $30 trillion has been invested in ESG themed assets. Standardization has never been more important, as Peter Bakker notes: “There are more than 600 ESG rankings and ratings, there are more than 4,500 ESG key performance indicators… Just look at how many numbers are relevant for the financial accounting. We need to compress and standardize more.”

But who decides on ESG standards in the corporate supply chain and how can banks help corporate treasurers navigate this evolving market? The second episode “ESG ratings… it’s a bit of a zoo” investigates this. In this episode, he further emphasizes the importance of the Task Force on Climate-related Financial Disclosures’ (TCFD) set of recommendation: “Companies need to disclose in a standardized way their climate-related risks, they need to be able to demonstrate that in all layers of the organizations, in their governance, they manage these risks, and they need to have a strategic scenario of what would happen to their business model in a carbon constrained world. It will only work if all companies use it, and truly do it in a comparable manner.”

The third episode “There’s a tech solution for everything in ESG” is focusing on the technology changing corporate disclosure such as big data, satellite feeds from space and social media platforms, with a deep dive into the tech innovations that are helping corporates to map their supply chain and influence ESG goals.

The podcast series is ongoing. Listen to the latest episodes here.
Based on our report “Modernizing Governance – ESG challenges and recommendations for corporate directors”, WBCSD recently launched a free online suite of resources for board directors to improve their decision-making processes to protect and preserve long-term value by considering the current pandemic and ESG aspects.