New Ceres Report Calls for Sustainability Practices Across All Corporate Boards

Citing the impacts related to Hurricane Irma, a new report from Ceres suggests that corporate boards bring extreme weather events, climate change, and other sustainability issues to the forefront of their decision-making process in order to meet their fiduciary responsibilities.

The report, titled “Lead from the Top: Building Sustainability Competence on Corporate Boards,” addresses the legal responsibility among boards to act when environmental and social issues threaten business models and financial performance.

“Sustainability should be a primary matter for all board members, not just those with environmental or energy expertise and backgrounds,” Carol Browner, former EPA administrator and board member at Bunge, writes in the forward of the report. “Expanding board expertise on sustainability should be part of every company’s board strategy. Understanding the material risks and opportunities for the company is inherent in a director’s responsibility to ensuring long-term value creation and resilience.”

According to a news release, key characteristics that make up sustainability-competent boards identified in the report include:

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Integrates knowledge of material sustainability issues into the board nominating process to recruit directors that ask the right questions.

Educates directors on material sustainability issues to allow for thoughtful deliberation and strategic decision-making at the board level.

Engages with external stakeholders and experts on relevant sustainability issues.

In addition, key practices corporate directors should follow to ensure boards are sustainability-competent include:

Incorporate material sustainability issues into qualifications for potential board candidates.

Find directors that can make the connections between environmental and social issues and the business context.

Recruit candidates representing a diversity of backgrounds and skills to improve decision-making.

Integrate new directors with sustainability competence into current board deliberations, especially on strategy and risk.

Require regular education on material sustainability issues for the whole board.

Find regular opportunities for boards to engage stakeholders on environmental and social issues.

Incorporate material sustainability issues into board-investor dialogues.

The report builds on a 2015 Ceres report titled “View from the Top: How Corporate Boards Can Engage on Sustainability Performance,” centered around a two-pronged approach for integrating sustainability into decision-making through board governance systems and board actions. The report also comes at a time where shareholders and investors are pressuring corporate boards towards sustainability competence as well as ExxonMobil’s decision earlier this year to appoint a climate scientist to its board.

Tags: Ceres, Corporate Boards, ESG, Sustainablility

Over the next five years, the global economy is expected to experience a 2.4% real average annualized growth, according to a recent report from Northern Trust.

Although the report, titled “Northern Trust’s Capital Market Assumptions five-year investment outlook,” acknowledges equity valuations are high in developed markets, Northern Trust predicts low inflation and steady economic growth will continue to keep stocks attractive. The report also says the highest regional average annualized return will come from emerging markets at 8.4%; followed by 7.2% for Europe, 6.6% for the UK, 6.0% for Japan, and 5.9% for the US,

The outlooks also expects rates on three-month bonds from the US, Europe, Japan, and the UK to increase to a range of 0.0% (Japan) to 2.1% (US). The 10-year bond expectation ranges from 0.5% (Japan) to 3% (US). In addition, the firm does not foresee a bond bubble, and expects interest rates to remain low with gradual and modest increases while being less than Bloomberg’s reported general market expectations.

The firm identified six investment themes, including “Waiting for the Monetary Godot,” which refers to the belief among investors that monetary policy will normalize as global growth remains depressed and inflation stays below central bank targets —which the firm believes is unlikely.

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“We may never see central banks return to traditional policies and don’t expect a return to pre-financial crisis levels over our forecast horizon,” Northern Trust’s Chief Investment Officer Bob Browne said in a statement. “A successful unwinding of huge central bank balance sheets, which is likely to remain larger than historical levels, will be the focus.”

In its “Popular Catharsis” theme, the forecast also assured that “populist earthquakes” such as the Brexit and the US presidential election would not derail another of the six themes titled “Entrenched Growth.”

“The rise of global populism has not dramatically changed the global economic outlook,” Northern Trust’s Chief Investment Strategist Jim McDonald said in a statement. “During this political and economic transition, investors will show patience and reward those leaders who drive change.”

The remaining themes in the report are “Stuckflation,” “Regulation in the Limelight,” and a “Valuation Structure.”

According to Wayne Bowers, CIO and CEO for Northern Trust Asset Management in Europe, Middle East and Africa, the report’s overall theme of “Entrenched (Global) Growth” and relative stability “is based on demand being constrained by natural regulators such as high debt burdens, aging developed market populations, and transitioning emerging market economies,” he said in a statement. “These factors, along with regulatory relief and persistent low inflation, will continue to allow easy monetary policy, and stop global markets from overheating.”

Tags: Capital Market Assumptions, Investment Outlook, Northern Trust