After Occidental vote, new Norges-backed research says focus should be on sustainability performance

Harvard academics look at the “value relevance” of corporate sustainability disclosure

(Amends to say that Wespath was the lead filer of the resolution.)

As investors begin to absorb the success of the shareholder climate risk reporting resolution at Occidental Petroleum late last week – and look forward to other climate change resolutions – new research backed by Norges Bank Investment Management says investors should focus on sustainability performance and not just disclosure.

The non-binding proposal, which passed on Friday at Occidental’s AGM, calls on the company to report on environmental risks and opportunities associated with climate change.

It was lead-filed by Wespath Investment Management alongside co-filers CalPERS, the Nathan Cummings Foundation, and the New York State and Connecticut pension funds. A first in the US, it was hailed as a “sign of progress” by Anne Simpson, CalPERS’ investment director, sustainability.

The vote, she said, “demonstrates an understanding among shareowners that climate change reporting is an essential element to corporate governance”. The vote was helped by the likes of BlackRock, Occidental’s largest shareholder, saying it planned to back CalPERS’ proposal.

Wespath’s CIO Dave Zellner spoke of a “groundswell of support for robust climate risk reporting”.

With the attention of investors interested in climate change now shifting to this week’s proposals at ConocoPhillips (executive pay & low carbon resilience) and First Energy (alignment with 2 degree scenario) and – further out – the annual meetings of BP (May 17), Royal Dutch Shell (May 23) and Exxon Mobil (May 31), timely new research has looked at the “value relevance” of corporate sustainability disclosure.Harvard Business School’s George Serafeim and Jody Grewal, with the support of Norges Bank, have analysed a sustainability dataset developed by the giant investor. The research has just been published as The Value Relevance of Corporate Sustainability Disclosure.

One main conclusion is that the probability of uncovering the value relevance of ESG data “increases if the data relates to actual performance, rather than only disclosure”.

“A groundswell of support for robust climate risk reporting”

They recommend building a data infrastructure that allows for performance comparisons across companies “which we believe could prove valuable over time”.

“We have determined from our analysis,” Serafeim and Grewal write, “that a distinction needs to be made between performance and disclosure”.

Meanwhile, the Global Investor Coalition on Climate Change (GIC), the grouping of investor networks, and environmental data body CDP, have released a new report concluding that some of the largest global oil and gas companies such as Statoil, Eni and Total are “well ahead” of others like ExxonMobil when it comes to climate change management and disclosure.

And, in what’s shaping up as a busy week, fund firm BMO Global Asset Management has officially announced it would exclude all companies with fossil fuel reserves from its Responsible Funds range, in a move first reported by Responsible Investor last month. BMO, the former F&C, worked with its external Responsible Investment Advisory Council, whose members include the Archbishop of Canterbury Justin Welby. Welby called it “a most impressive piece of work”.