We were invited to present to the US EPA's Smart Sectors program about the ESG Ecosystem and how it relates to Environmental Justice.

1. The business of sustainability
© Copyright 2019 by ERM Worldwide Group Limited and/or its affiliates (‘ERM’). All Rights Reserved.
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written permission of ERM.
Managing the ESG
Ecosystem
Mike Wallace, Partner, ERM
Strategic Market Engagement
February 2021

2. www.erm.com
Who Makes Up the ESG Ecosystem?
2
Some actively request information,
aggregate data, and add ratings.
Some purchase data and ratings from other
raters and add rankings.
Some organizations simply provide frameworks
for disclosure and do not evaluate companies.
Some passively pull information from
sustainability reports, aggregate data,
and add ratings.
Based on sustainability reporting standards and frameworks, there are 100+ organizations producing lists, rankings,
ratings, and scorecards of the “top companies” and “most sustainable” companies.

3. www.erm.com
Investor Coalitions and Networks (50+ Years)
1972
$400 billion
2001
$20 trillion
2000
$100 trillion
2003
$25 trillion
2006
$80 trillion
2013
$4 trillion
2015
$86.2 trillion
2017
$13 trillion
Copyright @ 2020

4. www.erm.com
Sustainability-related rating and data providers
Merger & Acquisition activity
A growing and dynamic market place.
RiskMetrics
Group buys
Innovest
FEB 2009
Thomson Reuters
buys Asset 4
NOV 2009 Bloomberg
buys New
Energy Finance
DEC 2009
GMI and
The Corporate
Library merge
JUL 2010
Vigeo and
EIRIS
merge
OCT 2015
MSCI acquires
GMI Ratings
JUN 2014
ISS buys IW
Financial
JAN 2017
Morningstar buys
40% of
Sustainalytics
JUL 2017
SEP 2009
Sustainalytics and
Jantzi Research
Inc. merge
NOV 2009
RiskMetrics
Group buys KLD
MAR 2010
MSCI buys
RiskMetrics
Group
JUN 2012
Sustainalytics
acquires
Responsible
Research SEP 2015
ISS acquires
Ethix SRI
Advisors
OCT 2016
Standard & Poor’s
buys Trucost
JUN 2017
ISS acquires South
Pole Group’s
Investment
Climate Data Division
MAR 2018
ISS acquires
oekom research
Sustainalytics
buys certain assets
from Solaron
Sustainability
Services
MAR 2018
APR 2019
Moody’s acquires a
majority stake in
European ESG ratings
firm Vigeo Eiris
Moody’s acquires a
majority stake in
climate data firm
Four Twenty
Seven
JUL 2019
SEP 2019
MSCI acquires
environmental fintech
and data analytics firm
Carbon Delta
JAN 2019
Sustainalytics
acquires GES
International
Thomson Reuters acquires
FC Business Intelligence,
the parent company of
Ethical Corporation
OCT 2019
RobecoSAM transfers SAM
ESG Ratings and
Benchmarking to S&P
Global
NOV 2019
APR 2020
Morningstar buys
the remaining 60%
of Sustainalytics
4
Copyright @ 2021
OCT 2020
FactSet, US based
financial services
provider, acquires AI-
driven ESG data
specialist Truvalue Labs
Deutsche Börse AG
acquires majority share
(80%) of leading
governance, ESG data
and analytics provider
ISS
NOV 2020
H2 2021
S&P Global and IHS
announce USD44bn
merger plans (effective
H2 2021)
LSEG completes $27bn acquisition
of Refinitiv (formerly the Financial &
Risk business of Thomson Reuters)
FEB 2021

5. www.erm.com
2010 2014 2019
2017
Frameworks, Guidelines & Standards (20+ Years)
2016
2015
2012
2011
2005
2000
1997 2020
Copyright @ 2020

6. www.erm.com
Global Alignment & Harmonization
6
January 2020 July 2020 September 2020
September 2020

7. Case Study:
ESG Due Diligence
Bloomberg
7

8. www.erm.com
GRI (1997) – Globally Crowdsourced ESG Issues
8
Environmental
 Materials
 Energy
 Water
 Biodiversity
 Emissions
 Effluents and Waste
 Products and Services
 Environmental Compliance
 Transport
 Supplier Environmental
Assessment
 Environmental Grievance
Mechanisms
Economic
 Economic Performance
 Philanthropy
 Market Presence
 Indirect Economic Impacts
 Economic Inclusion
 Procurement Practices
Human Rights
 Non-discrimination
 Freedom of Association &
Collective Bargaining
 Child Labor
 Forced /Compulsory Labor
 Security Practices
 Indigenous Rights
 Supplier Human Rights
Assessment
 Human Rights Grievance
Mechanisms
Labor Practices
& Decent Work
 Training and Education
 Employment
 Labor/Management Relations
 Occupational Health & Safety
 Diversity & Equal Opportunity
 Equal Remuneration for Men
and Women
 Supplier Assessment for
Labor Practices
 Labor Practices Grievance
Mechanisms
Society
 Anti-Corruption
 Public Policy
 Anti-competitive Behavior
 Local Communities
 Supplier Assessment for Impacts
on Society
 Grievance Mechanisms for
Impacts on Society
Product Responsibility
 Customer Health & Safety
 Product & Service Labeling
 Marketing Communications
 Customer Privacy
 Product Compliance

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ESG Scores & Comparisons (sample)
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Source: Bloomberg data accessed 06/10/19

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Environmental Metrics (sample)
10
Source: Bloomberg data accessed 06/10/19

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Social Metrics (sample)
Source: Bloomberg data accessed 06/10/19
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Governance Metrics (sample)
12
Source: Bloomberg data accessed 06/10/19

13. Case Study:
Strategic ESG Disclosure
Edwards Lifesciences
13

14. www.erm.com
Edwards Lifesciences Case Study: Strategic ESG
Disclosure
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https://www.edwards.com/sustainability/our-approach/materiality-stakeholder-engagement/

15. www.erm.com
Edwards Lifesciences Case Study: Strategic ESG
Disclosure
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https://www.edwards.com/sustainability/our-approach/materiality-stakeholder-engagement/

16. www.erm.com
Edwards Lifesciences Case Study: Strategic ESG
Disclosure
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https://www.edwards.com/sustainability/our-approach/materiality-stakeholder-engagement/

17. www.erm.com
Single Security Data
Company-reported ESG data is available at a single security level. Ratios and third-party
scores are also available, offering complete transparency.
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ESG Company data,
disclosure scores,
ratios and third party
data

18. www.erm.com
ESG Peer Analysis
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ESG Performance and
peer comparisons
including ESG scores

19. Evolving Human Capital
Landscape
2017 - 2020

20. www.erm.com
International Integrated Reporting Council (IIRC)
Released: 2010
20

21. www.erm.com
Harvard Law School – Corporate Disclosure of
Human Capital Metrics
Released: October 2017
The Harvard research study looked at disclosure on twelve
topics selected from the Human Capital and OHS sections of
RobecoSAM’s Corporate Sustainability Assessment (CSA).
 Training Hours
 Training Cost
 Return on Training
 Employee Development
 Employee Development
Business Benefits
 Employee Development
Qualitative
 Operating Profit per Employee
 OHS Framework
 OHS Oversight
 OHS Work Environment
 Lost-Time Injuries
 Fatalities
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Link: CSHS Website
Link to Harvard Research Report

22. www.erm.com
Human Capital Investor Perspective
Evolution of the Concept of Human Capital
fair labor
practices; health
and safety;
responsible
contracting and
diversity
workforce
demographics;
workforce stability;
workforce
composition;
workforce skills and
capabilities; workforce
culture and
empowerment;
workforce health and
safety; workforce
productivity; human
rights; workforce
compensation and
incentives
total headcount,
“broken down by the
division between full-
time and part-time
employees, gender, and
diversity”; Annual
turnover—including
both planned and
regrettable turnover;
Investment in training,
skills, and professional
development;
Employee engagement
score
gender diversity;
employment type,
such as full-time, part-
time or agency
workers; staff
turnover; accidents,
injuries and workplace
illnesses; investment
in training and
development; pay
ratios between the
highest paid and
median and lowest
quartile workers
across the company;
and employee
engagement scores.
workforce
composition,
unionization, worker
participation in
decision-making,
OHS practices,
training and
development and
employee
compensation
policies.
workforce
composition,
worker welfare,
investment in
skills and worker
representation.
Sources: Corporate Disclosure of Human Capital Metrics. October 2017. Retrieved from: https://lwp.law.harvard.edu/files/lwp/files/pension_paper_corporate_disclosure_of_human_capital_metrics_102317.pdf
CSHS Human Capital Project. http://www.centershs.org/human-capital.php
22
2014 2015 2016 2017 2018
2014

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Sustainability Accounting Standards Board (SASB)
Released: October 2018
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25. www.erm.com
GRI 403: Occupational Health & Safety
Released: November 2018
25
Management approach disclosures
• 403-1 - Occupational health and safety management system
• 403-2 - Hazard identification, risk assessment, and incident
investigation
• 403-3 - Occupational health services
• 403-4 - Worker participation, consultation, and
communication on occupational health and safety
• 403-5 - Worker training on occupational health and safety
• 403-6 - Promotion of worker health
• 403-7 - Prevention and mitigation of occupational health and
safety impacts directly linked by business relationships
Topic-specific disclosures
• 403-8 - Workers covered by an occupational health and
safety management system
• 403-9 - Work-related injuries
• 403-10 - Work-related ill health

26. www.erm.com
Social & Human Capital Protocol
Released: Feb. 2019
Evolution of Human Capital 26

27. www.erm.com
Culture of Health (GRI & RWJF)
Released: June 2020
27

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U.S. Securities & Exchange Commission
Released: August 2020 (Comment Period Opened: June 2017)
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29. www.erm.com
World Economic Forum
Released: Sept. 2020
29

30. Active ESG Management
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31. www.erm.com
Is it time to create your own ESG narrative?
Step 1: Understand the ESG Ecosystem
 What does the ESG ratings and rankings ecosystem
look like today?
 Are your competitors disclosing things you are not?
 Can you disclose these things?
 Do we want to connect the internal dots and do a report,
or fill the immediate gaps?
Step 2: ESG Research Firm, Shareholder
Mapping & Assessment
 Who is already looking at you and contacting you?
 Which of your largest owners have an interest in ESG?
 How important are those ESG research firms and
owners to you? (Prioritize)
…Or are you going to let others do that for you?
Step 3: Strategic and Integrated Disclosure
 What do we already have in-house that we’re not
disclosing?
 What are our most important (material) ESG issues?
 Who are the internal SMEs that can help measure,
manage and disclose ESG information?
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32. The business of sustainability
Thank you Mike Wallace
Partner
Strategic Market Engagement
+1 (424) 320-3501
Mike.wallace@erm.com

33. ESG Ratings Resources

34. www.erm.com
2020
Recent ERM Acquisitions
2019
 BrownFlynn, Ltd., corporate sustainability
and governance consulting business
 Kathy Jones and Associates Pty Ltd (KJA),
stakeholder engagement and communication
specialists
2018
 SustainAbility Ltd., advisory firm that inspires business
to lead the way to a sustainable economy
 CSA Global, mining consultancy firm
 Contek Solutions LLC, safety and environmental
engineering company
 The Fifth Business, integrated change management,
communications, learning and design consultancy firm
 Critical Resource Strategy & Analysis Ltd., assesses
stakeholder, political and ESG risks for the mining and
energy industry
 M.J. Bradley & Associates LLC, strategic
consultancy that addresses energy and environmental
issues for the private, public, and non-profit sectors.
ERM is a best-in-class sustainability consulting firm which seamlessly moves from strategy to technical implementation.
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35. www.erm.com
ESG Ratings & Rankings Survey
ERM ESG Webinar 35

36. www.erm.com
SustainAbility Rate the Raters 2010-2020
ERM ESG Webinar 36
View link

37. www.erm.com
ESG 2019 & 2020 Rate the Raters Results -
Usefulness
37
Investor Survey: ESG Ratings Usefulness
Expert Survey: ESG Ratings Usefulness

38. www.erm.com
European Commission Work
ERM ESG Webinar 38
Link to Article

39. www.erm.com
Recorded Resources
ESG Reporting Basics (58:50 min)
Access Link
ERM ESG Webinar 39
RTR Expert Survey Results (60 min)
Access Link
Understanding the ESG Ecosystem (9:35 min)
Access Link
ESG Related Metrics for Accounting and
Finance Professionals (15:16 min)
Access Link
ESG Due Diligence (6:35 min)
Access Link
RTR Investor Research Results
(60 min)
Access Link