How the perception of ESG changed amid the pandemic

Steven Fox, Executive Chairman and Founder of Veracity Worldwide, speaks with Yahoo Finance’s Julie Hyman at this year’s Concordia Summit on measuring ESG, companies ‘greenwashing’, and differences in operations for companies.

Video transcript

ALEXIS CHRISTOFOROUS: Our Julie Hyman who was standing by at the Concordia Summit -in New York City today with a special guest. Julie.

JULIE HYMAN: Alexis, thanks so much. I'm here with Steven Fox, who's the founder and executive chairman of Veracity Worldwide. And here at Concordia, the discussions are all about public-private partnerships, how we can harness different stakeholders in working on the big problems around the globe.

One of the things that you work on, that you were just in a panel about has to do with ESG. This is something you counsel clients about. And so first, I would begin by asking, over the course of the pandemic, how have we seen the perception of ESG change? And, you know, has there been a big increase in requests from clients? How do I get my ESG in order? Or hopefully, a more specific question than that.

STEVEN FOX: Absolutely. In the past, ESG was much more Europe-driven, and European companies were at the forefront. And we would say, in the last 18 to 24 months, there suddenly has been a sea change among US companies of a real interest in ESG issues. And originally, the emphasis was on the E in environmental. But I think that emphasis has shifted also to the S for social issues very much, particularly, during the pandemic period.

JULIE HYMAN: And so what kind of guidance are they looking for at this time? And also I would ask, you know, there has been always a concern around ESG, about so-called greenwashing or people not really doing the work. Are companies right now really interested in doing the work?

STEVEN FOX: So it's a good question. And it's easy to rely on rankings. The problem is that rankings have many limitations and shortcomings. And there's lots of ink that's been spilled on that topic. The question is, what do you do and how do you go deeper? And how do you take into account a particular sector? And then what's happening in a particular jurisdiction? Can you really place whatever the issue is into an appropriate context?

It's what we would call ESG intelligence as opposed to just having ESG rankings. Can you really get down to the heart and the core and ask penetrating questions and understand truly what's happening in a company precisely to avoid those greenwashing kind of situations?

JULIE HYMAN: So let me ask you this then. If you're an investor or a consumer for that matter who wants to buy products from which you consider to be a company that's following your values, what questions should you be asking? How, either as an investor or as a consumer, do you go about figuring all of this out?

STEVEN FOX: Well, I think as a consumer, it's probably more difficult and they depend on media and others to be scrupulous. As an investor, I think the question is really, as you're looking at a company, is this company serious about ESG? Is it merely checking a box and doing it for compliance purposes? Is it only for public relations purposes? Or is there a genuine commitment to try to live the story on whatever it is with regard to ESG?

And we see more and more of that happening in companies. And then finally, the other important categories, which are those small number of companies that are out there, that are really trying to move the needle, that are truly as we'd say, ESG attentive and that are pressing for an ESG agenda outside of their own business?

JULIE HYMAN: Outside their own business and also outside of their own nation. I mean, something we were talking about before the interview was that wherever around the globe that you're operating as an international business, the standards might be different, the laws might be different, the issues might be different. How do companies get their arms around that?

STEVEN FOX: So again, that is a challenge. And really understanding what happens and wanting to dig deeply and to rely on on-the-ground intelligence and figuring out what's happening in a particular marketplace, or to really apply a lens. So Wirecard is a good example of a company, where they made all the right ESG noises.

On paper, everything looked all right. But if you dug deeper into their governance and other aspects, it was not too difficult to determine. And as we did for a client in advance of the [INAUDIBLE], there was likely to be fraudulent activity, which there turned out to be to the tune of billions of dollars.

Another example is a palm oil plantation. We've recently been looking at a palm oil business in Southeast Asia. The company itself did all the right things. But in one of their subsidiary companies, the dirty activities were hidden there. And it wasn't clear the subsidiary was a part of the business at first blush. And it was only through careful looking that one could see this.

JULIE HYMAN: And so obviously, these kinds of things are not captured in a ranking, right. It's captured by the work of companies like yours. And so, I guess then, how does one find out about it? In other words, maybe you report it out. You release that information. The media reports upon it. I mean, those are egregious cases, though, whereas in most cases, it's going to be much more subtle.

STEVEN FOX: Absolutely. And so I think the short answer is that it's not easy to find, but that the overall needle is moving, and that there is a higher degree of self-policing, and where companies are worried about being caught out if they make a statement that proves not to be correct. And as a result, they want to make sure that their own house is in order before providing information to the ranking agencies.

JULIE HYMAN: Got you. All right, Steven Fox, thanks so much for being with us. Really appreciate it.

STEVEN FOX: Thank you for having me.

JULIE HYMAN: Thank you, chairman and founder of Veracity Worldwide.