Tom Fox chats with Senior Managing Director of State Street Global Advisors, Rakhi Kumar, about some of her company’s initiatives to make Environmental, Social and Governance (ESG) more approachable for business leaders.

Building For The Future

Rakhi says that risk keeps evolving and that ESG is a new type of risk. ESG issues tend to be seen as intangibles and nonfinancial. However, they create long term value for the company if managed correctly. She says that State Street’s mission is to invest responsibly to enable economic prosperity and social progress. This means they manage for the long term, which is why social issues inform their strategy. “From a fiduciary perspective what we keep focus on is financial materiality and research informing our decisions … to ensure we’re focused on value creation,” Rakhi notes. “ESG is an opportunity to build for the future and create long term value.”

Improving ESG Reporting

Tom comments that State Street’s research found that less than 25% of companies they evaluated had identified, incorporated and disclosed material ESG issues into their strategy. He asks Rakhi how her company is helping to improve this. She shares State Street’s stewardship initiatives to highlight ESG in the boardroom. In addition, they are raising awareness about the need for standardization across the market. She describes the R-Factor tool which provides a framework to measure “the performance of a company’s business operations and governance as it relates to financially material ESG issues facing our company’s industry.” 

Holding Companies Accountable

Rakhi says that her company will use its proxy voting power to get companies to improve their ESG performance. You can go to State Street’s website to apply for your company’s ESG score, as well as how you rank in relation to other companies. 

Resources

R-Factor