ESG in the Biden era: What to expect & how to prepare

In this episode of The ESG Experience, podcast hosts Helee Lev and Ryan Nelson are joined by Mari Bishop, an ESG manager at Goby, to discuss how the political future of the US will affect the ESG landscape. They examine the incoming Biden administration’s ESG-related policies and plans and review the administration’s plans to intensify the imperative for organizations to adopt ESG as a core part of corporate culture. Topics covered include the Biden administration’s plans to combat climate change and reduce the United States’ environmental impact, such as the pledge to rejoin the Paris Agreement, and new economic policies and regulations focused around ESG investing and corporate disclosure.

Topics covered in this episode include:

• Navigating & understanding new ESG policies
• Complying with new ESG regulations
• Moving from principal-based to rule-based disclosure requirements
• The SEC & Department of Labor increasing support of ESG investing
• And more

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Read the transcript of this episode below:

Helee Lev: Hello, and welcome to The ESG Experience, the podcast brought to you by Goby, the ESG platform. I’m Helee Lev, Chief Revenue Officer at Goby.

Ryan Nelson: And I’m Ryan Nelson, Chief Executive Officer, and we’re your hosts for this podcast.

Helee: So whether you’re an ESG expert or just dipping your toes into the ESG universe to understand how it can help with engaging your stakeholders, mitigating risks and attracting investors, this podcast is for you. Together, we will continue to navigate the alphabet soup of ESG, discuss ideas, review strategies and share industry news and trends.

In today’s episode of The ESG Experience, we’ll be discussing the new administration, whoo-hoo! How I feel about it, if it’s not obvious, and how this administration will intensify the ESG imperative. And we are lucky today to have special guest, Mari Bishop; super happy to have you. We’ll let you introduce yourself shortly and she is a passionate ESG expert and subject matter expert. So I’m going to hand it over to you to introduce yourself and also, maybe just at the highest levels, what are your initial reactions to this new administration and perhaps your high hopes of what it’s going to do for ESG?

Mari Bishop: Absolutely! Excited to be here. So like Helee said, I am Mari Bishop; one of the managers over at Goby. I manage one of the teams that delivers ESG wonderfulness and more to come of that, I believe. So whatever the upcoming shift in administration might mean to you, from an ESG perspective, it signifies exciting changes that relate to two main aspects with an intent to highlight climate change risk planning. Those two being regulatory changes and changes to economic policies.

So first, to address climate change, Biden has pledged to reinstate the United States Signatory status to the Paris Climate Agreement on his first day in the office. Then second, requirements for company ESG disclosure and climate risk planning are the overarching plan to move the needle from principle-based disclosure to rule-based disclosure. Both of these overarching policy shifts will make for an interesting and exciting 2021, I believe, in a good way. Different from 2020, we hope.

Helee: And maybe if we can ever travel abroad again, we’ll stop getting that weird, side-eye, dirty look. I feel like it had to do with us not participating in the Paris Agreement. That was half of it. Like how dare we not participate?

Ryan: Yeah. So to be clear, Helee, you are not just going to play Switzerland here on your position on the election results.

Helee: I thought that this podcast was about the results are signed, sealed, delivered at this point; almost, almost, almost. And my...

Ryan: And we’re happy about that.

Helee: Political views have nothing to do with this podcast.

Ryan: Okay. Okay, fair enough. Yeah. I mean I think it’s wild. I don’t play politics or know a whole ton, but like the first day thing? That’s a powerful thing, right? That means that they’re making it one of the priorities. You can only do so many things on your first day and on the first day, they’re proclaiming to rejoin the Paris Agreement.

Helee: That’s a statement right there.

Ryan: Yeah, right? Well, yeah. Mari, good to have you, like Helee said. Thank you for summarizing some of the Biden-Harris administration's main points. I was thinking about those and I think that there are great thought leaders in the U.S. which is where we’re based. Not just where our company serves necessarily, but where we’re based. There are great thought leaders in the U.S., but if we’re not considered to be a good participant in the climate change discussion, then we kind of lose that voice a little bit. And I think that’s where we’ve been for the last several years now is we couldn’t really engage in the conversation very well because at the highest levels, we basically stepped out of it and so we were no longer a leader.

Do we need to be a leader? Is it important to be a leader? I don’t know. I don’t necessarily proclaim that I have to live in the country that happens to be the leader. I mean it's cool, I guess. It’s something to strive for, but there’s definitely a lot of great innovators, thought leaders and ideas. And now, I think this is very positive because those people, those businesses, those individuals will be able to be taken seriously again. Exactly to your point, Helee, you won’t be in other countries getting a side-eye. You can actually just engage and maybe even be a little bit further, lead the conversation which is cool.

And then as far as rules and having rules about it, from everything I've studied just to prep for this and everything and just in general, nearly everyone supports clarity. When you talk about definitions and language and targets, almost everyone, no matter what your position, it’s describe what you’re talking about. What does ESG mean? How do we achieve it? What is an ESG fund or an impact fund? If people can provide more language and even rules, most people don’t like rules per se, but they like definitions and language. And nearly everyone supports transparency unless of course you’re doing something naughty. But if you’re not, then you typically support transparency. So clarity, transparency and being leaders. Or at least not being a negative contributor to the discussion is, I think, really good for businesses and individuals here.

There’s a quote here from the SEC Commissioner, “There is room for discussion as to which ESG risks and impacts should be disclosed and how, but the time for silence has passed.” And maybe that's just a better way of summarizing all the things I was trying to say.

Helee: I love that. The time for silence has passed. Or hearing this quote, an unsustainable silence. So it’s almost like by doing nothing, you’re not neutral. By being silent, you’re not neutral. You're almost guilty. And one other thing to point out in the spirit of clarity and transparency. As we see this shift in evolution that the light has been shined upon it during the events of this year, the pandemic and whatnot, is it’s not really just about that “E” anymore in ESG.

For the past decade, I feel like it was all about energy, water, waste, carbon, really heavy on the environmental. And what has really been brought to light perhaps over the last several years, but magnified in the landscape of this past year, is the “S” and “G” matter as well. You saw a recent announcement from the Nasdaq about the need for transparency in leadership and a mandate that within the next two to five years, every Nasdaq-listed company will need to have both a woman and a minority. Can’t be the same person, can’t get a twofer; two separate people on their boards. And roughly 20% of the companies currently listed on the Nasdaq meet that requirement. And if they can’t meet that requirement, they’re obligated to explain why not. So again, just a bigger lens on the “S” and “G” and just a stronger emphasis on transparency and clarity, like Ryan said.

So, Mari, I might ask you. I think about climate change and I know that’s one of your passions and areas of expertise. And I think of all the damage that we’ve done and I see these things about how we’re past the point of no return and the polar ice caps will never recover and the wildfires out west this year have never been worse and this is the worst hurricane season we’ve ever seen. And maybe some of that is dramatics from the media that likes to keep us in fear and captivated at all times, but in your opinion, your personal opinion as someone who studies this, is it too late for us as a human race? Have we gone too far? Is that it? We’re doomed?

Mari: Well, I know you can’t see me, but I laugh a little at that because I know that that tends to be one of those excuses that some people might make not to do anything. And I would say my personal take on that is if there is, and there is some truth to that, right? I mean in some ways, we are past the point of no return meaning there will be an impact regardless of what we do from here on out, but we absolutely have power over what kind of impact and the magnitude of that impact is going to be.

So I think from the business perspective, we should all be excited as our country will be kind of joining and coming to stand side by side with other requirements, global requirements and goals. Because as a business, the number one thing that you probably fear the most is risk and unknowns. So seeing all others signing up on these things and implementing climate change into their plans, into their risk management and you perhaps either tried to follow track on that as much as you could, knowing that there are no requirements or standards from the U.S. as of yet. Or perhaps, you just waited until that moment came and you knew exactly what you had to do. But regardless, you will know.

A lot of this information is already out there. If you go to their campaign website actually, you can scroll for many, many minutes and keep seeing more and more information on that. It's not a carrot that’s just moving in front of you as you walk anymore. You will have goals and they do align with the rest of the world. Especially if you’re a global company, this is very important. So it should be exciting to you that there will be less unknowns and less risks with regards to what does this mean for my business.

And then the other side on a more personal level, like I said, it shouldn’t be an excuse not to do anything. And I think at the same time that this is indeed difficult times to be living through. It's also very exciting times to be living through. It is when you are stuck between the two corners of that wall that you realize that you have nowhere else to go or nothing else to do, but to make a big change, to take the leap and to become that expert or that leader in the space. Or simply to adapt and not just adapt, but grow and become the next level company that you want to be. Or even personally, as a person. I think it’s very fulfilling when you do this kind of thing or you integrate this into your everyday work.

Helee: So another quote we came across in preparing for this podcast that, Mari, maybe I'll ask your opinion on, “It’s possible to view ESG as a response to regulatory failure. If the U.S. government paid attention to things like paid family leave or universal healthcare, then perhaps investors would find it less pressing to include those objectives in their investment strategies.” And this is from Elisabeth Kashner, Director of ETF Research. How do you feel about that? Do you feel that that’s true or is it kind of a chicken and egg thing, if you will?

Mari: So, sure. Yeah. That is true. And I mean chicken and egg, I don’t know. I think in this kind of industry, there is a way to move forward with the things that you have to do, the standards, the bare minimums, the baselines, while at the same time making sure that you’re planning to surpass those kinds of things. But yeah, I would agree. I will also be interested to hear about what your guys’ thoughts are on that.

Helee: Yeah. I don’t know. Ryan, what do you think? Did regulation fail us? I mean is it up to now the private investor or the private sector or even the public to put an emphasis on ESG because regulation has failed us? And I guess I asked because I talk to people with varying views on this.

Ryan: Well, personally, I’m one to not blame things on regulation. I tend to attach what we’re going to do and who we’re going to be to the end consumer. At the end of the day, to the individuals. So if the regulation is not there, ultimately, that’s on the individuals that didn’t put the right people in power and didn’t prioritize the right things. So chicken and egg or blame game, I don’t know. I think that this comment is accurate. If the government paid attention to things like family leave, universal healthcare, then yes. We wouldn’t have to be pressing so much to make them part of investment strategies. Maybe, we’d be in a different position now, but I think the blame game on that is kind of moot.

Helee: Yeah. So I keep the company of friends in many walks of life at the very ends of the spectrum from left to right and everything in between. And I recently talked to someone on the far right, don’t judge, not a close friend, a friend of a friend of a friend, acquaintance of a friend of a friend, let’s say, who feels very strongly that whether it’s the board, whether it’s the leadership within a company, it should be a meritocracy. It should always be the best person for the job. And having mandates like the one I discussed from Nasdaq that you must have a woman on the board, you must have a minority on the board, he went so far as to say that that is racist and sexist.

So I think it’s somewhere between. I don’t blame regulation. I do thank the investors shining a light on it. At the end of the day, the almighty dollar has power, right? So if the investor is going to withhold their almighty dollar because these things have not been addressed and that’s a mechanism to make our world a better place or to put the motivation in the right place, I'm all for it. I’m all for it, but at the same time, I would hate, I kind of empathize with this position, and that I would hate for someone to be looking at two people and say, “You know what? This 45-year-old White man is actually way better for this job, but I have a mandate to fill this seat with a woman. So I’m going to take the person who is going to be less good at the job because I have to meet this mandate.” So I think it still has to figure itself out, but I personally am appreciative of the legislation and the shove in the right direction or the motivation from investors that say you may not have my almighty dollar if you’re not doing these things or demonstrating to me that you’re doing these things. I’m cool with it.

So, Ryan, I'm going to ask you. You run a business, you’re an entrepreneur, you’re a founder, what is your honest take on that? Are we just checking a box here? Or do these types of things really matter? And more importantly, do they create real value in a business, in your opinion?

Ryan: Yes. I mean the short answer, yes. I do think they create real value. And I mean is it racist or sexist? I mean maybe someday you could make that case, but we need to think at the macro level here of all the decisions that have been made for decades or hundreds of years and how we got here in the first place. If you can’t find a super qualified, incredible woman or minority to fill that position, then you’re not searching properly. Like that’s the whole point. The network effect of you’re just the same thing. So this reality of saying I'm staring down this situation where I couldn’t fill this and now, I have to take the lesser qualified candidate, I just don’t really think that’s real, frankly. I would go even further to say you should still do it, if that’s the situation. Just because at the macro level of what has happened for decades, we need to position things differently for change. You had a comment probably on that, Mari, I would imagine.

Mari: Yeah. So actually, yes. I agree. And I would also like to build up that a policy or a mandate that is done right should have mechanisms within it that do not allow for this kind of situation to happen that you mentioned, Helee. So the “I had to hire this person regardless of whoever else applied because I needed another person of color to check my boxes,” it shouldn’t be a box-checking exercise. The whole point of having anything D&I related, a policy, a mandate, a regulation, is that you are creating a standard, a minimum, a baseline for companies or any others to follow. And setting that bar so they know what it is that they are trying to achieve, but then also how. Exactly how will that take place. How do you get there?

So like you were saying, Ryan, you would find it hard to believe that you really couldn’t find any person of color to apply for your position or that made it to your desk to actually review the top 10 applicants or whatever it might be. Then, that also means that your policy perhaps, your internal policy, is not thorough enough in explaining where to look for talent or how to look for talent. So that’s one example of things that you can do to build a system that works and not necessarily just a box to check.

Ryan: Yeah. So for me, I don’t know. At the macro level, again, we’ve seen what the privileged of the world bring to the table as leaders and what they do in the boardroom. I mean, Helee, you and I are constantly sending back, I mean it's sad maybe, but hilarious, like pictures from Zoom meetings or pictures from websites. And when you look at certain companies, when you look at a CEO forum that I might attend and I take a snapshot at, I mean, again, I wouldn’t say funny, but...

Helee: Yes.

Ryan: I mean it is...

Helee: It’s a whole lot of vanilla.

Ryan: Wild. So we’ve seen what those people do for decades now. Let’s see what can be accomplished when strategy at the leadership table is set by a diverse representation of humans. Let’s see what that would be like. So the long answer, there is value there. Yes, there is value there. It will be different, most likely, the way that things are addressed. And hopefully, different good.

I want to bring this pop culture reference in. One of my favorite artistes is Jack White. He has been in several bands now. I might have mentioned this last time, but now I have the actual quote. So this is a pop culture, a crazy, gritty artiste, but this is what he says. And this is just a point of view. You're going to get a different point of view. He says, “What I've noticed working with women is that a lot of BS goes out the window and the focus is on accomplishing the task and getting down to something. Guys walk in the room with a lot of other agendas, egos, hang-ups, especially 20-something White hipsters. They bring so much BS to the table that you have to sift through it. Then, they turn around and sabotage you a week later because of all those hang-ups. I haven’t really experienced that working with females.”

So again, just fun pop culture reference, but there is a difference when you bring different people, different points of view, different backgrounds to the table. You're going to get a different strategy and different tactics. And for better or for worse even, I'm all for it.

Helee: Yeah. And I think it just goes back to this notion of diverse representation. So you have some of that diversity you’re seeing now more so in the workplace, but it just hasn’t trickled up to the boardroom just yet. I’m confident that it will. And my position, I wouldn’t consider myself to be a feminist. I have some feminist tendencies, but also as a business owner, I feel like I can be objective about certain things. And again, it just comes back you want those faces around the table that are driving the ship to be accurate and representative of the rest of the people. And it’s not that those people in the room can’t be as empathetic. It's not that. It's just that sometimes, you need someone to be the active voice of the others because there are things that they don’t even think of.

And one example: I think of during the pandemic so if I think of just the faces around our boardroom, we had an early meeting, I don’t know, March, April, when we started to talk about what this next year was going to look like. And the focus was around how are we going to get back in the office or what safety measures. How much hand sanitizer do we have to buy? Are we taking temperatures at the door or not? No one, just maybe because of the demographic, had brought up, “What about all the working parents?” If you look at our leadership team, it’s 80% comprised of working parents who now don’t have childcare because schools are closed and that’s going to affect their ability to work.

So you have to have those different perspectives represented. Otherwise, you’re not going to make necessarily decisions that are inclusive of everyone. And inclusivity is part of it as well. So the acronym is not just D&I anymore, it’s D, E, and I. It’s Diversity, Equity and Inclusion. So it’s multifaceted, I guess, if you will. To me, it’s not about jamming someone in a seat and checking a box.

And the other thing I'll say is that bringing different perspectives, one thing I think that we do well at Goby is we do hire people with all kinds of backgrounds. A lot of people that are first generation in the United States or have grown up in other countries and they just bring such an interesting, different, worldly perspective. Not just to business, but to life. I enjoy getting to know people that didn’t grow up here, that aren’t part of the vanilla cookie cutter snapshot box that we were talking about. And they bring unique ideas to the table. So I believe it’s true and I'm a supporter.

Mari: Yeah, I agree. I'll throw in there, just to echo what you just said, Helee, that one of the things that we are pretty well known for I think within our space is our, well perhaps not so much right now that we’re all working from home, but we still have our happy hours and fun times over camera. But our work culture is pretty famous within our space. And I think one of the reasons why that’s the case why we have such good working relationship with each other and we achieve what we can achieve is because of that diversity aspect.

Ryan: Agreed. So again, we agree. It brings value to an organization. So, Mari, we’ve been talking about it a little bit. But now, let’s say you’ve got your written policy, rules, clarity, you’ve got a theory of what we want to do, all those sorts of things, but the success and our fate ultimately depend on, as Helee likes to say, where the rubber hits the road and the tactical execution. So we’re all excited, as you can see, so far about the new administration, but will they GSD? Which means “Get Stuff Done.”

Helee: Not stuff though, not stuff.

Ryan: Oh! Not stuff.

Helee: Clip me the PC podcast...

Ryan: That’s the PC...

Helee: Edited version of...

Ryan: I had to edit Jack White’s words and I edited my own to “Get Stuff Done.” You think they’ll get stuff done? Or is it a first-day announcement, a little bit of hype and then that’s it?

Mari: Well, I certainly hope they do and I want to believe they will. And mostly because it’s not just them. It’s not just a few people that get in that room and decide on whatever it is that the goals are for the next day, week, month, years. It’s because just, I think it was you, Ryan, mentioned earlier, it is a strong take to put out there for the world to see that there is commitment for this. And that will definitely bring about a wave of other people who are not sitting in that room making the decisions, but regardless are being impacted by the decisions. So it’s up to, all the way, up to us. It definitely sends a different kind of message. It definitely raises up the fire on our butts and it will get us all to do more, faster, better so I'm excited for that. Not so much what exactly they’ll be doing in that one room, but everything else that’s going to happen because of that.

Ryan: Well, Mari said “butts” now. So I don’t know if that changes the rating. I said “stuff,” she said “butts” so it’s getting crazy.

Mari: Oh, that’s nothing.

Ryan: Yeah. All right. So I think we kind of had the question, “Is it too late?” sort of thing. I'm hopeful...

Helee: Can we save the polar bears?

Ryan: Yeah. I’m hopeful. I don’t know if I had been hopeful from that far over the line, but I am hopeful. And the other thing about addressing and solving and moving the needle, I think to kind of wrap things up here, I believe in the compassion of humans. A lot of people say well, they’ll only do it if it’s financially driven and I don’t actually believe that to be true. I believe in the compassion of humans. And a lot of leaders that are doing the right thing are committed for other reasons, but also it would be really powerful and nice when ESG is also supported by or driven by capitalism. Then, that will be the guarantee that it’s going to move in the right direction where the capital goes, where the innovation goes, where that sort of stuff goes and there’s no turning that train around.

And there has been a lot of talk about corporations believing that they have a responsibility to all the stakeholders and not just the financial shareholders. And to me, I read Ayn Rand and all that stuff and I get it. And I believe in ego and capitalism to an extent. I don’t even think that holds against that too much. I mean against capitalism, if you will. You need stakeholders to be healthy and well to have a business. And the employees, the community that you’re nearby, the community that you impact throughout your supply chain, all that fits within that. So the fact that businesses recognize that it’s not, and they’ve made formal statements before. There was, I think it was Freeman, whoever, it was like, “A business exists to make money for its shareholders.” And that was the thesis and businesses should live by it. They’re starting to say that differently. No. Businesses exist to improve society or to improve the position of all their stakeholders which is different that their shareholders.

So anyway, we’re excited about the new administration. We believe there’s hope and we believe that that first day announcement or joining the Paris Agreement means that there’s actually legs to this and the rubber will meet the road, as they say. So the future is bright. And that brings us to “Beer or Beans.” The segment that everybody, all of our listeners are dying to hear. I'm switching it up. I'm going to ask Mari today, Helee. I’m sorry, but I’m going to quiz Mari.

Helee: That's good. I’m like one for one so I'm cool.

Ryan: You’re one for one. You got it right.

Helee: Yeah, stick with that.

Ryan: The answer was beer, I believe. Last time, you got it right. So, Mari, all you have to do is say “beer” or “beans” and guess this artisan craft situation I'm about to tell you about or “barley” or “beans.” I’ve got to call it “Barley or Beans.” That’s the clever way I want to do it. Barley is beer. Is this artisan barley or artisan beans? I’m just going to give you the name. It's called Bear Coast.

Mari: Barley? Beer?

Ryan: It is not. You’re wrong. I’m sorry.

Mari: Well, I don’t drink beer. So if you had asked about wine, I would know, but I'll take it.

Ryan: Touché.

Mari: Okay.

Ryan: But the thing is wine starts with a “W.” Beans start with a “B” so you have to do “Barley or Beans.” This is called Bear Coast. They're really proud about their artisan coffee. They have two locations. One of those is in San Clemente, California. Can anyone connect why I chose San Clemente to find this? It is the headquarters of a great new customer of ours called CareTrust REIT. They’re out of San Clemente, California so I chose this. So shoutout to them. They acquire and lease senior housing and healthcare properties across the country so we’re super excited to be working with CareTrust REIT.

Helee: Yes.

Mari: Yes, we are.

Helee: All right, friends. Well, thank you all, our thousands of listeners for tuning in to this episode of The ESG Experience. Spoiler alert for our next show, we will be discussing best practices for creating corporate social responsibility report with Kelly Meissner who is the Director of Sustainability at Ventas. And if you have not seen their sustainability report and you’d like a homework assignment before Episode 3, have a look. It truly is what I would refer to as the palace of CSR reports, very well done. So we appreciate our loyal subscribers for listening, and if you want to continue the ESG conversation between episodes, do follow us on your favorite social media channel at #esgexperience. Thanks, guys. Thanks, Ryan. Thanks, Mari.