Corporate Sustainability Is Corporate Excellence11 March, 2015 / Articles
Erika Karp, CEO of Cornerstone Capital, uses ‘corporate sustainability’ and ‘corporate excellence’ interchangeably.
She is not alone, as her view that sustainability “should be core to the business and not in a corner” continues to gain credence among investors and in corporate boardrooms.
In Rome this week she has been working in consultation with BCG and the UN Global Compact on workshop sessions for boards and CEOs on accelerating and implementing corporate sustainability. A former UBS banker – she was head of global sector research there and is a founding board member of the Sustainability Accounting Standards Board (SASB) – Ms Karp founded the predominantly female-owned Cornerstone last year on a mission “to finance global prosperity.”
Now SEC-registered, Cornerstone aims to help to move capital towards sustainable businesses. It is using what Ms Karp calls a “very broad definition of capital introductions” – the service investment banks provide their clients – in connecting investors with asset managers.
“We came to a consensus that among ESG – environmental. social and governance factors – governance comes first in terms of starting at board level and down through the work of the executives. If you look at governance first it gives a great framework for managing the rest and being infused into operational excellence throughout the corporation” she says.
John Wilson, Cornerstone Capital’s head of corporate governance, engagement and research, moved from TIAA-CREF, the largest private pension system in the US with direct responsibility for engagement with over 8,000 portfolio companies. His approach is well summed up by his penning of Five Governance Questions Shareholders Should Have Asked General Motors.
It is not surprising that Ms Karp is also passionate about the trend towards integrated reporting. “We must have transparency to restore trust” she says. She is an Ambassador for the International Integrated Reporting Council (IIRC).
‘Bringing sustainability to Wall Street is as difficult as, well, bringing any sort of change to Wall Street” wrote Eric Roston in a report on Cornerstone Capital on Bloomberg last year. True. But when it starts to become global, there is hope. Values-based investment for the longer term is catching on.
Talking about the importance of ESG factors in discharging fiduciary obligations, Chris Davis, director of investor programmes at Ceres was quoted by Simon Hoyle in Top 1000funds.com recently as saying: “ESG issues such as climate change and other environmental and social variables….have traditionally been considered extra-financial risks. That kind of implies they don’t matter financially, that they’re social issues or somehow extra-curricular to the serious business of investing.”
“But I think this is no longer true. The world is changing and economies are changing and things are becoming more complicated and life is becoming more risky. ESG failures and incidences can destroy value.”
Tradition can be a misleading thing….traditionally, global elites have reinforced inequality. But there are signs that there is a new global elite emerging with new ideas. Amazingly, they say ‘investment’ and ‘ESG’ in the same breath, without pausing.