Readings

Question 1

Readings for Ethics & Corporate Purpose (w1) (Gibson, 2009) (Laine et al.)

Answer 1

(Gibson 2009) Bhopal Disaster:
- Disaster raised questions about distinction between legal vs. moral responsibility, acceptability of risk and compensation and justice

(Laine et al.) Sustainability & Accounting
- Importance of public sector companies implementing policies to promote sustainability.
- Importance of SMEs as drivers of many economies, to adapt innovative sustainable practises despite limited resources

Question 2

Readings for Voluntary ESG disclosures and ratings (w2)
(Berg) and (Christensen)

Answer 2

(Berg) Divergence of ESG ratings
- companies may receive different ratings from different agencies.
- Main factors contributing to divergence are Measurement (56%), Scope (38%) and Weight (6%)

(Christensen) Why is corporate virtue in eye of beholder?
- Greater ESG disclosure actually leads to greater ESG rating disagreement
- Greater ESG disagreement is associated with higher return volatility

Question 3

Readings for Regulation of ESG disclosures (w3) (Unerman) (Busch et al.)

Answer 3

(Unerman) Corporate reporting and accounting for externalities
- discusses complexities of underlying externalities and the difficulties in developing reliable metrics to monetise their financial decisions.
- Accounting practises can be improved to better address externalities through enhanced quantification, integration of externalities data and narrative reporting

(Busch et al.) Corporate Carbon Performance Data
- data on direct emmisions are more consistent than data on indirect emissions
- voluntary and mandatory schemes don’t significantly improve reliability of carbon emissions data

Question 4

Readings for Governance, Diversity and Human Rights (w4) (FRC) (PwC)

Answer 4

(Financial Reporting Council) (FRC)
- to establish strong relationships with stakeholders, an effective board creates dialogue with workforce, engaged with shareholders and is transparent
- to ensure a diverse well-functioning board, companies should have regular succession planning with discussions of tenure at time of appointment

(PwC 2022)
- tax reporting is no longer just about compliance; it’s increasingly seen as a key indicator of a company’s commitment to social and environmental responsibility.

Question 5

Readings on Social Impact Reporting (w5) (Cohen, 2020) (Short, 2019)

Answer 5

(Cohen, 2020) Impact
- Emmanuel Faber, CEO of Danone, emphasised need for the food industry to take responsibility for negative impacts such as diabetes and obesity.
- Faber called for a redefinition of purpose of business, stating ultimate goal of market economy should be social justice.

(Short, 2019) What to include in your social impact report.
- Reports should state the needs/problems they’re trying to solve.
- Good practise to include things that didn’t go well and how they will be improved.

Question 6

Readings on Measurement Difficulties (w7) (Financial Times) (Aswani et al.)

Answer 6

(FT) Big 4 rush to join ESG bandwagon:
- PwC announced $12 billion investment plan focused on ESG advice. A quarter of which is going to investing into emerging markets in Asia.
- Increased emphasis on non-financial measures

(Aswani et al.) Are Carbon emissions associated with stock returns?
- Key factors driving link between emissions and returns:
-> Investor tastes: some investors may choose to avoid companies in ‘brown’ industries. This reduces investor pool and leads to more volatile returns (sin-stock premium)
- risk perception, more demands made for climate action, the risker brown stocks be

Question 7

Readings for ESG and capital markets (w9) (Baker et al.)

Answer 7

(Baker at al.)
Investors are willing to pay on average, 20 basis points more per annum for an investment in a fund with an ESG mandate compared to a fund without an ESG mandate.