Description
Assignment
The objective of this assignment is to design a comprehensive governance structure for the chosen company-BlackRock based on defined parameters. The governance structure should address the organization’s leadership, decision-making processes, roles and responsibilities, and accountability mechanisms, etc.
Part 1.Describe the Management Leadership and Board of Directors acceptance of ESG
Part 2.Define ESG leadership roles and responsibilities: ESG cross-business/cross-functional working groups/committees, ESG Management committee(s) and Board sub-committee(s)
Part 3.Describe how to integrate social and environmental issues into business operations with positive impact on society, brand reputation, customers, employees, and investors
ONLY Part 3 NEEDED!!!
Chosen company: Black rock
Unformatted Attachment Preview
ESG and ERM
Session 6
Agenda
Assignment #2
Corporate Governance Factor
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ESG Governance
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Board of Directors’ Role
•
Board of Directors Considerations
•
Executive Management’s Role
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Corporate Social Responsibility
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Exercise – Assignment #3
2
Assignment #2
Each group presents Assignment #2 results.
Group 1: BP
Group 2: BlackRock
Group 3: Boeing
Group 4: Hilton
Group 5: Unilever
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ESG Governance
A proper ESG Governance structure is required for an effective ESG program.
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Regulators have issued guidance on ESG governance
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FDIC Principles for Climate-Related Financial Risk Management: “The expectations is for
Boards of Directors and senior management of financial institutions to develop and implement
sound governance frameworks that appropriately incorporate the assessment and
management of climate related financial risks”
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The Principles are intended for the largest financial institutions, those with over $100 billion
in total consolidated assets.
4
ESG Governance
•
Weaknesses in how financial institutions identify, measure, monitor, and control the financial risks
associated with a changing climate could adversely affect a financial institution’s safety and
soundness, as well as the overall financial system.
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The principles would provide a high-level framework for the safe and sound management of
exposures to climate-related financial risks, consistent with the existing risk management
framework described in existing FDIC rules and guidance.
•
The principles will help financial institution management make progress toward addressing key
questions as they consider incorporating climate-related financial risks into their institutions’
risk management frameworks.
•
The FDIC encourages financial institutions to consider climate-related financial risks in a manner that
allows them to prudently meet the financial services needs of their communities.
5
ESG Governance Framework
A successful ESG Governance framework includes the following key components:
•
Management leadership and Board of Directors acceptance of ESG issues
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Defined ESG leadership roles and responsibilities
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Established ESG cross-business / cross-functional working groups / committees
•
Defined ESG Management committee(s) and Board sub-committee(s)
6
ESG Governance Structure
•
ESG Governance includes Board of Directors and Executive Management.
− Board of Directors
➢ Strategy
➢ Decision Making
➢ Oversight
− Executive Management
➢ Implementation
➢ Monitoring
➢ Escalation
➢ Reporting
•
ESG Governance includes Corporate Social Responsibility
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Long-term stakeholder interests
− Accountability
− Transparency
7
Board of Directors’ Role (1 of 2)
The Board of Directors should consider:
•
Triple Bottom Line (Profit, People, Planet)
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Sustainability: operating a business in a way that meets the economic, social and
environmental needs of the present without compromising the ability of future
generations to meet their own needs
•
Corporate Social Responsibility (CSR): corporate engagement, lowering carbon
footprint, charities
•
Social License to Operate (SLO): perception by stakeholders that a business or
industry is acting in a way that is fair, appropriate, and deserving of trust
8
Board of Directors’ Role (2 of 2)
The Board’s key responsibilities / areas to be aware of include:
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Define ESG goals that align with business strategy
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Incorporate ESG into the overall Board agenda
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Provide oversight for ESG program
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Communicate with stakeholders on ESG priorities
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Monitor compliance with regulatory requirements
•
Assess ESG program maturity
9
Board of Directors Considerations (1 of 4)
In order to effectively manage the ESG program expectations, the Board of Directors
should consider the following:
•
•
Define ESG Governance structure
−
Board responsibilities
−
Committee responsibilities
−
Reporting process
Establish ESG Management structure
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Leadership role / responsibilities
−
Management committee responsibilities
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Reporting process
10
Board of Directors Considerations (2 of 4)
In order to effectively manage the ESG program expectations, the Board of Directors
should consider the following:
•
Integrate ESG into business strategy
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ESG Strategy (examples include reducing greenhouse gas emissions, creating more
responsible and sustainable supply chains, implementing climate adaptation measures and
adopting a circular economy model)
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Company culture (environment a company creates for its employees through programs,
behaviors and hiring processes guiding principles for business decisions, actions and company
behaviors)
•
−
Company values (guiding principles for business decisions, actions and company behaviors
−
Employee communications
Incorporate ESG risk into ERM
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Board risk infrastructure
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ESG risks
11
Board of Directors Considerations (3 of 4)
In order to effectively manage the ESG program expectations, the Board of Directors
should consider the following:
•
•
Assess ESG program
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ESG Strategy
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ESG goals
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ESG reporting / disclosures
Monitor compliance with ESG standards
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International Sustainability Standards Board (ISSB)
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Climate Disclosure Standards Board (CDSB)
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Task Force on Climate related Financial Disclosures (TCFD)
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Sustainability Accounting Standards Board (SASB)
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Greenhouse Gas Protocol (GHG)
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Global Reporting Initiative (GRI)
12
Board of Directors Considerations (4 of 4)
In order to effectively manage the ESG program expectations, the Board of Directors
should consider the following:
•
Define and monitor ESG disclosure
−
ESG disclosure strategy (what? how? and why)
−
ESG program assurance (service that qualified and independent professionals provide to
assess the quality of the ESG information reported; limited vs reasonable assurance)
−
ESG reporting and disclosures
➢ ESG processes and controls (who oversees the reporting process?)
➢ ESG risks / Corruption risks
➢ Cybersecurity
➢ Corporate ethics (principles that guide decision-making)
➢ Corporate culture
➢ Environmental matters
13
Executive Management’s Role
Executive Management plays a key role in executing the ESG program.
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Implement the ESG program
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Provide ESG training and awareness
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Hire ESG professionals
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Implement DEIA initiatives
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Focus on innovation
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Monitor and report on ESG program implementation plan, status, risks and issues
•
Embed ESG related risks into the enterprise ERM framework and risk assessment
process and controls
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Establish Chief Sustainability Officer role (if needed)
14
Corporate Social Responsibility (CSR)
Integration of social and environmental issues into business operations with
positive impact on society.
•
Brand reputation / Customers
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Employees
•
Investors
15
Exercise – Assignment #3
Design governance structure for case study company.
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Homework
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Readings
–
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Environmental social governance – Chapters 2,3, pp.15-50 (35 pages)
Case Study
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Each group to submit Assignment #3 in Canvas: One Day Prior to Session 7
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Thank you
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