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Green-hushing is when a company adopts a ‘radio-silence’ approach to environmental goals. Many companies do it. Some don’t realise they’re doing it. Others do realise but will not openly acknowledge it. Nevertheless, ahead of COP27 in Cairo, the topic has returned to the fore again. Climate scientists are piling criticism on entities they feel are ‘green-hushing’ their way through environmental responsibility. It follows the release of a report this week from Swiss carbon finance consultancy South Pole. From a survey of over 1,200 self-professed “heavy-emitting” companies across 12 countries, 25% of respondents were “keeping quiet” about their science-based climate goals. These companies have, by and large, set themselves net-zero targets; they just aren’t publicising them, nor have they any plans to. What is green-hushing? Green-hushing is when companies take steps to stay quiet about their climate strategies. They do this through avoidance or refusal. If somebody asks about their climate goals, they decline to answer. If nobody asks, they don’t do anything. There are two main reasons for ‘green-hushing’: Companies don’t want to be called out if they fall short of their stated targets. Companies don’t want to be called out for ‘greenwashing’ (persuading stakeholders that they are more environmentally friendly than reality). ‘Green hushing’ was first coined in the late-2000s but has hovered chiefly under the radar when compared to ‘greenwashing’, which enjoys widespread familiarity. How are green-hushing and greenwashing related? It’s complicated. Green-hushing is often used to avoid being called out for greenwashing, and yet at the same time; some critics say green-hushing is an example of greenwashing since companies have no public benchmark despite claiming to be acting in the interests of the environment. The cycle is primarily one based on fear. Companies that green-hush believe there is little value and many risks in being truly open about their climate goals. Even if they have confidence in those goals, they don’t want to brag about them for fear that there is something they may be unknowingly omitting or exaggerating. So, for the time being, their best solution is to avoid the topic entirely, giving them the appearance of trying to hide their climate impacts. Does green-hushing matter now? Yes. It is hitting the news again, and South Pole’s report has suggested that it’s far more common than the corporate world thinks. One in four companies withholding climate strategies is enough for South Pole’s CEO Renat Heuberger to warn that the trend may be catching on. “We see that sustainability-minded businesses are increasingly backing up their targets with science-based emissions reductions milestones, which is absolutely the right approach,” he said in a statement accompanying the report’s release. “But if a quarter today aren’t coming forward with details on what makes their target credible, could corporate green-hushing be spreading?” What’s the risk of green-hushing for boards, and what can they do about it? It’s a simple chain: green-hushing can put companies at odds with their ESG goals; ESG goals are part-motivated by investors and other stakeholders; therefore, green-hushing risks putting companies at odds with their stakeholders. With suggestions that the concept is now more popular, boards should embrace it as a wake-up call. They should know what the concept means and be crystal clear whether their organisation is using the strategy in its reporting. In summary Green-hushing is withholding information on climate strategy for fear that releasing it will bring some form of reputational risk. For some, it’s a way to avoid accusations of green-washing. For others, it’s a sign that an organisation is already greenwashing. Boards should be conscious of the longer-term consequences of such an action, particularly in a corporate world more concerned by climate change than ever. by Dan Byrne on 26 October 2022

The economic shift to overcome global issues has increased the demands from almost all market forces, with part of the accountability falling on the shoulders of those that provide capital. Consequently, asset managers are increasingly integrating environmental, social and governance (ESG) issues into portfolio considerations and to become forceful stewards of their investments. SquareWell Partners’ annual study of 50 of the world’s largest asset managers, aims to bring to light how these asset managers are approaching some of the most prominent issues in today’s global financial market.[1] Below we highlight some of the key findings from the study that is relevant for board members to consider: ESG Becoming Mainstream Global challenges, such as climate change, biodiversity and societal inequalities, have led to a shift in investor behaviour, whereby incorporating ESG factors in portfolio construction has become commonplace. By the end of 2020, assets in ESG funds hit a record of almost $1.7trillion, up 50 per cent over the previous year, according to Morningstar.[2] Over the last year, the Covid-19 pandemic further underscored the necessity of building resilient business models, based on multi-stakeholder considerations. Indeed, Morningstar reported 51 out of 57 of its sustainable indices (89 per cent) outperformed their broad market equivalents in the first quarter of 2020, highlighting the benefit of incorporating ESG factors into investments. The United Nations-supported Principles of Responsible Investment (PRI) has been a driving force behind the growing integration of ESG factors in the investment process. Adherence to the PRI principles, as well as the PRI assessment scores, are now factored into the asset manager selection process of many asset owners. In the study conducted by SquareWell, it was found that all but one of the world’s largest 50 asset managers are a signatory to the PRI. However, it is crucial to look beyond whether an asset manager is a PRI signatory to discern whether investors are in fact taking ESG matters into account in their decision-making processes. Companies can get a clearer picture of an asset manager’s position through their investment and voting policies, public stance on key ESG topics, support for ESG initiatives, etc. Incorporation of E&S topics into voting policies Asset managers predominantly focus on governance issues, such as board composition and executive pay, in their voting policies. But are often encompassing of environmental and social (E&S) issues, too, with climate change and human capital sections becoming increasingly common. The SquareWell study found that 32 of the top 50 asset managers have included distinct E&S guidelines in their voting policy, up from 19 in 2019. Such changes to voting policies can have immediate and tangible impacts on investee companies. For example, in 2017 State Street Global Advisors started pressuring companies to have gender diversity within boards through its Fearless Girl campaign. Three years after introducing the campaign, female board members had been added in 681 companies. The asset manager now votes against all board members on the nominating committee of an investee company in target markets that doesn’t have female members on its board and pressures companies to improve their disclosures on diversity, in all its forms, within their workforce. Public positions on EGS topics Asset managers have also increasingly been offering their perspectives on key ESG topics, such as climate change, biodiversity and human capital, through position papers. These position papers provide further substance on their motivations and/or expectations when compared to voting policies, which companies should be aware of. The study by SquareWell found that, out of the top 50 asset managers, 34 produced position papers on ESG topics, compared to 24 in 2019. For example, nine of the top 50 asset managers published dedicated insights on their increased demand for transparency on portfolio companies’ approach to tax. Guided by the principle that a company’s approach to tax is a board responsibility, investors demand companies publish a tax policy and a country-by-country breakdown of tax payments to ensure that taxes are paid where economic value is generated. ESG reporting standards Over the years, many ESG initiatives have emerged. For the study, SquareWell selected several that have seen increasing levels of support by investors. Despite the prevalence of the Global Reporting Initiative (GRI) for multi-stakeholder ESG reporting, investors have started to show increasing interest in more targeted and material frameworks, such as the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-related Financial Disclosures (TCFD) of which 27 and 43 of the 50 asset managers supported, respectively. The high interest in the TCFD was to be expected, given its strong acceptance by the financial sector due to its association with the Financial Stability Board (FSB). SASB, originated in the US and initiated by investors with an emphasis on financial materiality of ESG topics, is gaining global acceptance as it reduces the need for investors to make sense of large amounts of sustainability information, thus reducing the analytical burden. The upcoming merger of SASB and the International Integrated Reporting Council will alleviate the US-centric limitations of SASB and could potentially lead to another boost in uptake. “COMPANIES AND INVESTOR RELATIONS TEAMS NEED TO DETERMINE WHICH ESG RESEARCH AND RATINGS PROVIDERS THEIR TOP INVESTORS ARE USING AND, WHERE APPLICABLE, WHAT DATA IS USED IN THE INVESTOR’S PROPRIETARY MODELS” The support of passive giants like BlackRock and Vanguard for both SASB and TCFD has resulted in a spike of uptake by other asset managers not wanting to miss out. While large passive managers may have ‘hard’ requests on reporting frameworks, they do not expect full alignment overnight but expect companies to get the process started of disclosing material ESG topics relevant for their sector. Fortunately for companies there is some overlap between existing reporting standards and frameworks, which helps to assuage some of the reporting fatigue. ESG ratings – the new influencer in town ESG research and data providers play a critical role in making sense of the heterogeneous sea of ESG metrics; however, differences in methodologies between ESG ratings providers can result in very different scoring. To overcome these disparities in ratings, investors are taking into consideration multiple perspectives, with 20 of the 50 asset managers consuming information from at least four ESG data and research providers. MSCI is the preferred provider for ESG research and data, unsurprising given its coverage of more than 14,000 companies and its ability to link their ESG ratings to the creation of ESG indices. To this end, SquareWell notes that MSCI is the ESG ratings provider for 28 (out of 40) of the top ESG ETF products globally (those above $1billion in assets under management). To efficiently utilise ESG ratings, investors need to select a provider that best aligns with their own ESG strategies. That said, the extent to which ESG information is diluted and standardised by rating providers may reduce its value towards the abstruse edge needed for outperformance in investments. This has led to an increasing number of asset managers looking to develop proprietary ESG ratings and tools, with 30 of the top 50 asset managers having created their own ESG ratings. For example, under Legal & General Investment Management’s (LGIM) Climate Impact Pledge, LGIM focusses on sectors that are considered key to meeting the world’s net-zero emission challenge and companies are assessed using a proprietary model that is fed by five different ESG research and data providers, including CDP. Companies and investor relations teams need to determine which ESG research and ratings providers their top investors are using and, where applicable, what data is used in the investor’s proprietary models. Companies can then take a top-down approach and map out what ESG factors the market evaluates them on to maximise the alignment of their ESG practices and disclosures. By Estelle Guichard, Partner – Head of Responsible Investment Research at SquareWell Partners Estelle’s areas of expertise include corporate governance, shareholder activism and shareholder engagement. Estelle has been advising listed companies on governance issues in Europe for the past eight years after serving as an investor relations consultant for six years, where she developed an in-depth knowledge of the financial community in Europe. She holds a Master’s from Tours-Poitiers Business & Management School. #ESG #shareholder #reporting #investment #governance #accountability

The role of the chair, to lead the board so it performs successfully, has been changing as societal expectations of effective board leadership evolve from ‘control and command’ through to ‘lead, enable and facilitate’. The challenges of the pandemic have accelerated the pace of change on many boards and increased demands and expectations on the role of the chair. Using emotional intelligence to deliver effective leadership The days of a hierarchical ‘command and control’ style are now history. Effective board leadership demands emotional intelligence, an ability to put ego to one side and become a truly facilitative, emotionally intelligent and enabling leader of the board. In an increasingly challenging and virtual world, there’s a need for adaptable, agile leadership. This requires chairmen to move to a more facilitative leadership style – one that embodies emotional intelligence. Today’s successful chairmen generate trust, build engagement, provide leadership and discipline to their boards, yet embody empathy to create and nurture a board culture of psychological safety. This allows bad news to travel to the board faster than good, empowers directors to have the courage to constructively challenge and creates an environment in which it is fine not to have all the answers, particularly during these difficult times. The foundation of an effective chairman is role clarity Role clarity is the foundation of an effective board and chair. Good chairmen know and respect the boundaries between the board and the CEO, and particularly between the chairman and the CEO, to avoid ambiguity and confusion. The boundaries between the CEO and the chairman should reflect the nature of the company, the strategy being pursued, the performance and impact in these times on the company’s prospects due to Covid-19. Purposeful chairmen are clear about the value they add in leading the board. They have board composition, workplans and calendars which reflect this value delivery, and a culture that regularly assesses board, CEO and individual director performance in stewardship of the agreed value creation. Make the most important relationship in the governance landscape strong and effective The most important relationship in the governance system is between the chairman and the CEO. The quality of this relationship affects the performance of the company, as well as impacting on the rapport between the board and the top team. In our experience, if this relationship is not working, then one or the other will leave the organisation. Success factors include honesty, candour and a relationship where the chairman and CEO are friendly, but never seen as friends. The relationship must be built on trust, respect and absolute role clarity. Future focus The health crisis has highlighted the need for the leader of the board to refocus directors on future strategy. Good chairmen must therefore think several meetings ahead and direct the attention of their board beyond the day-to-day and onto the purpose and future performance of the company and the board. Too much time and energy focused on oversight and past performance is often at the expense of future planning, strategy and better anticipation of risk. Create and maintain a first-rate board For the board to be effective, the chair needs to look at its composition and consider if it is fit for the future. Good, well diversified boards bring a range of perspectives to generate better decisions and outcomes. This requires a board that not only demonstrates the five drivers of diversity – demographics, skills, experience, thinking styles and circles of influence – but a truly inclusive and psychologically safe board culture where every director feels welcome, wanted, respected and valued. It is the job of the chairman to move the board beyond tokenism to true inclusion to deliver the added value the increased diversity of directors brings. “IT’S TIME FOR GOOD CHAIRMEN TO STEP UP AND BECOME GREAT CHAIRMEN. TO DO SO THEY MUST EVOLVE TO ENSURE THEY CONTINUE TO ADD MAXIMUM VALUE IN LEADING AND FACILITATING EFFECTIVE DECISION-MAKING BY THE BOARD THROUGHOUT THESE DIFFICULT TIMES, AND BEYOND.” Effective induction process The chairman must take the lead in making inductions work better. There’s no point dumping a pile of reading material on a new director and expect them to hit the ground running. To ensure the new arrivals add value as early as possible, which is particularly important in these challenging times, they must put an 18–24-month induction and learning journey in place. The chair must also continuously strive to improve this process, based on objective feedback. Leading the review of the CEO, chairman and the board The purpose of an assessment or review is to improve board performance. Chairmen must increasingly take responsibility to ensure that they, the board and CEO are ‘fit for the future’. They always need to be asking, does the board have the composition, leadership, capability, capacity and culture to deliver success for the organisation? To this end, they must take the lead in the areas of reviews, succession planning processes and recruitment to the board. The chairman, board and the CEO derive substantial benefit from a structured and systematic performance review with clear accountability and follow up. The need for this approach is even greater as boards continue to navigate through a Covid world after a tumultuous 2020. The chair needs self-awareness Finally, chairmen need to have self-awareness. This means they should honestly ask themselves if they are the right leader for the board today and in the future. They need to answer key questions, such as, ‘am I leading the board in a way that’s adding value?’ And ‘is my approach enabling or constraining the work of the board?’. It’s good chairmen who will consider if they need additional training, mentoring, experience or development, to ensure what they bring to board leadership remains relevant and truly value-adding. It’s time for good chairmen to step up and become great chairmen. To do so they must evolve to ensure they continue to add maximum value in leading and facilitating effective decision-making by the board throughout these difficult times, and beyond. This requires chairmen to be emotionally intelligent, to establish role clarity on the board, have a strong relationship with the CEO, be future focused, ensure a diverse board, deliver an effective induction process, lead reviews of the board and have self-awareness. By John Harte, Managing Partner at Integrity Governance John leads a global team at Integrity Governance, a company that is focused on making boards more effective. A boardroom expert working with multinationals, SMEs, trade associations and not-for-profits, he provides practical, impartial advice to directors, business owners, executives and CEOs to help improve board performance. John and his team have advised the boards of organisations in the UK and around the world since he founded Integrity Governance more than 16 years ago. #chairperson #leadership #emotionalintelligence

AICD and the Governance Institute explore the impact of the pandemic on board practices and how the lessons learnt throughout the crisis can help boards future-proof their governance practices. Almost every aspect of our lives has been disrupted by COVID-19, and the boardroom has been no exception. Boards have changed the way they operate, their focus, and how they govern. To capture these shifts, the AICD and Governance Institute of Australia have partnered to produce a new report that takes an in-depth look at the impact of the pandemic on board processes and how the learnings from the crisis can help boards improve their governance practices. LESSONS FROM THE PANDEMIC With input from directors and company secretaries across a range of sectors, the Governing Through a Crisis report identifies key learnings and recommendations to help organisations ensure they are better prepared for future crises. The report looks at: The foundations that must be in place for the board and company secretary to add value in a crisis; Effective crisis  and continuity  planning – what it  looks  like  in practice; The impact and future of virtual meetings; and How  the pandemic has changed  the  way  boards  engage  with stakeholders. RECOMMENDATIONS ON THE PATH FORWARD To help organisations develop stronger resilience and navigate their way out of the pandemic, the report also offers: Recommendations that address each of the key learnings; Practical tips to help boards operate and govern in the new environment; Insights from prominent directors; and Case studies exploring the virtual and hybrid AGM experience. HOW TO USE THIS REPORT The intention is for boards, management and other governance and risk professionals from across all sectors to use this report to reflect on the learnings from this devastating situation and ensure their governance practices are fit for the future. #aicd #governanceinstitute #boards #covid #governance

As large companies such as Nasfund, BSP and Lamana implement workplace vaccination programs, questions remain about the grey areas surrounding workplace vaccination policies. "We protect our employees and customers by getting the vaccine" - Steph, Lamana Hotel THE SITUATION IN AUSTRALIA Australian Prime Minister, Scott Morrison, recently said that vaccines should remain "voluntary and free" and that businesses have a legal obligation to keep workplaces safe in order to minimise pandemic risks. In the absence of public health orders, contractual obligations or industrial instruments, employers can only mandate that staff be vaccinated through a lawful and reasonable direction. "Decisions to require COVID-19 vaccinations for employees will be a matter for individual businesses, taking into account their particular circumstances and their obligations under safety, anti-discrimination and privacy laws," Morrison said. THE GREY AREAS "Generally, for any vaccination, whether it's for COVID-19, flu, smallpox or otherwise, you require the person's consent to do it. That's from a medical point of view, as well as in terms of employment contracts. The only way around this is if a vaccination is legislated." - Jamie McPherson, HBA Legal If there is no legislation, employers can be accused of discrimination because employees often resist vaccinations on religious or medical grounds, or if pregnant. However, if an employer gives a reasonable direction to an employee to do something, and the employee fails to do it, that person's employment can be terminated. "In the absence of a clear legislated mandate for employers to implement compulsory vaccination policies, businesses will need to look at their safety obligations and customer demand to justify such a policy. If the risk of infection at the workplace is sufficiently great, for example, hotel quarantine, or the consequences for the business and its customers sufficiently dire, then a mandatory vaccination policy is likely to be justified by work, health and safety legislation." MANDATORY VACCINATIONS Qantas CEO, Alan Joyce, has called for governments to mandate that all airline staff be vaccinated. Given the frequency of flights between P.N.G. and Australia, we expect the same requirements will be implemented here, if not already. While the data shows that the risk of COVID-19 transmission onboard aircrafts remains low, it only takes one case to inadvertently shit down a freight facility or passenger terminal which can have a big impact on the economy. A strict 'No Jab, No Job' policy will never work. Just look at the protesting going on in France after Macron's decision to make vaccinations compulsory. "A mandatory vaccination policy will only be defensible and enforceable if it allows exceptions on valid medical grounds and enables consultation about ways to keep in employment an employee with valid grounds to object to vaccination." #Covid #vaccination

The role of a board is to think strategically about the future of the organisation, to consider the big picture and take a birds-eye view so that the best decisions can be made. This is no easy task and requires an ability to take a step back from the day-to-day operation of the organisation and focus instead on the larger and longer-term picture. QUESTIONS BOARDS CONSIDER What is the future of the organisation? What is the status of the industry? What competition does the organisation face? What are the future challenges to the organisation? What is the financial state and future state of the organisation? What are the legal requirements the organisation must fulfil? While the role of the board is to develop and confirm this strategic thinking, it is then up to the management team to implement it. Therefore, a strong working relationship between the two groups is vital. A WRITTEN PLAN An agreed 3–5 year strategic plan and annual operating plan are critical. Taking time out of the day-to-day business to formulate the strategic plan and commit it to paper allows organisations to focus on what is important in the long-term and what they will need to do to achieve their long-term objectives. It allows the entire organisation to have a clear vision so management can align day-to-day activities to achieve this vision so sharing this plan with the wider organisation is an important part of the planning process. It also allows the board to monitor performance both against the overall strategic plan and the annual operating plan and budget. GETTING THE RIGHT INFORMATION Board papers are the most important source of information for them to understand performance against the strategy. They should link to the strategy and keep the board fully aware of the company’s position and progress. For a complete picture of the state of the company the board will normally need information covering company operating data, financial results and financial position, market and sales data, competitor activity and benchmarking and industry trends. The board will also receive detailed information in relation to capital expenditure proposals to allow it to make wise investment decisions. KEY PERFORMANCE INDICATORS (KPI'S) Most plans include a number of KPIs which allow for measuring and monitoring progress in relation to strategy. They allow boards to assess the health of the organisation and are often used as part of the organisations performance planning process for management to ensure that management are consistently working towards the relevant goals. KPIs: are factors that are critical to the organisation encompass both the organisation’s compliance and performance status are set out in the strategic and annual plans are agreed in advance as part of the planning process. The most common and significant KPIs are set in the annual operating plan and budget and are mainly financial in nature. However, there are other important non-financial KPIs such as customer service and satisfaction, employee satisfaction, quality, efficiency, project milestones and brand recognition. Monitoring of the KPIs including the budget should occur on a regular basis throughout the year to allow for timely intervention and adjustments if required. DIRECTOR AND BOARD EVALUATION The rationale behind evaluating boards is the need to ensure that the board is performing to the best of its capabilities and make changes if it is found that there are areas for improvement. It is gradually becoming acknowledged that, just like in executive and staff management, it is best practice for a board to evaluate their performance on a regular basis. Once it has been decided that an evaluation or appraisal is to take place, the board should determine the issues to consider and the manner in which evaluation should be conducted. It can also decide whether to evaluate the board as a whole, or individual directors, or both. Such evaluations should take place yearly to achieve maximum effect, with year-on-year comparisons being particularly useful to monitor change. IDAPNG's board evaluation service assists organisations in the evaluation and development of directors and the CEO. Questionnaires available are board, chair, director and CEO. It helps boards identify their strengths and weaknesses, assess their performance, and determine opportunities for becoming better at what they do. The resulting reports are comprehensive, easy to follow, and enable real change. It also shows how your board is performing against IDAPNG's Code of Practice. #boardevaluation #codeofpractice #boards #strategy