Sustainability Concepts

Identification

• Socially Bearable: Society's capacity to accept
• Economically Viable: Something feasible, workable, applicable, usable, and practical for the economy
• Environmentally Bearable: Something that can be accepted by the environment
• Socially Sustainable: The society's ability to maintain and support
• Environmentally Viable: Something feasible, workable, applicable, usable, and practical for the environment
• Environmentally Sustainable: Something society can maintain and support
• Socially Equitable: A society that is fair and impartial
• Economically Equitable: Something fair and impartial to the economy
• Economically Sustainable: Something that can maintain and support the economy

Matching Type (10 Criteria)

• Climate Change: Research on global climate trends has led investors to screen investments based on their impact
• Sustainability: The potential obsolescence of a company's product or service is key to its value due to resource depletion
• Diversity: Diversity and inclusion in recruitment and management is a key concern for investors, broader talent pools increase the chance of finding the best employees
• Human Rights: A 2006 US court case brought company social responsibilities into the financial arena, widening concerns to include community impact, employee health, and supply chains
• Consumer Protection: The shift from caveat emptor ("buyer beware") has increased consumer rights and litigation, making consumer protection vital
• Animal Welfare: Concerns about animal welfare are important for investors analyzing companies, from product testing to animal breeding
• Management Structure: A company's internal procedures and controls are important in valuing its worth
• Employee Relations: Improving employee relations is central to assessing a company's value, from diversity to corporate values.
• Executive Compensation: Companies are now required to disclose bonus payments and executive remuneration, facing scrutiny from stockholders and equity investors
• Employee Compensation: Equitable pay for all employees is a governance consideration, in addition to executive compensation

Scenario-Based (Six Investment Strategies)

• Positive Selection: Investors actively choose companies based on ESG criteria or select high-performing ESG companies for their investment portfolio
• Activism: Shareholders strategically vote to support issues or drive governance changes
• Engagement: Investment funds monitor ESG performance and engage in dialogues with portfolio companies to ensure progress
• Consulting Role: Large institutional investors use "quiet diplomacy" with management to exchange info and provide early warnings on risks and governance
• Exclusion: Removing certain sectors or companies from investment consideration based on ESG-specific criteria

Integration

• ESG risks and opportunities are included in traditional financial analysis of equity value

True or False

• Transparency: An organization's transparency is defined by how aware they are of how their decisions affect stakeholders
• Accountability: An organization's accountability is its capacity to be responsible and liable
• Responsibility: An organization's responsibility is its ability to control, manage, and take ownership of its actions
• Fairness: An organization's fairness is its ability to make impartial decisions, avoiding favoritism and discrimination

Internal Environment

• Refers to element within the organization

Process

• Refers to the organizations standard protocols that should consider in making decision

External Environment

• Refers to elements outside the organization's control

Government

• Refers to government mandated law that should consider in making decision

Society

• Refers to considering the beliefs, social norms, culture in making decisions

Economy

• Refers to considering the effects of decisions on country progress

Enumeration (13 Elements of Corporate Governance)

• Dispersed ownership
• Transparent Ownership
• One share/one vote
• Anti-takeover defenses
• Meeting notification
• Board size
• Outside directors
• Independent directors
• Written board guidelines
• Board committees
• Disclosure
• Accounting standards
• Independent audit

Multiple Choice (Four Guiding Principles of Good Governance)

• Leaders should be honest, capable, morally courageous and do what is right, regardless of popularity
• Decisions must anticipate future challenges
• Rewards should be based on merit, abilities, and hard work, regardless of background
• Stakeholders should have a say in decision-making, fostering belonging through dialogue and action

Fill in the Blanks (The Character Equation of Good Governance)

• Integrity + Honesty + Accountability + Ethics + Credibility = Honorability
• Integrity is telling myself the truth

Definitions

• Honesty: Telling the truth to other people
• Accountability: Being accountable and liable for decisions
• Etiquette: Ethical decisions put into action
• Credibility: Being trustworthy and believable
• Honorability: Inspiring others, enriching the world with decency