Public demand to combat the effects of climate change, social injustice, and unethical corporate leadership is transforming the entire business landscape. But these pressures aren’t driven by altruistic motives or moral outrage alone: More efficient standards for energy use, deeper stakeholder relationships, accounting transparency, and many other factors have been shown to improve company performance while simultaneously benefiting society at large.
A growing number of institutional and individual investors are carefully considering how organizations approach ESG—environmental, social, and governance principles—and companies are paying closer attention to the framework they employ to hold themselves accountable for these crucial non-financial factors that shape their stability and long-term success.
To examine initiatives, impacts, and career opportunities with an intentional focus on the environmental aspects of ESG, the McIntire School hosted the inaugural Blue Ridge ESG Seminar on Oct. 14, 2022. Held in partnership with UVA’s Office for Sustainability, McIntire welcomed keynote speaker Kurt Harrison (A&S ’87), Founder and Co-Head of Russell Reynolds Associates’ Global Sustainability Practice, along with other industry leaders for panel discussions and networking opportunities for interested student participants from across Grounds.
Setting the Stage
Before the seminar began, longtime sustainability advocate and educator Commerce Professor Mark White taught a pre-event workshop on life cycle analysis. The session introduced students to the structured methodology for using the sustainable business decision-making tool that measures the flow of materials, energy, and waste associated with a firm’s products or services.
The workshop was followed by a networking lunch for students and speakers for the day’s events, which kicked off with main seminar organizer Commerce Professor Kerrie Carfagno welcoming everyone in attendance and introducing McIntire Dean Nicole Thorne Jenkins. Jenkins recognized Carfagno for having the inspiration and dedicated effort to create and organize the event, as well as the commitments of McIntire staff members and student volunteers led by Katelyn Moulton (A&S ’23) and Maria Emilia Gandarela Lamas (UVA ’25), who contributed to the seminar’s success.
Jenkins discussed the timeliness and importance of the subject at hand, explaining that good ESG translates to good business. Citing 2021 research from the Center for Climate Finance & Investment at Imperial College Business School and the IES, she noted that, over the course of a decade, renewable energy investments provided more than seven times the return of fossil fuel energy generation in developed countries. She discussed the intertwined nature of the three aspects to ESG; the social connections to environmental issues, such as the detrimental health effects on low-income families and communities of color due to fossil fuel-related activities; as well as the links between governance and fighting climate change, as evidenced by outdoor clothing brand Patagonia’s ownership transfer to the Holdfast Collective nonprofit.
In referencing the potential for SEC changes in disclosure rules, Jenkins posited that these concerns will shape how companies conduct businesses—organizations that many McIntire students will likely be working for in the coming years. She briefly detailed how ESG was integral to the University’s Great and Good initiatives and to the values directing the future of McIntire and those who learn at the Commerce School.
“We know students are demanding ESG content because they are engaged citizens of the world. They care, and they know the changes coming will define their careers, regardless of their career path, and that this is a growing field with significant career opportunities for our graduates. It is also an evolving field, which is why events like this are so important,” Jenkins says.
She then introduced Harrison, an active UVA presence who serves on the Board of Governors of the Alumni Association and as a member of the Board of Governors of The Colonnade Club. Jenkins explained that his unique perspective comes from not only being in close contact with key companies and learning what they want from sustainability leadership, but also from being a pioneer in the field.
“Kurt realized—ahead of the pack—where ESG was going. He knew that executives working in the sustainability area needed to be experts in business and in their industry, and understand the challenges and opportunities of sustainability,” Jenkins says.
Harrison’s engaging discussion, “ESG 2.0: The Next Generation of Leadership,” began by outlining the dynamics surrounding ESG and how, by its very nature, it often represents very different meanings to different people.
“It depends on who you are, where you live, what you do, and what your views are. Demystifying ESG is the most important thing we can do to get past the noise of what we hear out there on both sides,” he says.
He delved into the main distinction between ESG and sustainability, clarifying that while they’re both concerned with the “triple bottom line: people, planet, and profit,” ESG tends to maintain an outward focus that communicates to the world outside of organizations about the non-financial metrics that investors, regulators, customers, and clients are interested in knowing. “Sustainability is more internally oriented. It’s more operational in focus,” he says, listing the type of topics that promote improved efficiency, such as net zero commitments, energy efficiency, water usage, LEED building certification, recycling, supply chain, circular economy and more.
Harrison predicted that, as the environmental, social, and governance areas of ESG are responsible for such varied sectors and issues, they will at some point be decoupled to be better implemented.
“As a Partner with the executive search firm Russel Reynolds, I have spent the last four years recruiting global and regional heads of ESG for some of our biggest clients around the world. And I have yet to meet a person who is a world-class leader and executive around each dimension of the E, the S, and the G. That person, in my mind, doesn’t exist.”
As such, he notes that all of his clients are far and away most concerned about environmental factors, specifically, climate and decarbonization.
Good for Business
Noting that even though, as of yet, there’s no pressing legal reason that many companies need to provide ESG data, Harrison says that the overwhelming majority of businesses are publishing their findings in order to satisfy their investors.
He says that attention to ESG impacts a firm’s brand equity, which will appeal to or alienate not only consumers, but also the people who choose to work for them.
“Companies are bending over backwards in the war for talent, the next generation of leaders. People are going to be fighting over you—and they know they won’t be able to attract you, no matter how much money they throw at you, if you feel like you’re not working for a mission-driven organization. This is a demographic change. Companies that are not good at being sustainable will not be able to hire or retain next-generation talent,” Harrison says.
Beyond personnel, ESG is impacting risk management and stock price—truly stressing ESG’s increasing importance.
“ESG is a business decision, and ESG leaders are business value creation people. They are driving business value creation at the organizations where they work. This is new,” he says. “Five years ago, your head of ESG was a mid-level VP—usually a repurposed legal, compliance, or marketing person who had zero ESG domain expertise. What happened was that CEOs got tired of answering questions about ESG from their investors that they couldn’t answer. They appointed somebody internally to build a basic framework, attempt to make the companies credible, and answer investor questions. That worked for a couple of years. But in 2020, that didn’t work anymore. Today and going forward, your head of ESG has to have actual ESG domain expertise.”
As Harrison believes that many of the negative ESG headlines are the result of bluster from hardliners whose claims are either unfounded or misdirected, he referenced a recently released PwC white paper that surveyed 250 institutional investors and 250 asset managers—500 entities managing more than $67 trillion worth of assets, almost half of the world’s assets. Perhaps unsurprisingly, 75% voiced their opinion that ESG is part of their fiduciary duty.
The fact is that ESG AUM (assets under management) in the U.S. are slated to double in the next four years to $10 trillion. Harrison urged everyone to “follow the money.”
“Despite all of the noise out there, this is half of the world’s assets, and they are all in on investing in ESG,” he says, because they are still attempting to generate returns for their clients.
Breakout sessions followed Harrison’s question-and-answer session with attendees. Students sat in with PwC’s Amanda Kish, Partner, and Zarin Mitchell, Director of ESG & Sustainability, who discussed ESG consulting, expanding on topics from earlier in the afternoon, including the increasing importance of ESG with stakeholders and the need for data transparency. Others attended a session with Aaron McCrady (A&S ’10, M.S. in Commerce ’11), Senior Director of Investments with Hannon Armstrong, the first American public company with $9 billion in managed assets, as he explored how they go about seeking climate solutions with superior risk-adjusted returns.
Later sessions featured SVP, Chief Sustainability Officer, and Director of ESG for Brown-Forman, Alex Alvarez, who talked about long-term success and the U.S. spirits and wine producer’s dependence on ESG. Recent Commerce School grad George Moss (McIntire ’20) detailed his experience in the ESG space as a Business Transformation Consultant with EY. Sandy Reisky (McIntire ’88), Founder and Board Member of Apex Clean Energy and current leader of Carbon Drawdown Collective, recounted how he seeks out early-stage investments for climate solutions.
The afternoon’s guest speaker schedule wrapped up with Lindsey Hall (A&S ’06), Head of Thought Leadership at S&P Global Sustainable1, reflecting on Climate Week in New York, where business, government, and environmental leaders tackled the many current and future challenges to sustainability.
While there are many such challenges, the upside is a proliferation of opportunities for the next generation of professionals.
Harrison says that, as a UVA alum, it is important to him to help UVA students achieve their professional goals, and he insists that ESG can help students to achieve them. “Honestly, I believe that ESG is one of the best career paths you can embark upon—I have told my own kids that they should go into ESG!” he says, noting the undeniable opportunity for growth in the field.
“People ask me all the time when ESG is going away. And I always say, ‘ESG is definitely going away. It’s going away as soon as we solve climate change, as soon as there are no social issues anywhere in the world, and as soon as good governance is no longer important. When all of those things happen, ESG is definitely going away. But today is not that day.’”