How an honest ESG assessment changes behaviour
We like to think we have ESG at the core of Amberside Capital’s business, we target clients who are looking to raise money or invest in sectors that have a strong sustainability focus.
To be confident we are practicing what we preach, we undertake an annual review of our ESG. The purpose of this blog is to share the thinking behind the decisions we made in this review and subsequent policy revision.
Of course, there are also commercial reasons to publish an ESG review, the world is moving towards more comprehensive ESG reporting, and whilst widespread reporting of scope three emissions is a way off, we want to meet industry expectations for a green supply chain. One thing we are acutely aware of is that the ethical and commercial rationale for ESG policies and behaviours are not always aligned.
There’s no one size fits all method for environmental assessment. All firms should assess greenhouse gas emissions, but some may have to consider other forms of pollution, use of natural resources, or impact on biodiversity, amongst others.
Our assessment focused on scope one and two emissions, i.e. those we emit directly and those arising from our use of energy.
Our scope one emissions come largely from travel (in our case public transport or EV) where there is publicly available data on average emissions per mile of various forms of transport.
It’s important to include embedded emissions in vehicles, those arising from the manufacturing process, which analysis from the International Council on Clean Transportation shows makes up roughly half of the climate impact of an EV. This may take a bit of digging, but most brands do publish this information.
This assessment highlighted that our emissions are lower than many of our peers on a per-employee basis, but certainly not immaterial. In order to mitigate our climate impact we decided to invest in a carbon offset scheme to achieve net zero.
Carbon offsetting is a complex space with plenty of potential pitfalls, we will address our approach to scheme selection in a separate piece in the coming weeks.
It is very tempting to stop at Environment (and many do) as the social and governance elements of the assessment are harder to quantify, disappointing for those of us whose weapon of choice is a spreadsheet. Resist this urge though, as social impact in particular is an area where many SMEs such as ourselves can do more, and may boost staff satisfaction in the process.
There are many frameworks available to assess social impact. These set out broad goals and sub-targets so companies can identify quantitative metrics to measure social impact.
In this annual review our social assessment was qualitative – we will seek to improve this in future. Our assessment was broken into two: internal, impact on our staff, and external, impact on our communities and society as a whole.
As a firm who moved to remote working over the pandemic, much of our focus has been on employee wellbeing after this transition. We prioritise regular face-to-face meetings and arrange periodic away-days. Our assessment of performance in this area is based on staff feedback, which has led us to offer co-working space subscriptions to those who want to work outside of the home.
Our external impact comes from helping small companies to grow and generate new employment opportunities. However in terms of direct action we found ourselves underperforming, so we have given ourselves a “must try harder” mark.
To improve our direct action we are implementing a policy of taking a day each year for the team to spend working on a socially beneficial project, and providing an additional “volunteering” day to each member of staff to use for a purpose of their choice.
When deciding how best to use the team activity we found that there is a trade-off between maximising social impact and doing an activity that participants will enjoy and want to repeat. The most impactful use of our time and expertise would likely be to provide pro-bono advice or training to a small company that would generate employment opportunities. However, we felt that doing something so similar to our usual work missed out on morale boosting and team building opportunities. For our business we believe that our approach meets the right balance, but this is certainly open to debate and we will re-assess next year.
The “G” in ESG is easily overlooked and covers distribution of rights and responsibilities among different participants in corporations, including the board of directors, employees, shareholders and other stakeholders.
As all FCA authorised firms must, we already perform an audit on our systems and controls annually and have a pretty comprehensive set of policies and procures. One of our most valued governance tools is our set of readily assessable registers which are regularly reviewed. These cover gifts and hospitality, formal complaints (fortunately a rarity), grumbles, breaches, and conflicts of interest.
As a small team, a weakness is providing staff formal, independent whistleblowing channels. Here we have to rely on hotlines with the FCA and CIMA.
Writing this up into a succinct summary that is more than lip service is challenging. Our view is that the ESG report should touch on the company’s governance processes and highlight any changes arising from the assessment, rather than giving chapter and verse on the process of the analysis itself.
What did we learn?
By performing an ESG assessment we have found that despite strong environmental policies our greenhouse gas emissions are not negligible. This led us to start investing in a carbon offset scheme to fully reach net zero. We certainly can do more to directly contribute to social good in our community.
For companies of any scale, we believe undertaking a robust ESG assessment, no matter how sophisticated, will provide information and insights that can lead to changes with real-world impact and is vital to meet the expectations of staff, customers, stakeholders, and society as a whole.
Our 2022 ESG Report can be found here