4 ESG-Friendly Findings about Borrowing Rates

In my last blog, I outlined three concerns that lending institutions have about companies with poor environmental, social, and governance (ESG) track records. First, environmental practices may expose borrowers to expensive legal, reputational, and regulatory risks that could jeopardize their solvency. Second, lenders want to ensure they are not stuck with the borrower’s current and past environmental liabilities if the borrower defaults on the loan. Third, lenders are wary of risks to their own reputations if the public perceives they are abetting the borrower’s irresponsible corporate behavior. For these three reasons, laggard companies with poor ESG track records may find they pay a higher rate for their borrowed capital. The Social Investment Forum’s 2010 Moskowitz Prize for scholarly research on socially responsible investing was awarded to Rob Bauer and Daniel Hann for their paper, “Corporate Environmental Management and Credit Risk.” In it, they analyzed 1996 to 2006 data on the environmental profiles of 582 U.S. public companies and their associated cost of debt. They found: Read More

3 Reasons Banks Fear ESG Laggards

How lenders respond to a company’s request for financial assistance is somewhat driven by the applicant’s environmental, social, and governance (ESG) track record. Borrowers require financial capital in order to purchase equipment or new premises in which to produce its goods or services. Some of these capital improvements may be for pollution prevention equipment to comply with tougher environmental regulations, with energy-saving retrofits, for water conservation and treatment, or for new green production lines. Some of the loans may have nothing to do with green projects. Regardless, one cold reality applies to any loan request: Your ESG track record can be a stumbling block. Read More

Aligning ESG Benefits with the Income Statement

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We need to make it easy for CEOs, CFOs, and others in the C-suite to see how embedding sustainability strategies into the company’s strategies and operations will contribute to the firm’s success. That is, we need to connect the dots between typical financial statements and the benefits that can be realized from smart environmental, social, and governance (ESG) approaches and programs. Aligning ESG benefits with income statement elements helps executives see the relevance of sustainability initiatives to their current financial priorities. Read More

A Better Business Model: B Corporations

Our current economic and financial systems sanction obscene excesses at the expense of society. It’s easy and therapeutic to rant. It’s more helpful, but more challenging, to propose viable alternatives. In my last three blogs, I reviewed Hazel Henderson’s, Michael Moore’s, and David Korten’s thoughtful proposals on how to repair our economic and financial systems. We also need more responsible business models, like Benefit Corporations (B Corps).B Corps are a new kind of company which uses the power of business to solve social and environmental problems. In a little over 3 years, there are already over 370 Certified B Corporations from over 54 industries, representing $1.8 billion in collective revenues. Read More

David Korten’s 10-Point Recovery Plan

We are encouraged to spend our way out of the economic recession—to consume our way back to normal. This recovery recipe has been used for decades. During the recession in the 1950’s, a reporter asked President Eisenhower, “What should citizens do to help the recession recede?” The President replied, “Buy.” The reporter asked, “Buy what?” Eisenhower replied, “Buy anything.” Read More

Michael Moore’s 10-Point Recovery Plan

I recently saw the new movie, “Inside Job.”  It is a shocking documentary about the $20 trillion global financial meltdown in 2008. As movie reviewers Mary and Richard Corliss said in TIME magazine, “If you are not outraged by the end of this movie, you weren’t paying attention.” I was. It was not an accident that millions of people lost jobs and their life savings. It was a premeditated plan by financial system insiders to defraud trusting outsiders. Read More