The following was first posted by the Travelers Institute and is reposted here with permission.


In this Wednesdays with Woodward program, Travelers Institute president Joan Woodward was joined by former U.S. Securities and Exchange Commission commissioner and Patomak Global Partners CEO Paul Atkins and Travelers’ Chief Sustainability Officer Yafit Cohn.

The speakers discussed why investors, customers, and employees are increasingly focused on Environmental, Social, and Governance actors when evaluating companies, what companies can do to keep up with these trends, as well as the current regulatory environment and anticipated disclosure requirements, and what they could mean for publicly traded companies.

Why All the Buzz About ESG?

The discussion kicked off with Travelers’ Yafit Cohn explaining what ESG means and why it matters to stakeholders.

“A company’s value creation does not depend only on its financial or business strategy,” Cohn told the audience. “The way it handles various environmental, social and governance matters could also impact its value.”

As examples, Cohn cited ethical violations, data breaches and environmental disasters, such as an oil spill, all of which have had significant negative impact on companies’ reputations and value as well as, in some instances, generating costly litigation.

“To remain competitive and to ensure their long-term economic sustainability, companies need to manage their relevant ESG risks,” Cohn said.   

"To remain competitive and to ensure their long-term economic sustainability, companies need to manage their relevant ESG risks." 

Travelers' Yafit Cohn

She went on to say that investors today are interested in ESG information because they recognize that how companies handle relevant ESG risks and opportunities can be important to understanding their long-term value potential.

“ESG matters now factor into many U.S. and global investment analyses,” she said, adding that, in many cases, they are being used as a selling point to potential investors.

Cohn said “companies that don’t give sufficient attention to business-relevant environmental and social matters or don't provide sufficient public disclosure about them put themselves at a disadvantage and run the risk that their investors will make incorrect assumptions about the company.”

Cohn advised that managing these matters well by having and articulating a thoughtful approach to business-relevant environmental and social issues can also create a great opportunity for a company to enhance its brand and engage and recruit employees.

What ESG Is Not

At its core, ESG is about value, not values, Cohn emphasized, and warned that the term is sometimes misused.

“There are countless groups putting significant pressure on companies regarding a broad array of environmental, social and political issues.

"Many of these groups have latched on to the popular term ESG in an effort to influence corporations to achieve their own agendas. The conflation of ESG with agenda-driven priorities divorced from shareholder value blurs the line between value and values.

At its core, ESG is about value, not values, Cohn emphasized, and warned that the term is sometimes misused.

"When corporations are pressured to spend management time and resources on items unrelated to shareholder value, shareholder value and by extension the economy, will suffer over the long term.”

Particularly in light of this politicization, Cohn shared that the company is “laser focused on the fact that we are stewards of shareholder capital.”

She explained, “At Travelers, when considering actions or initiatives that some might label ESG, we carefully assess what is in the best interest of the company and its shareholders over the long term.

"We prioritize the company’s key ESG risks and opportunities and we focus on what we call shared value. Those are efforts that are good for the company and its long-term shareholders and also good for other stakeholders like employees, communities and the environment.”

Former SEC Commissioner Expresses Concerns

Former SEC Commissioner Paul Atkins joined the discussion to talk about today’s regulatory environment and expressed concern that the SEC, which is currently looking into mandating ESG disclosure, may develop onerous new disclosure requirements that will do more harm than good.

“Is the pending avalanche of ESG information truly fulfilling the SEC mission to protect investors from what I am sure will be the ensuing litigation and other controversies?” he asked.

Atkins expressed concern that the SEC may develop onerous new disclosure requirements that will do more harm than good.

“Disclosure isn’t costless. That's why materiality is important.

"The Supreme Court’s materiality test does not ask what an investor wants, but rather what information a reasonable investor needs to buy, sell or hold stock.”

Broad, Mandated Disclosures 'Do More Harm Than Good'

The panel advised against broad, mandated ESG disclosures for public companies.

Atkins opined that a company’s board and management are “the only individuals that possess the complete set of facts and circumstances to make materiality assessments [about a company], and they bear a fiduciary duty to their shareholders to do so.”

Cohn added, “The concept of having a single blueprint to work from can seem enticing but throughout the years it’s also become clear to me that there’s really no one right way to produce sustainability reporting.”

Cohn warned that new, broad SEC-mandated disclosures will result in SEC filings that are “muddied with information that’s not material, and I think public companies will have to spend significant resources collecting and disclosing that information.

Potential new disclosure requirements may affect a company's decision to go public, ultimately impacting investment opportunities for the public.

"Disclosures relating to climate alone take dozens of employees and can cost millions of dollars, so I think, ultimately, we could end up with a situation that’s not good for either investors or public companies and could ultimately harm the competitiveness of the U.S. capital markets over time.”

But Atkins flagged that these broad disclosures concern many of his asset manager clients, as well.

“Meeting the request of all investors would result in information overload," he said. "The volume of facts disclosed [could] prevent an investor from understanding what is and is not important."

Finally, Atkins noted that potential new disclosure requirements may affect a company’s decision to go public, ultimately impacting investment opportunities for the public.

The former SEC commissioner cautioned, “there’s absolutely no question that the costs and liabilities” associated with the potential new disclosure mandates could be holding some companies back from going public.

How Companies Can Navigate the Disclosure Waters

For companies just beginning to manage disclosure of information around ESG issues, Atkins advised that they focus on what investors need to know as they assess the risks the company faces and how those risks are being managed and disclose what is “material” to the value of the business.

“Keep things simple and focus on what you think is important to impart to your investors,” he said.

"Keep things simple and focus on what you think is important to impart to your investors."

Former SEC commissioner Paul Atkins

Cohn added that it is important for business leaders to have a clear view of what ESG means to their company.

She advised the audience that companies looking to identify ESG priorities can look, for example, at which ESG factors have been on their board’s recent agendas or are already part of the company’s business plan, as well as which ESG-related risks are already embedded within the company’s enterprise risk management program.

Travelers’ ESG Reporting Journey

“[Travelers has] been integrating ESG into our business strategy for decades,” says Cohn, but in 2019 the company released its first comprehensive sustainability report.

Travelers’ sustainability report articulates the company’s approach to ESG and its various initiatives so that all the company’s stakeholders could understand “who we are and how we create value in the broadest sense.”

To identify which ESG issues to report on, Cohn spent several months engaging with Travelers investors to understand their views on which ESG factors were most relevant to a property casualty insurance company.

Travelers' annual sustainability report takes about nine months and over 150 subject matter experts to put together.

In addition, the company conducted a formal prioritization exercise that included a series of discussions, each dedicated to a distinct stakeholder group.

Through these efforts, the company identified 16 topics Cohn calls the company’s “drivers of sustained value,” which became the focus of Travelers’ sustainability reporting.

The company’s annual sustainability report, Cohn said, “takes us about nine months of the year and over 150 subject matter experts internally to put together.”


Built to Last: The Connection between ESG Issues and a Company’s Long-Term Success was presented by the Travelers Institute, the Partnership for New York CityCBIA, and the MetroHartford Alliance.

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