One of the trickiest challenges for companies looking to improve their ESG performance is dealing with the constantly-shifting landscape of ratings agencies and reporting best practices. Fortunately, Newmont’s Carrie Christopher has years of experience, both in-house, and as a consultant in the sustainability space and, now, as Director, Sustainability Reporting for the world’s largest gold producer. Ethisphere’s Emily Rickaby gets Carrie’s thoughts on how she and Newmont navigate this forest of agencies, requirements, standards, and practices.
Carrie Christopher, Director, Sustainability Reporting, Newmont. Carrie is a member of the BELA Working Group on ESG strategy.
Emily Rickaby: Hi Carrie, thank you speaking with us. Can we start by hearing about Newmont and your role there?
Carrie Christopher: Newmont is the leading gold company globally and a producer of copper, silver, zinc and lead. We are headquartered in Colorado and operate 12 mines in several favorable mining jurisdictions, including the Americas, Australia and Africa. We’re heading into our 100th year of operations and remain the gold producer listed in the S&P 500 Index.
I’ve been with Newmont for three years. As Director of Sustainability Reporting, my role is to oversee the company’s sustainability reporting strategy. I make sure we deliver a world class annual sustainability report, and that our non-financial reporting suite is a one-stop shop for all of the information that our stakeholders are interested in—investor ratings and rankings responses, Dow Jones Sustainability Index (DJSI), Carbon Disclosure Project (CDP), MSCI, Sustainalytics, Bloomberg, ISS, all of those. We are led by Stephen Gottesfeld, our EVP and Chief Sustainability Officer, reporting directly to the CEO and up to the board’s Safety & Sustainability board committee.
I’m also a core member of our internal cross-functional ESG strategy working group, formed in 2017. That group is co-championed by our Chief Financial Officer and our CSOs. I also represent Newmont on several external global working groups around standardization and harmonization for sustainability reporting, the Sustainability Accounting Standards Board (SASB) being one. I’m deeply engaged with Global Reporting Initiative (GRI) and stay abreast of others such as the Task Force for Climate-related Financial Disclosures (TCFD) and International Integrated Reporting Council (IIRC) and what’s going on in European non-financial reporting.
ER: And what should we know about the history of Newmont’s sustainability reporting?
CC: Newmont’s first sustainability report was in 2003, and it was called “Now and Beyond.” It contained basic key performance indicators, with mostly an environmental focus along with some social areas. And then in about 2007, Newmont started doing the DJSI assessments and added others such as CDP Climate and Water through the years.
It has been really nice to step into an organization where you don’t have to make the business case for why both sustainability and reporting are important. Newmont is a very mature organization in this space, because working in the extractives sector, our mining operations have an incredible impact. There are safety issues, tailings, emissions, water, social acceptance, value sharing, tax transparency, and so on. The business has so many touch points with communities, with investors, and with the environment.
It’s an overused phrase, but the social license to operate is very real for a gold mining company the size and scale of Newmont. If you don’t manage your social response and your social relationships on the ground in a transparent way, you’re not going to be welcomed in the community, and that can have very large and long-lasting implications. And I think that’s a big reason why we’ve been reporting and disclosing for so long.
ER: To set the stage for understanding the current landscape of ESG ratings and rankings agencies, how and when did investors start looking at non-financial aspects of issuers?
CC: When those of us in the early days of ESG started to see the rise of socially responsible investors in the 90’s, there were also investors who wanted to screen out “sin stocks” – alcohol, tobacco, firearms, certain media outlets, etc. from their portfolios. Finding “suitable” investments was more focused on elimination rather than participation, and the role shareholders could play in becoming agents for corporate change. Around the mid-2000s, investors really started to look at climate change through a financial and risk lens. Several factors contributed—there was an anticipated federal carbon cap and trade program here in the U.S., the Intergovernmental Panel on Climate Change (IPCC) 3 report was pretty dire, the CDP was formed, and investors and insurers were paying attention to long-term risks and stranded assets. It was no longer just about risk avoidance, but also the opportunities that could create value—green jobs, transition to renewables, and so on.
The ratings and rankings ecosystem came out of the exclusionary, negative stock screens and then shifted to things like the Carbon Disclosure Project. Rather than screening out stocks and industries, investors starting using the ratings and rankings to make connections between how you manage your carbon footprint and the financial and material impacts to your business. There was also shareholder activism that supported the rise of the CDP and the United Nations Principles for Responsible Investment (PRI). These were big drivers for disclosure globally across all industries.
As these shifts were happening, there were also a lot of ESG research and ratings agencies, all vying to be the “go to” source to help investors screen hundreds or thousands of companies based on non-financial data. Over the course of time there’s been a lot of mergers and acquisitions among those agencies. Sustainability as a long-term value driver has arrived. We just need to stabilize and normalize the evaluative criteria, to help measure and report consistently; that continues to evolve. While investors have become far more adept at managing thousands of inputs to their evaluation processes over the years, I believe there is still too much disparity and lack of standardization when it comes to sustainability reporting and this is confusing for them.
ER: These different ratings and rankings agencies have slightly different methodologies for selecting and weighing criteria, and some of them are more transparent about their methods than others. Is there a way to categorize the approaches that these agencies use? And if so, how do you describe what it is they’re doing to collect and analyze data?
CC: They’re all trying to summarize company performance for analysts who are wading through data or are new in the ESG space. Some research and ratings agencies are subscription research-based, and ranking efforts are more recognition based (e.g. best place to work for a particular demographic). Some do a lot of their own research and they’re providing very good profile data on a company. There are also the ratings and rankings firms that scrape public data.
Some agencies will engage us. They’ll explain their analysis and share their findings. You have an opportunity to review their ESG ratings report for accuracy before they publish it to their private subscription base. There are others that are more difficult to engage with. You’ll see your rating and profile and want to know more about how they arrived at their conclusions, and can only send an “info@” email, and you may get a response in a day, a week, a few months, or not at all. It’s really hard to know who the analysts are on the other side. What are their qualifications? May I engage with them? And may I have access to their scoring methodology?
I feel it’s in the ratings agency’s best interests to have accurate reporting and clear methodologies and definitions so they’re viewed as credible, and also to engage the issuers more directly to make sure their assessment is accurate. I’m fine if we don’t rate as high as I’d like us to – I just want to make sure they’re rating us based on accurate information.
ER: I know that Newmont has made concerted efforts to weed through this forest of ratings and rankings agencies so your efforts to respond to their requests can be more focused. How did you approach it?
CC: In 2017, we had to get in front of this because it was really starting to become unmanageable. We looked at three things. Our first step was to understand which agencies our investors were using. Second, we determined which ratings agencies will engage with us. And, third, we worked to disclose in a manner that ensures transparency and makes it easy for agencies to find our data.
We worked with our investor relations team to identify our top investors. And then, we cross referenced this list with the CDP list of investors. Then, crossed that with the signatories to the UN PRI. We saw that more than half of our investors were signatories to either CDP or PRI. Then, we began collaborating with investor relations to better understand the specific questions our investors were asking. We had direct engagement with many holders to find out what information sources they use besides their own primary research and analysis. Most were using two to four ratings agencies as an initial screen and/or supporting data that would help them zero in on problem areas using their own research and analysis approach.
Once we knew which agencies were important to our investors, we started having conversations with our investors and our short-listed ratings agencies, and asked things like, how do you find information about Newmont? How and where do you get your data? Do you use web crawlers and/or AI? How are you using the data? What do you think of our reporting suite? Which frameworks are most relevant to you? Is there anything that we can do to get this data front and center for you? That helped us align our reporting suite and data in a way that they can best access and use it. It helped us focus our reporting and ESG strategy to meet various needs.
I know that Newmont is not going to get gold stars across the board because each analyst and each rating methodology is different. And we’re not going to tell them how to rate us. But we do want to have a voice in any errors or omissions or inaccuracy, and we do want to put the information out there for them to easily access it.
ER: And this means your process for disclosure is also constantly evolving, yes?
CC: One of the big parts of my job is to make sure that all of the data that we collect is publicly available and it’s in a form that can be web-crawled or downloaded. Not just for research analysts doing quantitative work, but for those agencies using artificial intelligence—to make sure that data is out there because we could be rated and ranked with no engagement with this agency whatsoever.
In 2018, we started compiling what are called ESG data tables. It’s raw data in an Excel format. There are no formulas in the cells, it’s just a flat file — I refer to this as the “ugly data” without formatting or graphics—just data. We did this so that it can easily be downloaded for analysis. We want to report once and get all the data out there for people to see in one place. And, we’ve been successful at doing that and are the second most transparent reporter in the S&P 500 according to Bloomberg. Going forward, we will continue to evolve that ESG data center as analysts needs and technology evolves – it’s not a “one and done” project – it will evolve in step with what the market demands.
ER: How does a company try to make sense of where they should focus their times and resources in terms of responding to these requests?
CC: One strength we have is a solid partnership between sustainability and investor relations. If you haven’t already, I would start with your investor relations (IR) team. Find out where inquiries for information are coming into the organization. Check the contact information that’s on your boilerplate press release, and go to that person or department and say, “Hey, are you getting emails from Sustainalytics, MSCI, et cetera?” Sometimes those emails get kicked around an organization, and it’s good to have one point person responsible for those research and ratings contacts. At Newmont, it’s my role, because it dovetails in with the non-financial (sustainability) reporting function so nicely, and because I have that background. At other firms, it might be different.
The Bloomberg Terminal has a whole universe of ESG ratings and rankings and your IR person should be able to help you find them. You can see your CDP score, your SAM S&P score, your ISS quick score, et cetera. Just type in your ticker and “ESG” and you’ll get there, and will be able to pull comparables, and develop custom reports and templates.
From there, start working very closely with your ethics group, enterprise risk management, business planning, corporate governance group, the corporate secretary, environmental health and safety, supply chain, community relations. Evaluate what type of information the company is disclosing and how often. If you’re just starting out with reporting, don’t try to boil the ocean. Start where you are, even if it’s the plain ugly data—just get it out. That’ll start this dialogue with investors, with ratings agencies, with stakeholders. Once you start to develop those relationships, that’ll help you to begin to understand what you want to report on. I think of it as this continual cycle where any disclosure gaps that you find in your ratings reports, you want to make sure you get those in your annual sustainability report.
The other piece with the annual sustainability report is that you do a robust materiality assessment that includes stakeholders to make sure you’re reporting on what they care about. For example, are you aligned with your industry’s expectations or standards or frameworks? You want to make sure you know your audience, how they prefer to access the data, and under which reporting frameworks.
This article is part of a series of contributions from the Business Ethics Leadership Alliance’s Working Group on ESG. To get involved with future working groups, contact your BELA Engagement Director, or contact Ethisphere for more information about BELA membership.
ER: Knowing that resources are limited and you need to focus your attention on those requesters that are most important and material to your business and your investors, how do you go about the process of politely declining all the other requests?
CC: Very carefully. We want to be evaluated. We believe in comparability. But the requests are exponentially growing. I get five emails a day about a new agency or a new system. I also want to caution those new to this space to look very carefully at terms and conditions, licensing agreements and so on with the various ratings reports before you publicly disclose your ratings in an IR presentation or other communication—many of these are proprietary research and ratings that require a paid license to share publicly or even internally within your company.
After we went through the exercise of engaging investors and reviewing ratings agencies, we created a shortlist of the agencies with whom we will regularly engage and bend over backwards to provide information. We will absolutely engage requests regarding a significant event or controversy. And then, the other ones, we put together a very, very respectful boilerplate response. However, we put a great deal of effort into transparency and agencies can find anything they want in the data tables we already provide. All of our data is out there in the public commons for others to use and evaluate us, with or without our participation.
By shortlisting the research and ratings agencies to the ones that matter most to our investors and ensuring extreme transparency for all others, it frees us up to actually improve our performance. My role is dedicated to non-financial reporting and ESG. But there’s are many people at Newmont who are on the ground engaging communities and working with artisanal and small-scale mining outfits. They’re monitoring tailings facilities, and so on, and that’s where their focus needs to be. It’s very easy to get distracted by a recognition program or a new or consolidated ratings project, but it can be a rabbit hole that pulls your focus off of performance excellence. Don’t do it. Focus on transparency and performance and the accolades will come.
So, it’s that balance of where we put our efforts. Ratings are a tool. You definitely want to watch them as a predictor of emerging expectations. It can be very tempting to chase the ratings, but at the end of the day, it’s about the on-the-ground performance—how you are fulfilling your mission, managing risk, and creating long term value.
ER: Is there an upside for companies who actively participate in ESG ratings and rankings?
CC: Yes! While engaging with ratings agencies can be time consuming, it also provides companies with benefit if you do it in a strategic and targeted manner. If you only look at it this as a burden – “I don’t want to do it, I can’t keep up, it takes too much time” – you might be missing an opportunity. You can flip how you look at it, and you can think of it as free consulting. They’re showing you where the gaps are. It’s a stem to stern evaluation of how your company is doing for your corporate governance, ethics, safety environment, community. And so, it’s something that you can use as a tool. Pick a few that your investors and key stakeholders respect and use – maintain the discipline to just those few, and use them to understand external opinions and trending issues.
We continue to engage our shortlisted agencies each year because it’s this consistent external non-financial performance review. And we may not agree with all the findings, but it’s helped us to better understand emerging issues and increasing materiality of issues such as tax transparency, policy influence, supply chain screening, and so on. If you just flip how you look at it, it’s a very good performance evaluation tool from the outside in—even if you don’t like what the results are, it’s a good indication of where your gaps are.
Agencies such as SAM S&P are really specialists in ESG. They’re experts in your sector regarding leading practices. Do a few assessments on a regular basis, and then consolidate the feedback and ratings reports to get an idea of where you might want to focus your sustainability program. Same thing with local communities, watch groups, or activist organizations—let them share their knowledge with you, and then figure out if and how that informs what you’re doing at your company. It should have some weight in your decisions, because you’re not working in a vacuum.
ER: And, where do you think we’re headed with all of these ESG ratings and rankings? Is there some streamlining on the horizon? Does this get resolved with the adoption of some ESG standards?
CC: Companies have a role to play in supporting their people and communities. And so, I think the S in ESG is going to be even more critical. How are you responding to COVID? How are you addressing equity, inclusion and diversity?
And I do think using ESG as an approximation of responsible, equitable behavior is still going to be there. I also see an uptick in these focus areas like the Bloomberg Gender Equality Index and the Corporate Equity Index for LGBTQI-friendly work cultures.
I see more engagement between the agencies and the issuers. Right now, it’s easier for an investor to engage a ratings agency than it is for an issuer. I see that changing. I think it’ll reach a point where the ratings agencies are going to need to include issuers more—maybe in the development of methodologies where there is heavy reliance on a rating or a ranking. We need to be able to have a conversation about context for what goes into that.
I do see a lot of consolidation in the ratings space—even as we see competing products from the same ratings agency. I’m also seeing a real need for more harmonization and standardization of reporting frameworks and metrics. Ratings and rankings will not go away. I think there will be a little more sanity in the space maybe in three to five years.
I often go back to Mindy Lubber, my personal sustainability hero and the CEO of Ceres, who, when asked about what is material in terms of ESG responded, “Risk is risk.” How you’re treating a community, the health care provisions for employees, racial and gender equity, socio economic equity, those are all risks, and those are financially material.
About the Expert:
Carrie Christopher brings 15 years’ experience in sustainability and ESG reporting strategy to her role as Director, Sustainability Reporting for the world’s leading gold company, Newmont Corporation. Carrie is responsible for ensuring that Newmont’s non-financial disclosures, data and stories credibly connect Newmont’s strong sustainability performance to long-term value creation and differentiation as an ESG leader.