"We need to establish a baseline of metrics."

Ronald Philip "Ron" O'Hanley State Street Corporation Chairman, CEO

So argues George Serafeim, a Harvard Business School professor (and research partner of SSGA parent State Street) in a session this afternoon at day two of the online Investment Company Institute General Membership Meeting (ICI GMM). Serafeim was joined by Ron O'Hanley, chairman and CEO of State Street, for an ESG-focused session titled, "Timely Insights on Climate Change and Sustainable Investing."

Sarafeim says that carbon emissions, workforce composition and diversity, and other typically unmeasured business factors. He notes that it's also important to consider that these metrics might vary across industries.

"In the era of climate change, we see more and more organizations, now thousands of them, setting science-based targets ... such as 'How do we get to net zero [carbon emissions]?'"

"What we need to emphasize," he adds, "is outcomes, instead of just efforts and activities."

O'Hanley asks, "What are some best practices you've seen amongst boards, and what are some things the mutual fund board members might take away from those best practices?"

"For mutual fund board members," Sarafeim answers, they should ask themselves if " integration is part of ... core processes, or more of an afterthought."

He adds that leadership commitment within organizations is key to establishing ESG practices which will last and make a real difference in policy.

"Secondly ... how do we invest enough to do this right? We need to think about ESG as an innovation process. For that to happen, we need to invest."

Sarafeim says, "I'm personally a little skeptical when I hear people say, 'Well, we have always been doing this.' How can you be 'doing this' if you have never had carbon emissions data, or human capital related metrics, or the knowledge within the organization to evaluate those metrics?"

"Some of those things require new skills and new infrastructure to be built," he notes. "For example, when we think about the work we have been doing within State Street and State Street Associates, we have had to build new data, new skills, and new evaluation frameworks." 

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