By Chrissy Blasinsky
ALEXANDRIA, Va.—I’ll say it—ESG is a boring acronym that sounds like an outpatient medical procedure. But, alas, it is not. It stands for environmental, social and governance, and ESG scoring has quickly become an indicator of a well-run company that is focused on a long-term vision rather than short-term profits.
In (some) other words, if you want access to capital, or will down the road, you’ll want to keep reading.
An ESG report defines what your company is doing and what it will commit to in the areas related to the environment, social issues and the structure of your business. It’s how your company manages its risk, and it’s also becoming common for financial institutions to consider ESG factors when making corporate loans or providing borrowers with lower interest rates based on their sustainability profile, which includes attention to climate risks and areas such as executive pay, political affiliations and working conditions.
Speaking of climate risks, the U.S. Securities and Exchange Commission proposed two rules earlier this year that seek to mitigate misleading or deceptive claims by U.S. funds on their ESG qualifications and increase disclosure requirements for those funds.
NACS has strong concerns about one of the proposed rules and the negative impacts it would have for retailers with publicly traded equity and debt securities, and those that are privately held and not subject to SEC regulation. Here are our comments:
“The industry takes seriously its role in reducing carbon emissions and recognizes that structure and consistency in reporting are helpful goals. In our view, however, the proposal exceeds the SEC’s statutory authority, conflicts with its mission, creates unwieldy economic burdens on businesses entirely outside of its jurisdiction…”
The SEC’s proposal would also amplify ESG and “bring to the front the importance of relationships between suppliers and retailers at a level that we haven’t seen before,” said Mike Roman, senior fellow for public policy and ESG at the American Council for Capital Formation, and a member of the Fuels Institute Board of Advisors, during a recent Convenience Matters podcast.
In late October, the SEC announced it would miss its deadline and found a technical glitch in its commenting system. However, expect this issue to keep moving … just not as quickly as expected.
In the meantime, let’s get back to the “why” behind ESG planning and reporting, which Roman sums up:
“I’ve had discussions with banks. They are being asked by their shareholders, ‘Where are you investing your money, and who are you financing?’ In terms of financing, the discussions around the fuel and convenience retailers becomes important because banks are being asked that question. … Retailers … are going to buy new sites, and they’re going to introduce electric vehicle service equipment and other types of fuels, but they’re also going to have to maintain and upgrade their existing facilities. To do that, they’re going to have to borrow money and have to explain to a bank—so a bank can explain to its shareholders—where that money is going. That’s a challenge, and it’s a new one that they haven’t had to face.”
Regulatory Outlook: Expect Change
Although ESG reporting is voluntary, that is poised to shift. The convenience and fuel retailing industry sells 80% of the fuels purchased in the United States, which means ESG requirements would absolutely have an impact on your business. And it’s not just for the publicly traded retailers—privately held retailers seeking investors, access to capital, insurance coverage or loans also will be affected by ESG policies.
Find out how ESG impacts your businesses in this week’s Convenience Corner blog post “Why You Should Care About ESG.”
Chrissy Blasinsky is the content communications strategist at NACS.