The ESG Imperative

00:00:01:19 - 00:00:29:14
Mike Collignon: Been a while since we've been together. How was your summer? I hope you are responding to the positive. I honestly can't hear you, but I am aware of you because September is Attendance Awareness Month. See, I leave that in there again. I assume a positive response. Moving on. We have a positive, positive person as our presenter today. It's Sarah Gutman, co-founder and CEO of Green Builder Media.

00:00:29:15 - 00:00:58:15
Mike Collignon: She's here to explore successful ESG strategies, highlight standout companies, and share information about evolving investor requirements. Sarah is going to provide Cognition Smart Data market insights about consumer trends that have pulled ESG into the mainstream. And finally, she will discuss why ESG has become such a charged topic in the US and addressed critics concerns about the potential for ESG to negatively impact financial performance.

00:00:58:21 - 00:01:26:09
Mike Collignon: In case you don't know Sarah's background, she is a former venture capitalist. She graduated cum laude from Dartmouth College, and she holds an MBA in entrepreneurship and Finance from the University of Colorado. She has established a reputation as a visionary, thought leader and passionate advocate for sustainability, and she works closely with a diverse group of stakeholders in the building industry to develop impactful, long term green strategies that are simultaneously sustainable and profitable.

00:01:26:11 - 00:02:01:09
Mike Collignon: Now, I need to take a moment to thank our sponsors for this webinar. First is Rheem Manufacturing. The brothers Richard and Donald Rheem founded Remanufacturing Company in Emeryville, California, in 1925. While the company has produced a number of products in its nearly 100 years of operation, Rheem is currently the only manufacturer in the world that produces heating, cooling water, heating, pool and spa heating, and commercial refrigeration products, and it is the largest manufacturer of water heating products in North America.

00:02:01:13 - 00:02:32:09
Mike Collignon: Remanufacturing is a global leader committed to delivering innovative products to save energy and support a more sustainable future. Our other sponsor is Train Technologies. They are a global climate innovator solving sustainability challenges through innovation in the heating and cooling industries through their strategic brands Train and Thermo King and their environmentally responsible portfolio of products and services. Train technologies brings efficient and sustainable climate solutions to buildings, homes and transportation.

00:02:32:17 - 00:02:47:15
Mike Collignon: Now you can submit questions for Sarah today. Simply use that questions box. It's in the go to webinar control panel. I'm going to review those questions and pose those to her during the Q&A time set aside after her presentation. Sarah, how was your summer?

00:02:47:17 - 00:03:15:14
Sara Gutterman: My summer was fantastic, although way too short. Mike. But thank you for asking. I hope you had a great one too. Thank you so much. It's always such a pleasure to be here, Mike, with you and with our audience. A special thank you to you, Mike, for always being such a wonderful webinar moderator and coworker. And a shout out to our wizard behind the curtains, our production manager, Mary Kestner, who makes it all happen.

00:03:15:14 - 00:03:41:11
Sara Gutterman: So Mary, thank you. Another special thank you to train technologies and to not only for just being such wonderful ongoing partners and friends and colleagues, but also leaders in sustainability. We really appreciate the way that Train Technologies and Reme have both paved pathways for corporate and product sustainability. I'll actually talk about both of them a little bit later in the webinar.

00:03:41:13 - 00:04:04:23
Sara Gutterman: And thanks to everyone in attendance. I'm so pleased to be here to talk with you today about ESG, partly because ESG or environmental, social and governance is one of my favorite topics to talk about. Most of my coworkers and friends and family are sick to death of me, always bringing it up in any context. We're watching sports and I bring it up to my husband and he says, how is that connected?

00:04:04:23 - 00:04:31:17
Sara Gutterman: And I said, I don't know, but I just wanted to talk about it anyway. So that happens a lot. But I'm also incredibly excited about the momentum that ESG is gaining in the market. It's really become a moral imperative for businesses offering clear, tangible benefits such as risk reduction, climate resiliency, employee and customer retention, brand enhancement, and financial gains.

00:04:31:17 - 00:04:55:17
Sara Gutterman: I'll talk more about those benefits in a little while. And, you know, let's recognize it has become a politically charged topic in the US and kind of is the center of some culture wars. I'll also address that about. I'll also talk about why ESG has become politicized and controversial, as well as some legitimate and perhaps not so legitimate criticism of ESG.

00:04:55:17 - 00:05:33:10
Sara Gutterman: But, you know, I think some of my colleagues who have engaged in environmental, social and governance strategies in their own corporations have expressed concern about the step back from ESG as a term. And really, time will tell if the ESG label will stick. But the premise behind the strategy isn't going away. And at the end of the day, ESG fundamentals are here to stay, mostly because investor requirements and consumer demand are overriding political posturing and pulling it into the mainstream.

00:05:33:10 - 00:06:04:04
Sara Gutterman: And so ultimately, whether it's called ESG or corporate sustainability or fried Green Tomatoes, what really matters is that the ESG fundamentals, which I'll talk about today, make good business sense. But if you take nothing else away from today's webinar, please hear this ESG by whatever name it is called, let's call it a rose, is not just a shrewd business strategy.

00:06:04:07 - 00:06:50:17
Sara Gutterman: It is also a reflection of this moment in time and organizations that have a clear, thorough, authentic and transparent ESG ESG strategy really stand out like a beacon of light in a fractured and confusing world. And they offer hope to people amongst the fake news and the bedlam and what seems to be just daily chaos. And we as individuals, not business executives, not building professionals, not consumers or homeowners, but as individuals, we are searching for some semblance of sanity in what can sometimes feel like a world that's spinning out of control.

00:06:50:17 - 00:07:20:03
Sara Gutterman: And we want to feel safe and secure, and we want a pathway to hope and happiness and not the I don't really like this, but it will suffice for now version. But the I am all in wholeheartedly version. And I submit to you that ESG strategies are one vital spoke in a wheel of creating a world that feels safe and right and good.

00:07:20:10 - 00:07:50:19
Sara Gutterman: So I'm going to stop preaching for a minute until the end of the webinar when you'll hear me come back to that and let's just talk first about yes, origins. Where does it come from? So the term ESG originated from a United Nations report issued in 2004 titled Who Cares Wins? Which urged the financial industry to, quote, better integrate environmental, social and governance issues in analysis, asset management and securities brokerage.

00:07:50:25 - 00:08:29:19
Sara Gutterman: One year later, in 2005, the UN assembled a group of institutional investors, lenders, economists and other stakeholders to create what's called the principles for Responsible Investment, or PRI, which was a first of its kind signatory status that facilitated comparable measurement and validation for returns on investments that equally valued environmental, social and financial criteria. And to become a pre signatory, funds had to commit to incorporating ESG into investment analysis, decision making processes, governance policies and disclosures.

00:08:29:19 - 00:09:11:03
Sara Gutterman: Practices. So, since 2005, the number of PRI signatories has ballooned to about 2351 firms and represents about 2.5 trillion in capital. Now let's talk about why ESG. And I think if you're here on this webinar today, you get the environmental reality and really the urgency of that environmental reality. So we know that climate change is unequivocally here and the worst is yet to come, and that we need a full scale elimination of all greenhouse gas emissions to keep global warming under two degrees Celsius, ideally 1.5 degrees.

00:09:11:03 - 00:09:42:26
Sara Gutterman: If we surpass this threshold, we know that we will encounter irreversible impacts that will lead to widespread species extinction, extinction and ecosystem collapse, and that as the planet continues to warm, we can expect even more extreme temperatures, rising sea levels, intense super storms, excessive flooding, severe drought and raging fires. So I think that, you know, that should be enough reason for companies and executives and even politicians to adopt ESG strategies.

00:09:42:26 - 00:10:11:22
Sara Gutterman: And really, the main point here that I want to make that I really try to impress on people is that if we do not immediately curb our fossil fuel addiction and cease destroying forest and ocean habitats, transform our industrial and agricultural practices. Meaning if we stay on our current trajectory, we are expected to surpass that two degrees Celsius threshold within a shockingly short five years.

00:10:11:24 - 00:10:42:25
Sara Gutterman: Another major reason for ESG is our social reality. And this really, there's something very interesting happening in the West, and particularly here in the US, baby boomers who have worked for longer than generations previous to them are retiring in droves. And Xers, millennials and Gen Zs aren't taking on leadership positions in business, in politics, in media, in not for profits.

00:10:42:25 - 00:11:08:01
Sara Gutterman: And they are bringing with them an ethic of sustainability that is very ingrained into their kind of generational psyche, particularly millennials and Gen Zs who are deeply worried about the future and about climate change. You can see here on this chart that failure to mitigate and adapt to climate change is their number one global risk of highest concern.

00:11:08:01 - 00:11:43:06
Sara Gutterman: And 77% of millennials and Gen Zs consider the future to be frightening. 56% think that humanity is doomed because of climate change. That's not 6%, that's not 16%. That is 56%. And what's really interesting to point out is that about 61% of millennials and Gen Z, and it's actually higher among the Gen Z audience segment report in surveys and in Green builder media cognition surveys that they feel guilty about their negative impact on the environment and 45% feel shame.

00:11:43:06 - 00:12:26:29
Sara Gutterman: And so there's this surge in a new field of medicine called eco psychology, which actually measures the impact of nature and climate change on the human psyche. And we started watching eco psychology and its growth as a field of medicine several years ago. And we've just seen it explode. And it's because this is a real thing, again, particularly among these younger generations now, high levels of climate anxiety and low levels of accountability and transparency has really led to historically low levels of consumer trust.

00:12:26:29 - 00:12:54:13
Sara Gutterman: And so while our survey respondents tell us, about 78% tell us that it is extremely important and very important for companies to have transparent and ethical business practices, 58% believe that companies greenwash very often and almost well, let's say 12.5% believe that companies almost always greenwash, right? They pretty much say, I don't believe anything the companies say anymore.

00:12:54:16 - 00:13:32:26
Sara Gutterman: Now, you know, counterbalance that with the fact that over 90% of our survey respondents believe that companies should take a stand on environmental issues, and they prefer purchasing products from sustainable brands and companies that have strong ESG practices. I'll show you some more data that's pretty interesting a little bit later around these consumer trends. But, you know, I think what's really important to note here is that the only way we get out of this historically low level of consumer trust is by providing more accountability, more transparency, more clarity, clearer claims, better evidence, more measurement.

00:13:32:28 - 00:14:09:04
Sara Gutterman: And all of those things are incorporated into ESG measurement tools and strategies. The third thing, from the social reality standpoint, is that we talk about climate change from a global perspective, but the impacts are acutely personal. And so we're starting to see people in all age groups, but again, particularly millennials and Gen Zs, being impacted by climate change, and they're worried that climate change is going to affect their water supply, their food supply, their energy supply, their personal safety and security.

00:14:09:11 - 00:14:40:27
Sara Gutterman: Millennials are, you know, 34X more concerned about the resiliency, just resiliency in general and the impact on their homes because they are reporting that they are being impacted by hurricanes and tornadoes, extreme temperatures wildfires, drought, flooding. And so therefore that is continuing to drive that consumer demand for ESG. And of course, there is a just explosion in investor demand as well.

00:14:40:28 - 00:15:25:21
Sara Gutterman: So as you can see here in 2022, investor assets in sustainable investments equaled about 8.4 trillion, or about 12.6 of all US assets under management, 444 mutual funds, 177 exchange traded funds offer investors a way to invest in ESG or companies that have ESG strategies. And at this point, investors are really considering companies that have ESG strategies in place to be a better investment because they are better positioned to deal with the risks related to climate change and are therefore a safer place to put their money.

00:15:25:23 - 00:15:55:28
Sara Gutterman: We've seen that 81% of institutional investors in the US say that they plan to increase their allocations to ESG companies in the next two years. We're seeing that institutional based investors and money management firms with sustainability strategies name climate change and carbon emissions as their top priority, with each group saying it applied more than 3 trillion of the assets that they control into ESG related companies.

00:15:55:28 - 00:16:35:07
Sara Gutterman: And the list goes on and on. We have Global Data's 2023 UK Life and Pensions Survey that reveals that younger consumers are 50% more likely to put emphasis on sustainable investment principles and ESG companies, and that almost 70% of people under 40. See the principles of sustainable investment as important compared to older generations, which didn't quite emphasize sustainability and ESG as much historically in their investment decisions, even if they are doing more.

00:16:35:07 - 00:17:28:04
Sara Gutterman: So now. Now we know that ESG strategies help to minimize risk and hands long term performance and improve resiliency against market volatility and idiosyncratic events like natural events. We also know, fortunately, that ESG is really becoming mission critical and an essential business requirement for investors, for lenders, for business executives themselves, and also for consumers. And, you know, I think fortunately, we are seeing that ESG is delivering tangible benefits like streamlined operations and productivity enhancements and supply chain strengthening beyond the risk reductions, which, again, is yielding positive results, financial results and other kinds of results.

00:17:28:04 - 00:18:08:08
Sara Gutterman: Relationship based results, for example, two companies. And then on the market side, we are seeing new market driven requirements for transparency and accountability to again address those historically low levels of trust. So our theory is that, you know, ESG is really an unavoidable future to all of our benefit, because we really see that with some of the SEC requirements and other compliance based issues, which I'll talk about in a moment, companies are soon going to be required to take more stringent action on climate and with respect to ESG.

00:18:08:10 - 00:18:49:09
Sara Gutterman: And again, I think that that only ends up benefiting corporations because ESG, we're seeing ESG strategies now lead to enhanced access to financing options, cost reductions, access to capital again, increased productivity, decreased cycle time, increased use of circularity as an example, a circular economy, and then again, as much as anything else, enhancing the relationships with stakeholders of all kinds, including investors, customers, and employees.

00:18:49:11 - 00:19:29:12
Sara Gutterman: Now let's talk about ESG performance because this is important. This is really where the center of the ESG debate has come in, because opponents have claimed that ESG harms financial performance by placing artificial constraints on decision making, thereby creating obligations to prioritize unnecessary operational improvements and negatively impacting short term results. And we've seen some of those more vocal critics take some pretty strong action against ESG.

00:19:29:12 - 00:20:04:26
Sara Gutterman: So, for example, Florida Governor Ron DeSantis signed a bill in May barring the use of ESG when investing public money. And we're seeing that GOP controlled states have pulled billions of dollars from firms like Blackrock, which, as we all know, was kind of an early proponent of ESG strategies. We also heard from the Utah State Treasurer, Malo Oaks, that, according to Malo, ESG is Satan's plan.

00:20:04:28 - 00:20:41:08
Sara Gutterman: So we've seen some pretty big culture wars. So I'm not going to necessarily get into the idiosyncratic and dogmatic part of ESG. What I will tell you about that, though, is all of the experts that I have spoken with, whether those are business executives at a very senior senior level of very large companies who are implementing strong ESG strategies, whether those are investors or bankers or even friends of Blackrock, they are all basically saying, look, that's kind of a flash in the pan, right?

00:20:41:09 - 00:21:17:12
Sara Gutterman: The criticism, the dogma, the culture wars, because what the real point here is, is that there is no empirical data that shows that there is a lack of performance from ESG companies. So let me cite a couple of examples. A recent study by PitchBook, which is a morningstar company, provided comprehensive insight into the performance of ESG investment funds in areas of private equity, real estate assets and private debt.

00:21:17:12 - 00:21:51:25
Sara Gutterman: And this study showed that ESG related investment commitments rocketed from 16.1 billion in 20 10 to 530 500 and about 20,000,000,000 in 2021. It actually dropped back a little bit in 2022 to 430 billion. Of the segment of investors that this study was examining. But that rollback in 2022 was due to tightening marketing market conditions, not a systematic step back from ESG funds.

00:21:51:25 - 00:22:30:17
Sara Gutterman: But according to this report, there was no evidence that ESG funds differed in performance from their peers in any statistically valid way. And so a clear and consequential data point that works to debunk critics claims regarding subpar returns was provided through that report. There are other reports by Mackenzie or by Kroll, which is a financial analytics firm that studied, recently studied 13,000 companies globally.

00:22:30:17 - 00:23:20:23
Sara Gutterman: And they showed that actually ESG performance was better. Those companies had about a 12.9% return versus an 8.6 return from laggards in ESG strategy globally. And those numbers actually went up in the US to about 20.3% returns versus a 13.9% return for the laggards. So clearly, there is a growing body of evidence that shows that there are market rate or even better returns for ESG investments, meaning that whether, again, it's called ESG or corporate sustainability or whatever other label you want to give to it, these ESG commitments from lenders and venture capitalists, private equity, pension funds, stakeholders for companies are only going to increase.

00:23:20:26 - 00:23:59:21
Sara Gutterman: Now. There are some legitimate criticisms and concerns regarding the ESG measurement and ratings process, and there is a serious lack of standardization in both kind of what and how ESG factors should be measured and evaluated. And this is really true throughout all sectors, particularly the building industry, because some of the rating systems and the tools that have been created are for very large, very high impact sectors that use child labor and, you know, extract blood diamonds.

00:23:59:21 - 00:24:36:18
Sara Gutterman: And so some of the rating systems that are not necessarily applicable to the building sector. So I will address what's being done to provide a nuanced and focused ESG set of defining principles for the building industry. But I do think that the criticism that ESG has for, in some cases, being too vague or for not really having very targeted measurement and reporting requirements is a legitimate criticism.

00:24:36:20 - 00:25:09:02
Sara Gutterman: So with that, let me move on to ESG for building. So first let me just say that there has never been more interest and capital available in the building industry for companies with ESG practices and those that incorporate ESG into their decision making processes. We are absolutely seeing that ESG performance is influencing investment, loan and insurance decisions. It's also influencing home buyer decisions.

00:25:09:02 - 00:25:42:24
Sara Gutterman: And I've got a bunch of data I'm going to show in a few minutes that corroborates that. And, you know, what I will say is that for the companies that are interested in crafting or refining and enhancing their ESG strategies, you know, it can be a little daunting even for the most veteran of building professionals, because, again, the ESG reporting frameworks are a bit amorphous and not necessarily industry specific for the building sector.

00:25:42:24 - 00:26:38:06
Sara Gutterman: And so that unconformity nature of ESG measurement and reporting can be a little, let's say, confusing or perhaps frustrating. And also the fact that, you know, it's largely voluntary at this point. I do believe that that's going to change very quickly, not just with the SEC compliance requirements, but also through other regulatory requirements. So Green Builder Media, in response to the fact that there is no industry specific guidance for the building sector for environmental, social and governance, about probably a year and a half ago, we put a call out to the industry to pull together a group of subject matter experts to create a set of defining principles that are specific to the building industry.

00:26:38:06 - 00:27:08:15
Sara Gutterman: And so we put a call out. We thought we'd get maybe 20 to 30 people to join with us to create this set of defining principles. And we got about 100 people who raised their hands. And like some of the smartest people from around the industry builders, developers, architects, folks from from industry organizations like ResNet, investors, manufacturers, energy raiders, other types of stakeholders, folks from Rocky Mountain Institute.

00:27:08:15 - 00:27:45:13
Sara Gutterman: And we pulled together this group we created, we decided to call it ESG for building. And we broke up the group into a handful of subgroups. So business case, environmental, social governance, compliance, measurement, innovation and marketing and outreach. So I'm going to go through the first seven of those areas and just talk very briefly. I'm not going to give a full dissertation just because we don't have time on each one of those sections, but just talk about some of those highlights.

00:27:45:16 - 00:28:09:11
Sara Gutterman: And then for those of you who are interested, go to Builder Media and look for the tab on the nav bar. And you can actually sign up to receive ongoing news about our ESG for building group. It's a it's a fully voluntary group, with the exception of our staff members who are organizing it, which, you know, we're paying for internally and totally transparent.

00:28:09:11 - 00:28:41:28
Sara Gutterman: And the set of defining principles will be ready for public consumption, hopefully by the end of this year. So the first subgroup is Business Case, and I think I've already talked about a lot of these elements in terms of increased access to capital, reduced risk, enhance brand reputation, enhanced relationships with stakeholders, talent retention, etc.. But I think what's really important here is some of this data.

00:28:41:29 - 00:29:18:08
Sara Gutterman: This is cognition, smart data, which is Green Builder Media's market intelligence and data division. Clearly you can see here, you know, when 60% of consumers tell us that they're more likely to do business with a company that has strong ESG practices and, you know, 25% are very likely. And then, you know, when we look at the fact and this one's really interesting to me, that consumers are now associating ESG practices with the quality of a businesses products.

00:29:18:10 - 00:29:52:00
Sara Gutterman: So it's not just about how a corporation operates in the emissions that that that said company emits. But now the perception is that ESG actually impacts the quality of products and services. So I think data like that is the business case itself for ESG practices. When we shift over to environmental, we can look at these topics on the left, you know, greenhouse gas emissions first, of course, starting with scope one, two and three.

00:29:52:02 - 00:30:19:17
Sara Gutterman: So emissions created internally in that emissions created by sourcing energy and then externally through supply chain partners. That's one of the kind of most top of mind topics in that space with respect to energy, of course, for buildings, that has to do with energy efficiency and renewables. In terms of land, this has to do with biodiversity and habitat protection error.

00:30:19:17 - 00:31:06:19
Sara Gutterman: Of course, indoor and outdoor air quality, things like fugitive emissions, which are maybe unintentionally released emissions from leaks or other unintentional carbon emissions, water, of course, having to do with quality, quantity and things like stormwater runoff, climate resilient design, waste management. This really gets into that discussion about a circular economy, sustainable product design. So using products that have environmental product declarations or other certifications and then innovation, and then working with supply chain partners to actually enhance their transparency and accountability and their ESG practices.

00:31:06:20 - 00:31:12:15
Sara Gutterman: And so we're starting to see more questions around.

00:31:12:18 - 00:31:45:07
Sara Gutterman: This environmental related topics. So not just only what are the environmental impacts of a community? And is that community located in an ecologically sensitive area. But questions now like, how can builders and developers actually utilize natural features of a site, whether it's a single family home or multifamily project or an entire community to enhance climate resilient design and just resiliency in general?

00:31:45:07 - 00:32:22:11
Sara Gutterman: So one wonderful example that I like to point out is Babcock Ranch. When Hurricane Ida hit Central Florida not too long ago, Babcock Ranch, which is 100% solar powered community that actually utilizes natural swales and mangroves rather than just raising the land, cutting everything down and plopping the community down on it. It utilized those natural features, and it was one of the only communities in that flood zone from the hurricane that actually didn't flood, because nature did what it was meant to do, which is absorb those flood waters.

00:32:22:13 - 00:33:02:20
Sara Gutterman: Next, we move to the social element. And I think that the most commonly discussed element of social is di or diversity, equity and inclusion. And so this could span a range of looking at ethnicities and gender. And, you know, just in terms of inclusive hiring practices, certainly pay equity and living wage looking at employee well-being and acquisition programs, career development programs, but then also looking outside of a company to community engagement.

00:33:02:20 - 00:33:31:00
Sara Gutterman: And I think once we start looking at the questions around the social element in the built environment, I'm hearing a lot of questions around not only what are amenities that a community can offer to enhance that social element, make the life better, improve the quality of life for occupants in that community or in that home. But how can the community provide a positive contribution to neighbors and surrounding communities?

00:33:31:03 - 00:34:01:26
Sara Gutterman: And I think that's a pretty exciting and interesting conversation that I'm hearing, because all of a sudden, builders and developers and architects and designers and even energy raiders are not functionally functioning only within the context of a project, but kind of looking at that surrounding community, moving on to governance. This is the, you know, a lot of where we can, again, address those historically low levels of trust and look at enhanced accountability and transparency.

00:34:01:28 - 00:34:36:20
Sara Gutterman: So a lot of the governance practices have to do, for example, with board and executive compensation and oversight. So is ESG integrated into bonuses and compensation structures, supplier codes of contexts. Excuse me? Codes of conduct, environmental health and safety management, of course. Code of ethics, not just within a company, amongst employees, but within the board and the investor group and even the supply chain.

00:34:36:22 - 00:35:07:13
Sara Gutterman: And, you know, looking at risk management, risk management strategies to reduce risk, but also again, enhance transparency. Right. So what is what are the real climate risks for a company. So some of those questions again that we're participating in and hearing that we're excited about is, you know, is there dedicated oversight of ESG issues, not just in a little department, in a back room, in a back office, but at an executive and a board level?

00:35:07:15 - 00:35:44:04
Sara Gutterman: How is ESG being incorporated into business strategies and decision making? Our leadership, executives and employees following code of conduct? And how is ESG really not just assessed, but how is it impacting performance when we move on to measurement, as we know, just with like green building certifications, there's a whole vast landscape of measurement tools and software programs and companies that are trying to address parts and pieces of ESG.

00:35:44:05 - 00:36:21:22
Sara Gutterman: So there are business measurements like B Corp, there are calculators that try to measure greenhouse gas emissions, like Beam and EC3. There are some of the stalwart energy rating software systems like Check and Echo Trope. There are water programs. One actually, that our moderator, Mike helped to create the words water efficiency, rating, system resiliency. We see fortified homes a lot with respect to resiliency measurement.

00:36:21:28 - 00:36:50:27
Sara Gutterman: There's a whole, you know, spectrum of health and wellness and indoor air quality rating systems. EPA's Indoor Air Plus is one of the most well-recognized ones. And then, of course, you've got your building certifications like the Department of Energy, Zero Energy Ready Homes program and green building programs like the National Green Building Standard. And each one of these are kind of trying to take a little bite out of ESG.

00:36:51:00 - 00:37:20:17
Sara Gutterman: I can't say that there's any one tool or software program or platform that we've studied that provides everything to everyone. So in our Defining Principles document, we actually go through and provide insight into what the benefits are for each of these tools. I think I think we describe all of these on on this slide and more in that.

00:37:20:17 - 00:37:50:21
Sara Gutterman: And so I think what we'll see is just like we've seen with green building certifications and rating systems that builders and developers and manufacturers are going to have to choose the certifications at this point that work best for them. Now, when we come to compliance, compliance is really important because as ESG has largely not been.

00:37:50:24 - 00:38:26:01
Sara Gutterman: There's not a set compliance structure that's in place at this point to follow that is mandatory, that is changing. And what we're seeing is that there are regulations that are putting into place, and this is going to impact all aspects of real estate development, building, manufacturing, and it's going to change the landscape. So, you know, these new regulations in ESG reporting are going to affect everyone from large public companies to smaller private companies.

00:38:26:01 - 00:39:04:24
Sara Gutterman: And it's really important for professionals to understand not just what these compliance and regulatory requirements are going to be, but how they can meet and exceed those compliance and regulatory requirements without negative impact on their companies. So, you know, I think, for example, the SEC and Treasury rules are going to be relevant to the housing industry because large publicly traded companies will be under a clear obligation to report, for example, climate risk disclosure.

00:39:04:26 - 00:39:45:06
Sara Gutterman: We're also seeing that, you know, private development companies and builders and other smaller companies are impacted when they're going to seek capital. And then home buyers are actually also going to be working with lenders and insurers that will be subject to reporting requirements and implementing climate related considerations into their lending and underwriting processes. We're also seeing a little bit of this take place in the insurance sector right now, as we're seeing different insurance companies pull out of places like Florida and California because of super storms and flooding and wildfires.

00:39:45:08 - 00:40:13:04
Sara Gutterman: And so while that isn't necessarily a direct compliance issue, we are going to see, again, changes in the marketplace that will impact, you know, major sectors related to the building industry. I'm not going to go into the specific SEC requirements or some of these other compliance issues just because of time. However, again, these will be included in our Defining Principles document available later this year.

00:40:13:09 - 00:40:42:13
Sara Gutterman: And then Product Innovation. I led this subgroup. So it's one of my favorites. You know, we really looked at products homes and buildings and then communities and developments and how to design up front with decarbonization, sequestration, circularity lifecycle in mind. We also go into great detail about alternative materials. It's really important right now, especially for concrete and steel.

00:40:42:15 - 00:41:20:11
Sara Gutterman: So two of the the sectors that have the highest environmental and carbon emissions impact that we either replace them with alternative materials or look for lower carbon solutions like carbon cures, concrete that integrates CO2. It actually integrates carbon into a cement mix to yield a more a more structurally sound and concrete product that also ends up being a better carbon sink for carbon to absorb carbon in the long term.

00:41:20:19 - 00:41:56:27
Sara Gutterman: I also just wrote a blog on the decarbonization of the steel industry. Lots of pretty interesting things happening there. Using scrap metal to recycle into new, greener steel and then also using greener manufacturing processes that actually use electricity and renewable energy as opposed to massive amounts of coal and natural gas and other fossil fuel based energy. So lots of innovation with respect to materials, same thing with respect to homes and buildings.

00:41:56:27 - 00:42:28:09
Sara Gutterman: So not only are we seeing huge advancements in net zero, all electric, healthy, connected solar plus storage power homes, but of course offsite construction and prefab, which I really believe does help solve for many issues that are plaguing the the housing market, labor, material shortages, high material prices, you know, offsite and prefab doesn't come. It's not, you know, the leprechaun and unicorn that's going to cure all of our ills.

00:42:28:09 - 00:42:56:06
Sara Gutterman: It does have challenges as well. But, you know, I think that we're seeing huge advancements in those areas. And then same thing on a community and development scale. We're seeing changes in terms of the way that we're looking at land use, more mixed use development. And, you know, whereas we can be a little more flexible with zoning. Certainly we're playing with density and looking at diversifying housing options to accommodate multiple income types.

00:42:56:06 - 00:43:39:19
Sara Gutterman: And I think the thing that's really exciting from an ESG perspective for me, with respect to communities and developments is that, you know, we, again, are starting to participate in and talk with builders and developers and architects and related professionals that are looking at, again, not just the energy efficiency or renewable energy of a home or community, but how we can create housing to become a panacea for health and wellness and to actually create generational wealth for home buyers, not just for the first homebuyer, but the second, third or fourth buyer and owner.

00:43:39:22 - 00:44:13:12
Sara Gutterman: In terms of trends, we're seeing that the most commonly used ESG frameworks include things like Sustainable Accounting Standards Board or Sasb GRI, which is a global reporting initiative, the UN Sustainable Development Goals and the UN Global Compact. In terms of data transparency, the companies that we deem kind of exceptional with respect to ESG do have their data third party validated, rather than just having an internal audit.

00:44:13:15 - 00:44:49:04
Sara Gutterman: We are seeing that ESG reports are largely organized around a company's material risks, and generally those start with the then the S and then the G in the building industry, in other sectors, we actually see that the S comes first because that is more material to other industries. But in the building industry, because the built environment is so conspicuously consumptive, it's really the that comes first, both for manufacturers as well as the few builders and developers that are at this point releasing ESG reports or at least information.

00:44:49:06 - 00:45:03:05
Sara Gutterman: It is very important that all companies go through this materiality assessment to understand which areas are most important to their companies, and to create goals and strategies accordingly.

00:45:03:07 - 00:45:29:17
Sara Gutterman: Now, a couple of eco leaders in these two happened to be our sponsors, but I think it's really important that the reason why Train Technologies and Rheem are our sponsors today is because they are eco leaders, and we've been working with them for a long time and have just been impressed for years and years. Train technologies again for at least a decade, probably more, has been a leader with respect to corporate sustainability.

00:45:29:17 - 00:45:59:00
Sara Gutterman: They've released a Gigaton Challenge, which is a pledge to reduce about 1 billion metrics of carbon emissions by 2030, with a goal of becoming carbon neutral across all aspects of their operations. They're really focusing on water and waste reductions and other social related things like gender parity advancements. And again, they're looking to decarbonize not just their company, but their entire value chain by 2050.

00:45:59:02 - 00:46:25:02
Sara Gutterman: And I think something really important about train is that Train Technologies is the first in its industry, and one of the first companies in the world to have its net zero carbon emissions targets approved by the science based Target Initiative, or SBT. And Rheem is also considered by our team as an eco leader, really, not just for their efforts on a corporate level, but on a product level.

00:46:25:02 - 00:47:12:26
Sara Gutterman: So they were the first to market with an energy certified heat pump water heater, which we know is critical for the advancement to of a climate movement, from switching from gas to electricity or an all electric home. They have done some wonderful things with respect to packaging and recyclability. They also have focused a lot of dollars and human resource into kind of streamlining the process for their stakeholders, as well as their customers, plumbers and contractors, and other key stakeholders to understand how to specify and install their sustainable products.

00:47:12:26 - 00:47:41:17
Sara Gutterman: So kudos to both Train and Rheem for their efforts and sustainability. Now I'm going to take a few minutes just to go through some of our data. Green Builder Media's Cognition Smart Data just conducted a survey of our leading edge audience. So keep in mind I'm going to show you the data. Over the next few minutes, we reach a group of millions of early adopter and first mover consumers as well as building professionals.

00:47:41:17 - 00:48:03:04
Sara Gutterman: So keep in mind, this is the leading edge of the market. And when we survey, our audience is kind of like having a crystal ball, so to speak, because we're our audiences. Today is where the mainstream is heading in the next six, 12, 24 months. So our leading edge audience has a fairly high level of ESG, high level familiarity with ESG investments.

00:48:03:05 - 00:48:37:25
Sara Gutterman: You can see that over 65% are either extremely familiar or very familiar, and about 70% have ESG related investments in their portfolio. When we ask which factors influence their decision to invest in ESG companies? The first is enhancing environmental protection. The second is enhanced financial returns, and the third is more responsible governance. So again, addressing those low levels of trust and accountability and transparency, I mentioned this earlier, but I wanted to point it out again.

00:48:37:26 - 00:49:08:14
Sara Gutterman: Our consumer audience, 50% say that ESG practices impact the quality of products and services, and then a great deal. And then 25% say somewhat. So there is that link in consumers minds. You can see here that, you know, 85% of our leading edge audience are either very likely or somewhat likely to do business with a company that has a strong ESG focus compared to one that does not.

00:49:08:14 - 00:49:41:04
Sara Gutterman: And our audience, you know, about 58% believe that companies with an ESG focus are more likely to have long term financial success than those without. You can see that about 75% of our audience say that they have stopped purchasing products from a company because of concerns over their sustainability practices. And, you know, very high level. So let's say 72%, 75% believe that it's important to that.

00:49:41:04 - 00:50:19:00
Sara Gutterman: A company's marketing and advertising messages align with their ESG practices. Again, very important to have that authenticity and transparency. So not, you know, greenwashing. So when when we ask about homes and buildings again here, you can see that, you know, over 75% say, of our consumer audience say that they're more likely to choose a building or a residence with strong ESG practices from a builder or a developer or a home that that has energy efficiency, renewable energy, health and wellness systems in place, etc..

00:50:19:01 - 00:50:46:08
Sara Gutterman: And then when we ask how much we our our survey respondents believe that buildings with strong ESG practices can have a positive impact on health and well-being. Again, here you can see that nearly 50%, let's say 48%, believe that there's a great there's a great deal of impact of buildings with a strong ESG practice that impacts health and wellness.

00:50:46:08 - 00:51:15:19
Sara Gutterman: So again, just like our consumer audience makes a link between quality of products and ESG practices at a corporate level, they also link health and wellness with ESG practices. And this is a question that we asked. And we broke down by generation. And so you can see that the younger the generation is, the more ES and G factors into decision making product, the decision making process when making decisions about purchasing products.

00:51:15:21 - 00:51:47:06
Sara Gutterman: Now our consumer audience is not only investing in and buying products from ESG companies. They are, you know, kind of taking action to decarbonize their own lifestyle by driving electric vehicles, increasing the energy efficiency of their home, reducing waste, turning their homes all electric, eating organic food, buying sustainable products. They think that the best way to decarbonize is adopting renewable energy, electrifying transportation and buildings, and then reducing emissions from industry and manufacturing.

00:51:47:12 - 00:52:13:00
Sara Gutterman: And they believe that decarbonization strategies for companies result in enhanced innovation, generate positive brand equity and yield greater financial returns, and also mitigate risk. Now, when we shift over to our builder insights and we ask our builder audience and again these are leading edge, early adopter, first mover builders, what the main driver is for adopting ESG into their businesses.

00:52:13:00 - 00:52:52:11
Sara Gutterman: The first is increased access to capital. The second response is meeting consumer demand. And then the third is meeting investor demand. So very kind of finance and sales based. We have also seen that about 55% of our builder survey responses, respondents tell us that they have seen an increase in ESG requirements when applying for for financing. And they about, let's say, nearly 45% believe that adopting an ESG strategy is important to the long term success of their company.

00:52:52:11 - 00:53:30:04
Sara Gutterman: And almost 30% believe that adopting ESG practices for the long term success of their company is extremely important, and about 65% have seen an increase in demand for ESG compliant buildings in just the past year. So that's a pretty big demand increase. Now, when we ask our builder survey what types of ESG investments in the building sector they think will have the greatest growth potential in the next five years, it's first water and efficient HVAC systems and sustainable materials in general, and then demand side energy management systems.

00:53:30:06 - 00:53:52:29
Sara Gutterman: When we ask what the main drivers are for their company for building a sustainable supply chain. So this is important for the manufacturers. It's access to accurately accurate and reliable data for disclosures and to prevent greenwashing claims. Those are two of the top responses. Develop innovative products and solutions, and then also respond to external pressure from investors and consumers.

00:53:52:29 - 00:54:28:26
Sara Gutterman: So you can see that our builder audience is telling us that they need enhanced accountability and sustainability from their suppliers, the vendors and other partners in order to enhance their own transparency and accountability. It seems that for our builders, environmental, social and governance, you know, they're not too far. This is a ranked and weighted average, so it's not too much of a dramatic difference between the INS and the G in terms of what they prioritize and measure within their company.

00:54:28:29 - 00:55:03:28
Sara Gutterman: And you know, interestingly, and this was a surprise to me, you know, let's say about 70% of our audience believe sorry, 60% believes that they are prepared for increased regulatory oversight, either because they already exceed current requirements and can transition to new requirements, or they're in the process of becoming prepared and developing an ESG strategy that, you know, can withstand that shift in regulations and oversight.

00:55:03:29 - 00:55:33:09
Sara Gutterman: So that's the data I wanted to present. So let me just summarize and with, you know, the fact that, you know, there is much ground to cover in terms of determining ESG guidelines with respect to shifting compliance and regulatory landscape, in terms of implementation and measurement and reporting and accountability. But, you know, certainly one thing is sure that, you know, the direction of travel is clear.

00:55:33:10 - 00:56:04:14
Sara Gutterman: And, you know, if you're not already considering ESG for your organization, frankly, you know, the train is leaving the station. And sorry to be so cliche, but you really want to hop on it. And, you know, again, hopefully I have demonstrated the tangible risks and the investor demand. But as much as anything else, because we are in the building industry, I just want to, you know, go back to the fact that today's homeowners aren't just looking for net zero electric, healthy, resilient, connected homes.

00:56:04:14 - 00:56:32:24
Sara Gutterman: What they really want is a sense of security, safety and stability in troubled times, purpose and meaning in a confusing world, and authentic leadership that really stands out like a beacon of truth. And, you know, I think that ESG is certainly one way to provide that level of orientation and optimism that consumers, especially those younger generations, are looking for.

00:56:32:26 - 00:57:02:11
Sara Gutterman: You know, because I think they're looking to do business and by products from companies that make their lives safer and help them selves become more sustainable. And I think that, you know, we should all be prepared for these younger generations to continue asking big questions that are tough and to the point. And so we need to prepare our strategies and have not just the commitments in place, but the validation and the accountability and the measurement.

00:57:02:13 - 00:57:44:05
Sara Gutterman: You know, and I think that if you can provide that, that's how companies, whether you are a building professional or a manufacturer or some other related type of professional, can really create enduring bonds, because today, you know, relationships that matter have never been more vital, nor have they been harder to craft. And, you know, we see this increase in the desire to believe in better from these younger generations where they want purpose and truth and meaning more than they want a lot of stuff, or a really big house with a lot of square feet, you know, they're much more discerning about what they buy.

00:57:44:05 - 00:58:12:09
Sara Gutterman: And these younger generations actually, is to climbing the consumerist ladder that says that what you have and what brands you where determine your identity. So, you know, again, I think that is a really clear and important pathway to get to where we need to be from an environmental standpoint, but also to repair some of our social issues through clear governance, through clear measurement and transparency.

00:58:12:09 - 00:58:33:02
Sara Gutterman: And so I'm going to wrap up there. We've got about let's say seven minutes for questions. So Mike I'll turn it back over to you. Thank you everyone for listening. Feel free to email me if you have any questions that we're not able to address today. And please go to our website at Green Builder Media and click on the tab.

00:58:33:03 - 00:59:03:06
Sara Gutterman: You can sign up for our ESG for building RSS feed, which will get you delivered into your inbox, articles and blogs about ESG and related topics. And then ultimately, it will get you access to our set of defining principles, which goes into much more depth into all of these things. Finally, I will just make a shameless plug for the fact that Green Builder Media does offer ESG consulting services.

00:59:03:06 - 00:59:29:10
Sara Gutterman: And, you know, if there's a nuanced area that we can't address ourselves because it requires specific subject matter expertise, we do work with a wide spectrum of other outs, other subject matters, and outside experts, excuse me, subject matter experts and outside organizations. There we go that complement our expertise. So again thank you. And Mike, take it away for about seven minutes.

00:59:29:12 - 00:59:57:19
Mike Collignon: All right. Thank you. Sarah and I started out describing as a positively positive person. But you are also a positively passionate person. So for all that you presented here and yes, please send in your questions for Sarah. Now, we do have one already from Sean who wanted to know what is the process for Green Builder Media to research product innovation?

00:59:57:21 - 01:00:31:20
Sara Gutterman: So that is a good question. And let me give a two layered answer. The first layer is since our inception 18 years ago, we have always endeavored to be on the leading edge of sustainability. And so we've been doing this for a while, and our team really understands innovation with respect to the built environment. So we are constantly looking at products and systems and technologies that raise the bar on sustainability.

01:00:31:23 - 01:01:08:21
Sara Gutterman: So it's something that's just inherent in our DNA. And we've been doing for a long, long time. So we do that on literally a daily basis for our editorial creation throughout all of our media channels, specifically with respect to the ESG for Building Initiative, we had a subgroup that was comprised of a really great group of, again, builders, developers, subject matter experts, designers, you know, etc. that also have been on the leading edge of sustainability for decades in their own careers.

01:01:08:21 - 01:01:33:15
Sara Gutterman: And so and then we have a dedicated staff member that is focused on helping to provide research for this set of defining principles. So we gave her direction just based on our own subject matter expertise. And collectively through our group, we went out and, you know, kind of divided and conquered and researched different categories and different types of products.

01:01:33:16 - 01:01:54:09
Sara Gutterman: Now, with that said, our search was not exhaustive and we certainly don't know what we don't know. And so if you have any ideas for innovative products that you'd like to submit to us, either for editorial coverage through Green Builder Media or inclusion in our defining principles, doc, please shoot me an email. I'd love to see what you have to say.

01:01:54:12 - 01:02:21:07
Sara Gutterman: One thing I do want to say about product innovation is I was providing a webinar to a very a group of people from the National laboratories and the Department of Energy and other related organizations, and there was someone on that call that happens to be in the mycelia space. So mushroom based insulation and other related products, which is an exciting sector.

01:02:21:10 - 01:02:43:23
Sara Gutterman: But he kind of got on me for talking about cross laminated timber and bamboo as viable alternatives, because bamboo is quickly growing and cross laminated timber is and efficient use of timber. And he said, how could you, you know, promote would you know, it's natural resource, blah, blah, blah, whatever. He had his arguments. And so just so you know, right now we are taking an all hands on deck.

01:02:43:23 - 01:03:09:11
Sara Gutterman: We need every single thing we can to replace conventional, non sustainable products. We're not advocating for, you know, one category over another. We're really saying look here is the whole spectrum of what's available and what needs to be considered. So we're looking more at the consideration process and decision making process necessarily than any one particular product that we're calling out, or even one particular category.

01:03:09:11 - 01:03:27:18
Sara Gutterman: Because I really do believe that it's more important right now to kind of have a whole menu of products and systems and technologies that we can pick from that are appropriate for a wide spectrum of products, because there's no silver bullet product. If there was, everybody would be using it.

01:03:27:21 - 01:03:52:25
Mike Collignon: So all right, thank you, Sarah. And I've got a question for you as well. But I also wanted to put out a final call for questions from our audience. So you brought up greenwashing earlier. And I guess I'm still kind of wondering how do companies walk the line between marketing their accomplishments while avoiding doubts or concerns about greenwashing?

01:03:52:25 - 01:04:16:05
Mike Collignon: And here's what I mean, Sarah. Most people aren't going to read an ESG report, not unlike most people don't read a company's 10-K or their quarterly SEC filings. Right. So if they tout their own ESG report in marketing, what do they need to do to convince their targeted audience that it's legit?

01:04:16:07 - 01:05:03:24
Sara Gutterman: It's a great question, Mike. And, you know, the real truth is I'm not sure that I have, like, the complete answer. Like, I don't think there is any, you know, panacea or silver bullet to say, you know, that differentiates differentiates between like, here is your totally green washed solution versus one that has some ambiguity. What I will say is that the companies that we work with that do have that third party validation and the certification, and can point to at least attempts to really try to validate, you know, kind of accurately measure and validate their data are the ones that don't get accused of greenwashing, either ever or as often, let's say, the ones that

01:05:03:24 - 01:05:28:26
Sara Gutterman: make claims based on a good marketing spin think are the ones that are more at risk of being accused of greenwashing. And, you know, I think it can be pretty, you know, pretty clear, pretty, you know, black and white in terms of, you know, if you if you have set certain goals and you have achieved those goals, then talk about that.

01:05:28:26 - 01:05:49:24
Sara Gutterman: If you haven't achieved those goals, that's actually okay too, as long as you talk about it. Right. As long as you talk about challenges and you know why you didn't reach something or struggles that you encountered and why you had to pivot. In fact, we have a group that I know you're familiar with. It's called our Next Generation Influencer Group.

01:05:50:00 - 01:06:12:26
Sara Gutterman: It's comprised of Millennials and Gen Zs influencers, just cool people doing cool things and sustainability. And they we had just had a recent discussion with them and they said exactly that. They said, look, I don't need a company to be perfect. I just need them to be honest in order for me to trust them. So, you know, and I think about, like, there was that whole Volkswagen scandal.

01:06:12:26 - 01:06:43:02
Sara Gutterman: It was, you know, years ago about the emissions from their vehicles. And folks wagon had previously had such an impeccable reputation. And then all of a sudden, you know, they were it was unveiled that they were actually lying and, you know, cheating on emissions tests. And all of a sudden, this group of buyers, not necessarily younger buyers for that particular case, but they just decided that they just like they were going to walk away from Volkswagen because they felt lied to.

01:06:43:03 - 01:07:07:19
Sara Gutterman: Right. And it was a thing where they were like, look, Volkswagen doesn't have to have a zero emissions vehicle right now. They just need to tell the truth about what they are emitting. So, you know, I think that the truth is you just need to tell the truth and, you know, be as transparent as possible and then as much as possible, measure and validate, you know, and get that third party validation for your claims.

01:07:07:21 - 01:07:52:02
Sara Gutterman: The other thing that's interesting, there's greenwashing. But now there's something that's called green huffing. Right? So it's these companies that one's very vocal about their ESG and corporate sustainability strategies that because of the politicization of ESG, they're walking back against talking about them, even if they are still implementing them. So green hushing is a thing, which honestly is it makes me sad to see because I just I feel like the way that ESG wins is that we just get rid of the drama, right?

01:07:52:07 - 01:08:15:11
Sara Gutterman: And just make it common sense and show the economic returns and the material benefits to companies. Right? And just say, look, this isn't political, it's not emotional. It's not, you know, sentimental. It's it's just common sense. And frankly, that's what we did with green building. I mean, you were with you've been with us for decades, you know, in this journey.

01:08:15:11 - 01:08:28:19
Sara Gutterman: And you know, the reason why green building and sustainability has been pulled through in the built environment is because it's cost effective now, and it makes sense and consumers want it and investors are demanding it. So same thing with the East.

01:08:28:21 - 01:08:49:21
Mike Collignon: Yeah I agree with you. I think the third party validation is where it is going to get its foothold. And then from there you build that reputation. Because a lot of this is, I don't want to say new, but the ESG component and the reporting component is relatively new. That and that obligation that I think I agree with you.

01:08:49:21 - 01:09:17:07
Mike Collignon: I think it'll get a foothold there. They'll get their integrity and reputation going and it'll just carry on through the day. So. Well. Thank you so much for going through this. And the cognition smart data is always cool to look at. So we really do appreciate it. And we get a lot of positive comments from people, some of our friends and family saying hi, but also people we don't know quite yet have also said, thank you for all this wonderful information.

01:09:17:07 - 01:09:38:04
Mike Collignon: And for those of you who are watching live and you're wondering, hey, I want to check this out again, you'll be able to see the recording. You'll get a link to that a little bit later in the week. I wanted to make sure to not just thank our audience, but also thank our sponsors, Train Technologies and Remanufacturing. Thank you both for your generous sponsorship of this webinar.

01:09:38:05 - 01:09:58:26
Mike Collignon: And I wanted to make a quick plug for our upcoming housing 2.0 Thought Leader webinar. It's happening one week from today. It's going to be September 20th. If you're watching the recording, we will be joined by sustainability superhero Peter Pfeifer and he will discuss climate change, responsive design, and we'll start at our usual time of 2 p.m. eastern time.

01:09:58:28 - 01:10:03:09
Mike Collignon: Till next week. Stay safe, stay healthy and take care everyone. So long.