The Latest Dirty Word in Corporate America: ESG
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The Latest Dirty Word in Corporate America: ESG

Executives switch to alternatives like ‘responsible business’ to describe corporate initiatives

By CHIP CUTTER
Thu, Jan 11, 2024 10:08amGrey Clock 4 min

Many companies no longer utter these three letters: E-S-G.

Following years of simmering investor backlash, political pressure and legal threats over environmental, social and governance efforts, a number of business leaders are now making a conscious effort to avoid the once widely used acronym for such initiatives.

On earnings calls, many chief executives now employ new approaches. Some companies, including Coca-Cola, are rebranding corporate reports and committees, stripping ESG from titles. Advisers are coaching executives on alternative ways to describe their efforts, proposing new terms like “responsible business.” On Wall Street, meanwhile, some firms are closing once-popular ESG funds as interest fades.

The shift in messaging reflects a reality: “ESG is complicated,” said Daryl Brewster, a former Kraft Foods and Nabisco executive who now heads Chief Executives for Corporate Purpose, a nonprofit of more than 200 companies focused on social impact.

The movement to bake accountability into business decisions stretches back centuries; the term ESG gained momentum after the United Nations used it about 20 years ago. Over time, the effort became divisive—derided by some state officials as “woke capitalism,” and criticised by others for putting too much focus on measurement and disclosure requirements.

Many CEOs stress that they continue to follow sustainability commitments made years ago—even if they are no longer talking about them as often publicly. A December survey by the advisory firm Teneo found that about 8% of CEOs are ramping down their ESG programs; the rest are staying the course but often making changes to how they handle them.

Many leaders are more closely examining disclosures, wanting to avoid regulatory scrutiny or political criticism. In lieu of lofty pronouncements, advisers are telling CEOs to be more precise and to set goals that can be achieved. Saying as little as possible is recommended.

“We’ve seen a great deal of reframing and adjusting by CEOs in the ESG arena. Not only of what they say, but also where they say it and how they characterise it,” said Brad Karp, chair of law firm Paul Weiss who advises a number of CEOs. “Most companies are moving forward operationally with their ESG programs, but not publicly touting them, or describing them in different ways.”

When Thomas Buberl, CEO of Paris-based insurer AXA, met in the U.S. last year with the leaders of an asset manager, a fertiliser maker and a tech company, executives suggested that he reflect the newfound caution. “I used the abbreviation ESG, and people taught me not to use that word,” Buberl said. “I said, ‘What do you want me to call it?’”

Few people had a ready answer. Buberl said the importance of environmental efforts and other goals shouldn’t be underplayed. “We need to move from intentions to actions,” he said.

ESG became even more politicised following a spat in 2022 between Disney and Florida Gov. Ron DeSantis. That opened the door to sharp commentary on ESG efforts broadly by more than a dozen other state officials and a pullback by some asset managers. Investors yanked more than $14 billion from ESG funds in the first nine months of 2023, according to Morningstar.

BlackRock’s Larry Fink wrote a letter to investors in 2023 that didn’t explicitly reference ESG, after some states pulled money in 2022 over the firm’s ESG emphasis. State Street in November announced a new voting policy for investors who may not want to emphasise ESG as heavily. Fidelity last year removed language considering potential ESG impacts from its proxy-review process.

On earnings calls, mentions of ESG rose steadily until 2021 and have declined since, according to a FactSet analysis. In the fourth quarter of 2021, 155 companies in the S&P 500 mentioned ESG initiatives; by the second quarter of 2023, that had fallen to 61 mentions.

Adding to the challenges for companies is that some dimensions of ESG, particularly the social goals, can be difficult to quantify. Corporate diversity programs, often part of an ESG agenda, face new scrutiny following a Supreme Court decision on affirmative action and legal challenges from largely conservative groups.

Executives and their advisers say companies remain more committed to the “E” in ESG, wanting to respond to climate change. Some CEOs say that environmental factors are crucial to their business, one reason many went to Dubai for COP28, the U.N.’s climate conference. Climate change is also likely to be a key theme at the World Economic Forum in Davos, Switzerland, next week.

Revathi Advaithi, CEO of Flex, said the manufacturer has 130 factories across the world and there isn’t a question of whether they need to operate in a sustainable way.

“It’s not as though I got a whole bunch of new investors because we had a sustainability report or we were ESG-focused,” she said. “We didn’t do it for that purpose…. We wanted to focus on water reduction, power reduction, all those things. So I don’t view it as, hey, it’s a trend that came today and it’s gonna go off tomorrow.”

Some of the changes leaders are making are subtle. At Coca-Cola, the company published a “Business & ESG” report in 2022; in 2023, it was released as the “Business and Sustainability” report. The beverage giant also renamed committees on its board of directors.

The fiercest critics of ESG say they welcome less discussion of it. “If this trend is decreasing, these CEOs must have realised that this puts them at greater legal risk and costs them customers,” said Texas Attorney General Ken Paxton, who has pushed back against ESG policies, in a statement.

What to call such efforts now remains a debate. Brewster’s nonprofit CEO group advises leaders to discuss initiatives in clear language, explaining efforts to cut water use, for example, or to use terms such as “our people” or “our natural resources.” Brewster said he wants more leaders to adopt the phrase “responsible business.”

“You can be anti-ESG,” Brewster said. “It’s hard to be anti-responsibility.”



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New York Watch Auctions Record Uptick in Sales in the Face of Market Slowdown
By LAURIE KAHLE
Mon, Jun 24, 2024 4 min

Luxury watch collectors showed ongoing strong demand for Patek Philippe, growing interest in modern watches and a preference for larger case sizes and leather straps at the June watch sales in New York, according to an analysis of the major auctions.

Independent and neo-vintage categories, meanwhile, experienced declines in total sales and average prices, said the report from  EveryWatch, a global online platform for watch information. Overall, the New York auctions achieved total sales of US$52.27 million, a 9.87% increase from the previous year, on the sale of 470 lots, reflecting a 37% increase in volume. Unsold rates ticked down a few points to 5.31%, according to the platform’s analysis.

EveryWatch gathered data from official auction results for sales held in New York from June 5 to 10 at Christie’s, Phillips, and Sotheby’s. Limited to watch sales exclusively, each auction’s data was reviewed and compiled for several categories, including total lots, sales and sold rates, highest prices achieved, performance against estimates, sales trends in case materials and sizes as well as dial colors, and more. The resulting analysis provides a detailed overview of market trends and performance.

The Charles Frodsham Pocket watch sold at Phillips for $433,400.

“We still see a strong thirst for rare, interesting, and exceptional watches, modern and vintage alike, despite a little slow down in the market overall,” says Paul Altieri, founder and CEO of the California-based pre-owned online watch dealer BobsWatches.com, in an email. “The results show that there is still a lot of money floating around out there in the economy looking for quality assets.”

Patek Philippe came out on top with more than US$17.68 million on the sale of 122 lots. It also claimed the top lot: Sylvester Stallone’s Patek Philippe GrandMaster Chime 6300G-010, still in the sealed factory packaging, which sold at Sotheby’s for US$5.4 million, much to the dismay of the brand’s president, Thierry Stern . The London-based industry news website WatchPro estimates the flip made the actor as much as US$2 million in just a few years.

At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire
Richard Mille

“As we have seen before and again in the recent Sotheby’s sale, provenance can really drive prices higher than market value with regards to the Sylvester Stallone Panerai watches and his standard Patek Philippe Nautilus 5711/1a offered,” Altieri says.

Patek Philippe claimed half of the top 10 lots, while Rolex and Richard Mille claimed two each, and Philippe Dufour claimed the No. 3 slot with a 1999 Duality, which sold at Phillips for about US$2.1 million.

“In-line with EveryWatch’s observation of the market’s strong preference for strap watches, the top lot of our auction was a Philippe Dufour Duality,” says Paul Boutros, Phillips’ deputy chairman and head of watches, Americas, in an email. “The only known example with two dials and hand sets, and presented on a leather strap, it achieved a result of over US$2 million—well above its high estimate of US$1.6 million.”

In all, four watches surpassed the US$1 million mark, down from seven in 2023. At Christie’s, the top lot was a Richard Mille Limited Edition RM56-02 AO Tourbillon Sapphire, the most expensive watch sold at Christie’s in New York. That sale also saw a Richard Mille Limited Edition RM52-01 CA-FQ Tourbillon Skull Model go for US$1.26 million to an online buyer.

Rolex expert Altieri was surprised one of the brand’s timepieces did not crack the US$1 million threshold but notes that a rare Rolex Daytona 6239 in yellow gold with a “Paul Newman John Player Special” dial came close at US$952,500 in the Phillips sale.

The Crown did rank second in terms of brand clout, achieving sales of US$8.95 million with 110 lots. However, both Patek Philippe and Rolex experienced a sales decline by 8.55% and 2.46%, respectively. The independent brand Richard Mille, with US$6.71 million in sales, marked a 912% increase from the previous year with 15 lots, up from 5 lots in 2023.

The results underscored recent reports of prices falling on the secondary market for specific coveted models from Rolex, Patek Philippe, and Audemars Piguet. The summary points out that five top models produced high sales but with a fall in average prices.

The Rolex Daytona topped the list with 42 appearances, averaging US$132,053, a 41% average price decrease. Patek Philippe’s Nautilus, with two of the top five watches, made 26 appearances with an average price of US$111,198, a 26% average price decrease. Patek Philippe’s Perpetual Calendar followed with 23 appearances and a US$231,877 average price, signifying a fall of 43%, and Audemars Piguet’s Royal Oak had 22 appearances and an average price of US$105,673, a 10% decrease. The Rolex Day Date is the only watch in the top five that tracks an increase in average price, which at US$72,459 clocked a 92% increase over last year.

In terms of categories, modern watches (2005 and newer) led the market with US$30 million in total sales from 226 lots, representing a 53.54% increase in sales and a 3.78% increase in average sales price over 2023. Vintage watches (pre-1985) logged a modest 6.22% increase in total sales and an 89.89% increase in total lots to 169.

However, the average price was down across vintage, independent, and neo-vintage (1990-2005) watches. Independent brands saw sales fall 24.10% to US$8.47 million and average prices falling 42.17%, while neo-vintage watches experienced the largest decline in sales and lots, with total sales falling 44.7% to US$8.25 million, and average sales price falling 35.73% to US$111,000.

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