A generation and transmission (G&T) electric co-op was receiving inquiries from its credit ratings agencies about its Environmental, Social, and Governance (ESG) efforts—with the most interest on the “E” as its ratings agencies indicated environmental performance has the greatest potential impact on long-term access to capital. Additionally, over the past several years, there was increasing member interest in environmental issues—specifically carbon emissions. Though the co-op had established and published carbon-emissions reduction targets and has long emphasized and established policies to ensure sound governance practices, its leaders recognized the topic of ESG is not going away; “so it is important for us to ground ourselves in the ESG issues most material to our stakeholders.”
Examples of Materiality Issues Included in Materiality Assessment
ScottMadden conducted this materiality assessment using a multiphase approach. We began by working with co-op leadership and its board members to scope the exercise by agreeing to relevant ESG issues and aligning on stakeholder groups to be included in the assessment. We then captured inputs from stakeholders through various methods of engagement from research to surveys to interviews. The results from the assessment as well as an overview of potential next steps were summarized in a final report.
Stakeholder Detail: Board Members
The directors represent the interests of the residential, commercial, and industrial customers at each of the distribution cooperatives that purchase power from the G&T co-op. Based on the interviews conducted, directors appear to recognize that governments, customers, and the culture are shifting on ESG factors, particularly with regard to Environmental factors like carbon emissions, and that there is need to pay attention to the topic.
Employee Group vs. Board Member Importance
Environmental: 11 of the 16 issues received higher
importance mean scores from the employee group (4.22) than from board members (3.96)
Social: 10 of the 13 issues received higher importance mean scores from board members (4.55) than from the employee group (4.32)
Governance: 12 of the 15 issues received higher importance mean scores from board members (4.74) than from the employee group (4.56)
Sussex Economic Advisors is now part of ScottMadden. We invite you to learn more about our expanded firm. Please use the Contact Us form to request additional information.