ESG Talk: Driving Accountability for Financial and Social Impact ft. Sarah Chapman, Manulife

Key Takeaways

Join the conversation with Sarah Chapman, Global Chief Sustainability Officer at Manulife, as she and host Mandi McReynolds discuss how business can drive stronger accountability for both financial and social impact. They share examples of how ESG is a team sport, strong company governance structure, and predict what will be top of mind for ESG in five years.

 

 

S1 Episode 7: ESG Talk | Transcript

 

Mandi McReynolds  

Hello, and welcome to ESG Talk. We're so glad that you decided to take time to be with us today. Remember, you are a part of shaping the show. So we're going to have a question coming out on LinkedIn in the next week or so we're we're going to ask you to help us shape the second half of this season. So be sure to provide your feedback there or @ESGTalk on Twitter, and help us create the show you want and crave. If you can be so kind, please leave a rating for us and comments so that we know how to meet your needs and your demand. Well, based on feedback, we really wanted to hear from the practitioner perspective. And I'm so delighted to have from Manulife, Sarah Chapman, with us. And here's some reasons why. When you look at Manulife, it's an organization that has a global landscape. They work in Canada, Asia, and Europe. And if you're located in the US, you may know them as John Hancock. But here's two fun facts about Sarah. First of all, she's a life long learner. Sarah has co-authored and published 15+ research based, peer reviewed textbooks, articles, case studies, on corporate governance, impact measurement, communication, during her PhD at the University of Technology in Sydney. The other part that I'm so happy to share this news with you. She was known as the Sustainability Leader of the Year in PR News in 2022 Social Impact Award and named one of Sustainability Magazine's Top 100 Women in Sustainability. Sarah, thank you for giving us your time and being with our audience today. Welcome to the show.

 

Sarah Chapman  

Thank you, Mandi. I'm so pleased to be here.

 

Mandi McReynolds  

So as someone who's listened a little bit to the show before, we do fun, one or two conversation starters, to help our guests get to know you a little bit more. You have worked, Canada to Sydney to the US as this lifelong learner, like we said, so I want to know what was your favorite course and why?

 

Sarah Chapman  

So my favorite course going through university was actually in my undergrad. And it was, if you can believe it a neuroscience course focused on concussions. Now, why that's relevant is it's actually that course, that drove me into the corporate responsibility space, and now what we call ESG. Because what I realized through that course, and I was doing a science degree at the time was that so much of what we didn't understand about the neuroscience issues, could actually be predicated back to the fact that in professional sport, the doctors on the field had a, you know, financial interest to get the players back. And that's actually what was causing many of the prolific concussion issues. And so it actually catapulted my interest into what is really the responsibility of organizations, to their employees. And that, for me, was the turning point, the TSN Turning Point to use a sport analogy, in that, in my career, and my focus on really the responsibility that organizations have.

 

Mandi McReynolds  

I absolutely enjoyed you sharing that story because I think that's a piece of my own journey and my career. The 10 years in higher education. I really learned about how the brain works and how change management works based on how humans learn and develop. And it really is truly interesting how a course that wasn't necessarily sustainability related can really shape your direction as a practitioner. And we always have to be open to the field and the differences, different perspectives. I'm sure that makes you a lot stronger as the Chief Sustainability Officer today. So thank you for sharing that. Now, we have a lot on our plate both personally and professionally. So when your head hits the pillow at night, what's on your mind, what are you thinking about?

 

Sarah Chapman  

So quite practically, what I'm thinking about which of my two daughters, so I have two daughters under two. I had two COVID babies. Which of them is literally going to wake me up at night. But more philosophically, I always try and finish the day being inspired by something outside of you know, my ESG and sustainability lens and really draw inspiration from history and from technology and really cool innovation. So I'm usually just trying to wrap my head around, whatever I've just been reading.

 

Mandi McReynolds  

Yeah, and I think that's a really good piece too, as you think about, you know, this part of your brain where you're like, okay, at night, what do I reflect on? And then in the morning, what do I reflect on? And I think those are the beautiful things, whether it comes with the personalness of COVID baby kids, or, you know, in my case, I had the death of my dad. And I learned a lot through that experience in COVID. And it restores us to getting centered to what matters most, both personally and professionally. So as we think about what matters most, I really have loved how Manulife and your team have built out a really strong sense of accountability and governance around ESG, and how it can be integrated to derive business, both financial and social impact, to create that accountability for what matters most for the organizations. Can you tell us how that structure was developed? Can you give us context to why that accountability matters? And really unpack that for us today.

 

Sarah Chapman  

Sure, so I'll anchor this in sort of three sort of main points. The first one is that ESG is absolutely a team sport. So ESG is, and, you know, sustainability and social impact is not something that is done by one person in an organization or one team. In order for, you know, sustainability and social impact, to truly have, you know, the real value creation that it needs to have, it needs to be embedded, you know, across all teams, and as a lens with which, you know, business decisions are made. And that's certainly how we approach it at Manulife, I think about it as a lens with which we make all business decisions, whether it's related to our people, and our you know, wellness benefits, or how we're thinking about, you know, our own people. Whether we think about the way that we interact with our customers, and, you know, the different innovations and products and services really thinking about how do we maximize, you know, the social and environmental impact and actually mitigate perhaps the negative impacts as well. So really it's a team sport. And I would also say that there is an increasing amount of industry collaboration and industry accountability that we're seeing. This is one area where there really is, regardless of peers competing against each other for business, there's a large amount of cohesion. And again, that sort of team sport spirit, where we're not all racing on a track, you know, against each other, we're actually all on a soccer field trying to get the ball into the same net. And I think that's just a really important sentiment, as we think about, you know, where this industry is going is certainly it's a team sport. The second one is tone from the top. And yet, you know, the foundations that are laid, you know, at the foundations of an organization. So tone from the top is critical. To have leaders that are bought in not only looking at this from a risk mitigation perspective, but truly also the value creation. So the tone from the top becomes critical, while still also understanding and ensuring that the foundations are there and the real groundwork is being done. On the accountability side, one of the things that is helping to drive accountability in the sustainability and social impact space, is embedding ESG targets into executive compensation. And in 2021, when Manulife launched our Climate Action Plan, at our AGM by our CEO, we made it very clear that this was a priority all across the organization and demonstrated that from an accountability perspective by having it linked to executive compensation. Which I think is a really important sort of nod from that perspective, to drive that sort of accountability. And then also just, you know, similar to the team sport comment, but making sure thirdly, that this is embedded in business strategy. So that's how you build good accountability is making people see, you know, that it's not just a side of desk thing, but we're building in the the accountability and the governance into everyone's roles.

 

Mandi McReynolds  

And tell us how, as you look at your governance structure, is it an executive team that is across the board reporting into the board? Unpack that for us a little bit more.

 

Sarah Chapman  

So at the top of the house, we have our board that ultimately has oversight over ESG. We have a corporate governance and nominating committee, that I am and our CEO reporting to you on a quarterly basis specifically on ESG matters. We then have an executive Sustainability Council, which is nine members of our executive leadership team, plus myself, that meet on a monthly basis and are looking at all things ESG from a strategy, reporting, disclosure perspective. And that includes everyone, including our CEO, but also our Chief Risk Officer and our Chief Financial Officer and our Chief Investment Officer, and all of the people that really would be, you know, guiding not only the strategy, but also ultimately responsible for the execution. Again, to my point of team sport, it's it's not just the Chief Sustainability Officer, everybody has both accountability and responsibility for this. Underneath that we've got a center of expertise that really pulls in all different business units and group functions that come together to really drive, you know, overall, the strategy. And then we have individual task forces. So our climate change task force and a DE&I council that are all really on the ground, making sure that you know, that we're continuing on the journeys that we need to. So it's multi layered. And again, really driven tone for tone from the top, but ensuring that again, there's there's a groundswell of people that are focused on this across the organization.

 

Mandi McReynolds  

I so appreciate the fact that you said it's a team sport. We've shared that in past episodes and other guests. I think it's probably the theme of of the season. And the ability for us to have that strong example that you demonstrated of what does good governance look like, the engagement of your CEO. In a previous chat, we talked about the Workiva survey where we did 1,300 practitioners, and organizations around the globe in 13 markets, and this internal/external Task Force or a combination of the both really does unlock business value. And as you think about this, moving towards being tied to compensation, you probably wouldn't have gotten to that step had you not had that overarching executive buy in and the commitment of your CEO behind it. Can you tell us a little bit more about this next step of compensation? And what are you learning from that?

 

Sarah Chapman  

Ultimately, as we think and this is, as we think about how ESG metrics are tied to executive compensation, there's a couple of things right. We look at it from an employee engagement perspective, we look at it obviously, from a diversity, equity and inclusion target perspective, as well as our climate. And, you know, I think some of the challenges with respect to some ESG targets is the long term nature of the achievement of these targets, and the variability on an annualized basis. So if we take emissions as an example, so we've set, you know, at 35% reduction by 2035, emissions reduction target, and that's not something that you can sort of perfectly map out on a, you know, on an equal annualized basis, because things happen in the world, for example, COVID, right. And we saw that with so many organizations whose own emissions dropped, so significantly, for a variety of factors, limited business travel, you know, manufacturing changes, and yet now starting to ramp up, and that doesn't mean that progress hasn't been made, it just means that the world has changed. And so also, as we think about some of our emissions targets that are with respect to our real estate, you know, those things, again, don't happen on an annualized basis. They are capital improvements that are made that will, you know, sort of waterfall so that becomes challenging as you think about how do you how do you think about ESG metrics on an annualized basis when they are very long term? And we could have the same conversation on the Diversity, Equity and Inclusion side of things as well. So that I think, is one that, you know, we continue to work through and make sure that we're setting appropriate annualized targets, but also thinking about this in the long term.

 

Mandi McReynolds  

Well, I think that's where compensation will evolve as the practice evolves to and I love that your organization has taken a step of not only strong governance, building the team, but then beginning to look at then how does this play out in the compensation realm and going through that with some flexibility. I think that's why we're starting to see well, is it tied to bonuses, which may be where were some companies and organizations start. Is it tied to different pieces and how do you allow for that flexibility over the long term as even in some organizations innovation. Like I think of our manufacturing colleagues, right where innovation is needed before they can actually say the plan to a net zero target will come to fruition, or talent and development might be needed or different recruiting practices or university partnerships that often take two to five years to really develop and start to cultivate the talent from a diverse pool. So I really appreciate your transparency. And thank you for for the authenticity of sharing how that journey has been has been for you. As we look to where your work has done, and you mentioned these KPIs and metrics, you have a very strong Impact Agenda that has allowed you to delink to that accountability, can you share a little bit about what differentiates your Impact Agenda and how that came to be?

 

Sarah Chapman  

Our Impact Agenda is essentially the prioritization of the key areas with which we know and believe Manulife to be able to have a credible impact from both a social and environmental perspective. And so our Impact Agenda really reflects three key pillars of priority for the organization, one around empowering sustained health and well being, the second one are driving inclusive economic opportunity, and the third one around accelerating a sustainable future. Now, what makes this unique in some ways, many organizations, when they're thinking about their sustainability strategy, or their their corporate purpose, or impact strategy, whatever the rhetoric, we want to use, many assemble it and think about it by stakeholder. So they'll say this is our people, our you know, our planet, our environment and our products. And we've actually taken what I would call an issues focused approach. So we focused on what are the issues in the world, that we as Manulife have, you know, the authenticity and credibility and, frankly, right to address through our business. And it's a multi stakeholder approach within that. So when we think about, you know, empowering sustained health and well being, as a life and ealth insurance company, it is in our DNA to be focused on the health and financial well being of our customers. At the same time, we are equally as focused on that for our own people, as well, obviously, as broader communities. And so it's a multistakeholder approach, under each of those key issues that we believe Manulife really is truly driving a, you know, a measurable and meaningful social and environmental impact against. And that's, you know, this is a strategy that was that was very much built, bottom up to understand where is it across our business. Again, looking at where we credibly are already having an impact that we can accelerate, you know, and looking at where it is that we as Manulife really do focus from a business perspective, in terms of driving social and environmental change. And really built it from that ground up. I would say the ethos behind it is 100% focused on shared value. And when we talked about shared value, we talked about how do we actually drive economic and business opportunity through addressing societal issues. In other words, we believe that there is business value to be created here, that this isn't just a cost to the business, but that there is actually, you know, real value creation that comes from from focusing on all of these. And happy to give a few examples of, across the the pillars, where we're really seeing business impact, both on the social and environmental perspective, but also on the business and sales side.  

 

Mandi McReynolds  

I appreciate that, because I think that CeFPro research we had shared earlier in the podcast, and then in that chat that investors and bankers were like, you know, everything's so boilerplate, you know, it's like, you could copy and paste. And so this strategic approach that you and your executive team went through, really allowed you to also prioritize what you're going to say no to. And what I look at and say that beautiful strategy that is where you have influence and authority. And I think so many can learn from your best practice there is I agree that there's this part where it's if you chase every stakeholder, you're going to chase every strategy and you're going to end up with peanut butter or shotgun strategy. And also when people come to you and say, Hey, Sarah, you know, I have this, and I joked with someone was when somebody asked a question around, what was our opinion as a technology company around the future of agriculture and cows being the next climate crisis? And I was like, we have nothing to do with that. That's not the impact of our business. That's not a defined stakeholder based on our stakeholder materiality. And, you know, great if there's a somebody in agriculture, who can answer that for you, you should go talk to them. But that's not really where our businesses is and I'm okay, marking no to that question, or I'm okay, not answering that individual request, because it's not material to my business. So I really love how you went around that effort. And I think that's where many can learn from your great practice. You mentioned business and societal value, and I want to make sure in our last couple minutes together, we get to talk about that, because that's the other wonderful part is you've tied it throughout your pillars to drive capital to drive business value, as well as a societal value. Can you give us some of those examples that you want to share?

 

Sarah Chapman  

Sure, so one, you know, most obvious one maybe is in our health insurance area. So we think about, you know, our behavioral insurance, our focus on behavioral insurance, and our real focus on incentivizing our customers towards sustained behavior change. Because like I said, we are invested in the health of our customers, and it's a win win win. The healthier our customers are, you know,  better off we are as a business, and the better off the world is. And so through things like Vitality and our sister product MOVE in Asia, we are incentivizing healthier behaviors, which in turn is driving, you know, reduce premiums for our customers, but also, you know, a better business outcome for ourselves. The other area of significant interest, and real leadership for Manulife, many people don't know that Manulife is one of the largest institutional managers of agriculture and timber in the world. So interestingly, Mandi, to your point on agriculture, that is actually for us a space where we say yes to, because we really do have a very interesting, incredible products that there. So when we think about that nature based solutions. So when we think about timberland, or to certain extent, agriculture, they really represent another significant way for investors to meet their sustainability objectives. So what we call living solutions, so inspired and supported by nature, they actually offer viable and investable ways to mitigate climate change, and protect biodiversity and build resilience into ecosystems and communities. So, you know, one example is the ability of forests to actually capture and store carbon dioxide. It's actually broadly recognized as one of the most effective and cost efficient methods to mitigate climate change. And so with our timberland and agriculture assets, we are well positioned to help drive the creation and adoption of these types of investments solution. So that's a real business opportunity, but one that comes with such a significant, both social and environmental impact.

 

Mandi McReynolds  

I love it. And I think that's a really good example of, you know, that you may find other opportunities to create societal and product impact that isn't the first thing somebody thinks about your company. But it creates real differentiation, different ways that the market can look at you. This time has gone by so fast, I'm sure we can spell probably three more episodes as we unpack in the work that you've done. And what I love about you, as a lifelong learner and your research side is you're often able to dig deep into the research and the practice and then think about the future. So our close out question for you, Sarah, is five years from now, you know, you're hopefully back on ESG Talk, and you and I are looking back and saying, Well, what are we, you know, what are we thinking now for the field? What do you think we'll be talking about five years from now?

 

Sarah Chapman  

Yeah, I think there will be a real reckoning point. You know, if we think about where we're at in five years, 2027. We'll be coming up very close to a lot of the 2030 targets that the companies have set with respect to both, you know, diversity, equity and inclusion and climate change. I think there will be a real sort of look around to say, Are we on track? And are we making the progress that we have stated, you know, we've come through this journey over the last few years of a, you know, what are we doing should we set targets now, we've set the target that now, you know, a lot of companies are going to be coming to us to an important head to sort of reset, and really demonstrate progress. So I think we'll be well in terms of knowing whether we're on track for many of the very significant, ambitious targets that companies across all industries have set.

 

Mandi McReynolds  

But I think it's also will be that time where the data is available for us to really understand what COVID really did both personally, mentally, for organizations, kind of as we opened the show, right? You will have this seven year look back and go now what's happening to the COVID babies? What's happening to somebody my daughter's age, that's the you know, 12-13 now that's going to move forward and be ready for college. You know, what is her her life gonna look like after a reflection of a global pandemic. And I think organizations, like you said, closer to goals, further away from the pandemic. I think we'll have a better sense of how it really changed us as society in any significant global event? Well, thank you so much for sharing your best practice with us and getting real practical with our listeners. As we close out, we'll make sure to include Sara's LinkedIn so that you can connect with her and follow her to hear the latest of what's going on. We'll also put the Manulife sustainability report in the show notes so that you can can do that. As we tune into future episodes, we've got a chat coming up, where we're focusing on the book Gloom to Bloom: How Leaders Transform Risk into Resilience and Value. So fitting for Sarah's talk around the value for us to build on that with the author interview coming up. Have a great day and we'll talk soon.