Environmental, Social and Governance Decisions Leading a Tectonic Shift

“Capitalism is the biggest system we ever invented but we 
need to try and make it better so that it works for the planet
and people. We know we don't want to have all of the
excesses and negative externalities.”
Marcelo Palazzi, Co-Founder B Lab

The Annual Construction Industry Network Global Roundtable 2021 hosted by the Young Presidents’ Organization (YPO) brought together an impressive lineup of world class speakers and panelists over three days. The YPO Event Champion Ken Colao, ‘77 and Chair of our Advisory Board and Vice Chair of NJIT's Board of Overseers, chose the topic of Environment, Social and Governance (ESG) with a focus on education and leadership. The themes of Building Awareness, Embracing Change, and Leading underscored the practical learning experience. Colao organized the attendees into Forums in groups of eight who met once pre-event and then at the close of each day where members engaged in dialogue and exchanged ideas. He retained professionally trained facilitators who moderated each Forum to ensure a high impact learning experience and actionable initiatives for attendees to take away. “Our Construction Industry Network (CIN) is focused on what is set to be one of the biggest disruptors in the industry - Environmental, Social and Governance (ESG) - our members will get the opportunity to learn new insights, reset practices and lead with inspiration. Leading experts will raise our awareness about the implications of ESG to our industry.” Colao proudly noted, “Of the 36 speakers, panelists and interviewers 58% were woman and 67% were woman and BIPOC from seven countries and four continents.”

These experts came from the financial, energy, real estate and infrastructure sectors along with academics, architects, management consultants and organizations like B Lab, speaking together on topics including investing in a sustainable economy, what growth and social impact might look like in the context of climate change, sustainable practices in construction and healthy living and work spaces post pandemic. 

In an article entitled ‘Why ESG Can Make or Break Your Company’s Competitive Advantage’ Richard Steel, who presented on the opening day of the roundtable on the evolution and impact of ESG, writes that, “Your customers, clients, vendors, employees and shareholders expect more from you today than ever before, regardless of your business or industry. The latest metric is where you stand on environmental, social and governance (ESG) issues. In simple terms, how does your company treat their people and the environment, and what do you stand for.” 

Larry Fink, Chairman and CEO of BlackRock, an American multinational investment management corporation, has articulated this trend to the business leadership community. In his letter to CEOs, The Transition To Net Zero Is Fundamentally Reshaping The Global Economy, he states that “I believe that the pandemic has presented such an existential crisis – such a stark reminder of our fragility – that it has driven us to confront the global threat of climate change more forcefully and to consider how, like the pandemic, it will alter our lives. It has reminded us how the biggest crises, whether medical or environmental, demand a global and ambitious response.”

Steel supports this perspective pointing out that, “And if you think ESG is just a passing trend, consider that BlackRock calls these changing attitudes a “tectonic shift.” Presently, the total valuation of ESG assets is around USD30 trillion. That’s more than 25% of the managed assets in the entire market. That percentage will increase as we experience a massive transfer of wealth called ‘The Great Wealth Migration.’ This migration is USD68 trillion transferring to future generations, and they consume and invest completely differently than baby boomers. Only 22% of boomers express interest in impact investing. For Gen X, it’s 31%. And 71% of millennials report interest in investing in impact-minded corporations. In just 2020 alone, more than 1,500 companies announced goals to become carbon neutral, three times as many as in 2019. There are now 2,706 sustainable funds available that meet ESG criteria, and inflows to ESG funds rose by 72% in Q2 of 2020.”

Day three focused on the theme of leading this reckoning forward. Dean Branko Kolarevic organized and moderated the panel on The Architecture of Tomorrow with leaders in sustainable architecture. Panelists included Andrew Whalley, Chairman of Grimshaw, Christopher Sharples, a founding principal of SHoP Architects, Christian Giordano, President and Owner of Mancini Duffy and Deborah Moelis who is a principal and founding member of Handel Architects. 

Kolarevic queried panelists on whether they believe ESG will - as driven by clients - define architecture of tomorrow, and whether those ESG policies are currently affecting what they provide as services. Across the board each are working in different ways with clients to move towards more environmentally sound practices while also taking into account the social benefits that come from good design, yet noted the industry needs to continue to innovate, and pay more attention to the issues within governance such as diversity and representation. 

Andrew Whalley’s perspective on the role of architecture is clear, “Architecture has a social responsibility to put right what we have done wrong – 36 percent of carbon emissions come from buildings, 70 percent overall come from cities. And solving the problems won’t always cost money. With our own buildings, Grimshaw found that switching to renewable energy was actually a saving. We must walk the walk as well as talking the talk!” 

As Colao noted, “We are all in this together. Change will only occur through your leadership and intentional decisions and actions.”