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State Street cred

By Elaine Cohen (BeyondBusiness) on August 10, 2009 at 1:50pm.


State Street Corporation describe themselves as "the world's leading provider of financial services to institutional investors" with $16.4 TRILLION assets under custody and administration and number one US pension plan servicer.  State Street’s customers are among the largest institutions in the world, including governments, corporations, insurance companies, mutual funds, hedge funds, investment managers, central banks, endowments, foundations, nonprofits, health care institutions and unions. 28,000 employees. Over 100 markets. 

The significant value of CSR in a business such as State Street is in the indirect impacts, and the way State Street change investment habits and behaviors through the way they do their core business. So many trillions make for massive potential to deliver massive positive impact through incentivizing their customers.  This gains airtime in around 6 pages of discussion in the Business section of this report, and focuses on development of Environment, social, governance (ESG) tools for investment analysis, ESG investment opportunities and strategic sourcing plans.

Whilst State Street demonstrates high activity in this area, the actual impact seems limited – only 12 customers are provided with environmental analytical tools for investments (worth only $285 billion in assets) and only 4% of State Street's total assets under management are ESG screened ($60 billion). One of the challenges appears to be the lack of empirical data supporting the proposition that ESG investments are financially rewarding. State Street talk about research they initiated to explore this, involvement in industry initiatives including UNEP FI, Ceres, CDP and more, and emphasize ESG in proxy voting services. I would have welcomed more discussion from State Street about the challenges of increasing customer awareness, interest and commitment to the inclusion of ESG in investment decisions.  The Community section describes how State Street channels investments into funds which support community and environment such as the Massachusetts Housing Investment Corporation for affordable housing, investments to facilitate solar energy use in housing development and microfinancing investments, which is all good stuff.

Stakeholder engagement and materiality gain low-level coverage in this report – State Street uses external stakeholders from Ceres to provide input to the reporting process, though little behind-the-scenes discussion is disclosed.  For the first time, an employee materiality assessment workshop was held, which sounds positive, though the report could have stretched to disclose how many employees out of the possible 28,000 actually attended this one-time workshop. There is no evidence in this report to suggest leading-edge stakeholder engagement, no generous disclosure of stakeholder feedback, clear prioritization of material issues or description of responses to these issues.  However, it appears that State Street is slowly adopting a broader approach and we might hope to see more of this in future reports. 

State Street reports strongly on employee impacts (9 pages), including a Global Inclusion Program with targets integrated into management compensation, a new  "Office of Flexibility" to drive flexible working arrangements, and growing employee networks and mentoring. Diversity data is presented clearly and women and minorities appear to have good representation at all levels of the business (though average wages for women in State Street US operations is still 13% lower than average for men).  Turnover rates at 16-19% have reduced, and whilst not significantly high, represent several 000's of leavers year on year. I would have welcomed some commentary on how this is addressed.  Other aspects of employee association, training, development and benefits are covered factually and clearly. I miss some perspective on the level of employee engagement – an employee survey or some other form of employee feedback – as this is not covered in the report. How great a workplace really is State Street Corporation? The bunch of awards they received would suggest a pretty good one.

A weakness of this report is its environmental and carbon footprint reporting – this is evolving and State Street are learning how to measure more comprehensively. However, for a financial services organization with no manufacturing operations, which has been reporting for several years including CDP participation, it surprises me that I cannot find a clear single number for total global GHG emissions, and this relative to previous years. Similarly, the narrative shines with State Street's emission reducing initiatives, but it appears that electricity usage is increasing.  I would have liked to hear why all this good activity delivers the wrong effect.


This report is well structured, precisely worded, styled simply and exudes straightforward and earnest narrative, presented in a methodical and calculated way.  In this respect, it is a pleasure to read. No high and fancy cheerleader stuff, the State Street report is as direct and as to-the-point as you can get, without being boring to the point of yawn-inducing. The design is modest and simple and focuses on content with no over-facing design elements. It may not be a wonder in creativity but it is a model of clarity. Data tables are well set-out and easy to understand.


This is one report from the financial services sector which addresses the global financial crisis in more detail than the prevailing "these are challenging times but we are optimistic" statements. State Street's report covers some of the ways the Company has reacted.  One such example is the statement: "Given that our shareholders are making sacrifices through dividend reductions, we believe that we must also be willing to make our own sacrifices. Therefore, certain members of senior management did not receive incentive compensation for 2008. We also reduced 2008 incentive compensation by 50 percent for all but our most junior employees."  A nice pre-emptive statement, as far as it goes, touching on an area of high sensitivity in the financial services industry.

One of the true highlights of this report is its assurance statement. Det Norske Veritas do a superb job with a 5 page Statement (despite non-environmental data not being verified) which is a delight to read, includes focused recommendations and adds good weight to the credibility of this report.

Bottom line for State Street: This is mainly a report about direct impacts, which leaves room in future reports to reflect the real challenges of using this business's financial leverage to change institutional investor behavior – something I suspect doesn’t really reach its full potential in this report. However, this is a straightforward, systematic, clear report with a reasonable measure of street cred.


1. Bite the bullet on reporting indirect impacts, not only inputs, more extensively.
2. Include fuller disclosure of stakeholder feedback and materiality prioritization.
3. Sharpen up environment and carbon footprint reporting

Elaine Cohen is the Joint CEO of BeyondBusiness Ltd, www.b-yond.biz, a leading CSR reporting and consulting firm in Israel, specializing in a wide range of consulting services for the development of social and environmental responsibility of businesses. Elaine Cohen is an independent reviewer and has no relationship with the reporting company.