Mark Fasken: So Jordyn, I thought to kick things off, we would talk about where H&R Block's ESG journey began. So my first question for you is what motivated the company to implement an ESG strategy?
What motivated H&R Block to implement an ESG Strategy?
Jordyn Eskijian: Yeah, definitely. And Mark, thanks so much for having me on the podcast today. I'm very grateful to be a part of it. I think when it comes to the H&R Block story, we're still very much in the early innings of our ESG journey. Our first sustainability report was released back in 2020 and we've made a lot of progress since then. And as you, and everybody knows, the space has just evolved tremendously. But really when we think about our priorities at Block in terms of ESG, they're really driven by three things.
First, investor demands, second, regulatory requirements, and third, our purpose. And really everything we do at Block relates back to our purpose, which is to provide help and inspire confidence in our clients and communities everywhere. The topic of ESG has been of rising importance among the investment community, amongst our management team, the board of directors, our clients, and just the general public.
And so in turn, they're really important to us too. And I think that one of the things we talk about a lot internally, is just that being a responsible corporate citizen that cares for our planet, that cares for our communities, for our people. It's really been a part of our culture and our aspirations at H&R block from the very beginning. Which makes all of our ESG initiatives really just a natural extension for us.
Mark Fasken: Yeah, I think that's great, because I know that there are certainly a lot of companies that are focused on ESG for the same reasons that H&R Block are, but also some companies that are perhaps focused on it because it's, they feel like it's something that they have to do, or if they want to talk to certain investors and they have to have an ESG strategy.
What platforms and frameworks do you prioritize?
Mark Fasken: So it's great to, it sounds like it's just very aligned with the core values and longterm vision of the business. What platforms and sort of frameworks has H&R Block used as you've gone through this journey? And like, how do you prioritize all the different projects that you have in, in play?
Jordyn Eskijian: Definitely. I think that's a great question. And I think when you're making those decisions at the very beginning, crafting your narrative, it can be super overwhelming. There are so many just kind of acronym soup type rating agencies and everything feels urgent, right? You're getting emails right and left about submissions for deadlines and surveys that you've never heard of.
And I think that that's what makes prioritization of those efforts just so important. You have to think about, or at least for us, what we do, is we started to think more about impact. So where can our company actually make a difference? Because that's what matters. And, you know, that's, that's a good story.
And so, for H&R Block, we're a tax preparation company. So we don't have giant factories that are putting off a bunch of emissions. We're not drilling for oil. We don't have really an extensive supply chain. And so when we think about, where can we really make a difference, for example, on the environmental front, it really boils down to paper reduction, the movement to digitization. And so by taking that approach, and thinking about what really matters to us and where we can make a difference, we put together a five year road map and ESG strategy where we have different items built out for each category.
So on the environmental front, on the social front, on the governance front, what are things that we need to accomplish? Or what can we be doing in the next year, in the next three years, in the next five years? And when we were thinking about what else to include in those roadmaps and what to prioritize.
We conducted a gap analysis. And so just looking at the major frameworks are the ones that we wanted to disclose against at the time that were the most relevant to our business. What are our key stakeholders looking at? And realizing there's a level of overlap in some of these areas.
There's a lot of places where low hanging fruit is what we called it. What are these frameworks looking for that we might even already be doing, but we're just not talking about it or, we're already doing these things . We just don't have something disclosed publicly, that people can point to that we're not getting credit for.
And so for us it was, okay, let's get our key stakeholders involved. So you've got the board, your management team, and then our partners in legal, our partners in accounting, you know, getting everyone on board, everyone aligned with what we're doing. How can we best move forward? And then for us, on the investor relations front, it's our job in the ESG space for our company, and our role to kind of shepherd and monitor the process as the guides and the leads on ESG.
And then, once you've got your roadmap in place and everything, it all comes down to messaging. So I think when you take, this is something that we've talked a lot, a lot about internally. When you make the, conscious decision to not disclose something or to, not submit something for a certain framework, I think that's okay. It's just a matter of, having a why. And that's where the priorities and the roadmap comes into play because you can say thanks, or, this is not information that we're publicly disclosing at this time. And we're continuing to evaluate these measures and how they fit into our strategy, because we have one.
And so just having that source of truth to go back to.
Mark Fasken: That's great. And so as it relates to platforms, and there's been a lot of platforms that have cropped up over the last couple of years to help with tracking of information and sort of product management around ESG, is H&R Block using any tools right now to support the process, other than maybe things that already existed internally?
Jordyn Eskijian: Mhm. Definitely. When it comes to measuring performance, I think for us, we're all about progress. And I think sometimes in the ESG space, it can be a little bit of a slow burn, like it can be a little harder, and I wish that it was quicker to come by, because a lot of times the rating agencies and the frameworks that you're looking at, they're a little slower to update their ratings.
When you put new information out there, sometimes it takes six months to a year before they're going to update your rating. And so half of it is just making sure that your latest information is being picked up by those agencies, whether you're submitting it through a portal, whether you're sending it to your contact at the institution, making it easily accessible on your website, having things titled very clearly. I think, externally we have like different rating agencies that we look at almost on a tier. Just throwing, throwing some out there.
It's like, you've got your primary, which might be TCFD, MSCI, Sustainalytics, and then maybe your secondary that are more like, your ISS quality scores or Refinitiv and, you know, you've got GRI and SASB out there too that you're looking at. And then internally, when we think about, you know, progress, we go back to that roadmap that we talked about just a second ago.
Did we disclose what we wanted to? Did we get that environmental policy across the finish line, or you've got these like kind of landmark check boxes that you're going against. But I think that that's the really unique piece about the ESG landscape is you're never really done, right?
The work is kind of always ongoing. And there's always more you can be doing or disclosing or working towards, but in our minds, progress is really the name of the game.
Mark Fasken: Yeah, that's great. It's a marathon, not a sprint. And one thing that you said there that I think is great.
I mean, one is setting out those goals, having a longer term vision, realizing that, you know, you're not going to do it all in a year or two years. It's going to be a long term thing. The other one I really like, and it was actually mentioned in our, I think our first episode that we ever put out, we had Victoria Sivrais from Clermont on and she's talking about frequently asked questions and one of the recommendations that she made was was exactly what you mentioned of, look out there for what are some of the things that you may already be doing that are going to start moving you forward and to your point, you may not actually be disclosing some of these things yet.
But those are very easy fixes. And so a lot of companies are already doing many of these things. It's just a matter of creating documents, putting them on your IR website or wherever they need to go. So lots of great points there. So H&R Block, as you mentioned, produced its first ESG report in 2020, which is crazy.
How do you adapt your strategy to respond to the evolutions in the ESG landscape?
Mark Fasken: It's three years ago now. What's changed since then? And how have you adapted the strategy to remain relevant and responsive to evolutions in the ESG space?
Jordyn Eskijian: Definitely. I think, we talk about all the time, the landscape is just so multi faceted and ever changing. And in the past three years, so we put out our first report in 2020, it's 2023, now we've got our next report coming out in September of 2023. And in the past three years, we've had completely new frameworks emerge. We've had old frameworks merged together to create new frameworks. Scoring methodologies have changed. The list goes on and on. And I know that it can be Almost a little frustrating, right?
When you think you've got your arms wrapped around something, there's, you know, another acronym that comes up. But I think that's where having your priorities and your roadmap is so important because when those new opportunities come across the desk, you can go back to your source of truth and you can see, does this fit?
Is there a place for this? And if it does, you can consider the addition, you've got your teams on board, but if it doesn't, you have your reasons and you can save your energy for other efforts or other tasks. And that's where it's really just a balancing act. How can we balance stakeholder demands with items that are relevant to our business?
And so just having your priorities, having your roadmap is your source of truth and being able to stick to it.
Mark Fasken: Not an easy thing to do, especially for a company with the size of H&R block. And I'm sure there's been been bumps along the way. So what are some of the biggest obstacles that you and the team have run into, and how have you overcome those?
What are the biggest obstacles in managing your ESG strategy?
Jordyn Eskijian: Yeah, absolutely. And I think, how much time do we have?
There's so many obstacles. I think it just comes because the space is so vast. And I think for H&R Block, the biggest thing for us, and I don't know if this is a personal problem, but for us, we have a really hard time with just the industry classifications. So a lot of rating agencies have scoring methodologies that are relative.
And so making sure that you're being compared against companies that are like you, whether it's the same industry, or the same size is super important. And we have a hard time from a competitive standpoint, because there isn't really anyone who does exactly what we do. We're a tax preparation company, but we're competing in the DIY landscape and in the assisted landscape.
And not to mention, we also have year round financial products and services that we've been rolling out recently with Block Horizon strategy. And so I think that it's a battle to reclassify. And I think that one of the first things that people can do, when they're looking at their rating agencies, or they're looking at their scoring and something seems really low or really off is, take a deep breath and go and look at the initial report and see what is my industry classification?
What is my grouping? What is the GICS? What is, what am, who am I being scored against? Because for us not to name the specific rating agency, but we were being compared we're H&R Block, we're a tax preparation company. We were being compared against makeup brands, like L'Oreal and some household cleaning supplies, just stuff that was completely, you know outside of any sort of people.
Mark Fasken: Taxes are a staple. Maybe that was the methodology.
Jordyn Eskijian: Taxes and makeup, I don't know. We were like, what in the world? And we were on the phone with people, we're trying to get this fixed, finding a contact, and through all those conversations, and again, you have to be a little relentless about it, a little persistent, but through that, we were able to change the the classification, the grouping that we were scored against, and our scores went up tremendously.
And it's like, okay, you know, if we could just pay a little bit of attention to who were being scored against, it makes a big difference. And so I think that, just the industry classifications, making sure you're compared against the right type of people in the industry or the right companies.
And then having ownership, I know at the very beginning of our ESG journey, there's so many moving pieces. You've got so many teams involved. You've got IR, you've got your comms, you've got accounting and legal, all these people who are key stakeholders in the business. And for a company of our size, you just need to have a point of contact on who's going to be the ESG person.
And I think that we took some very deliberate steps internally to have ownership. And the roadmapping really helped with this. So delegating and assigning areas to groups, and having quarterly check ins, and making, those standard operating procedures and documentation to know, okay, when it comes to our path to paperless initiative.
This is who we're going to go to. Our company wide recycling program. This is going to be the key point of contact. So just all those baseline things, making sure that those are smoothed out before you go any further are really helpful. And then just one other obstacle I can think of, is when it comes to emissions reporting. That's something that was really difficult for us right at the beginning, it's still kind of a gray space, I know for a lot of companies and there's pending SEC regulations and regulatory requirements that are still coming out about it. But just understanding scope one, scope two, scope three. What they are, how to calculate them, making sure that our calculations are in line with the greenhouse gas protocol.
We ended up, and it was a really great move for us, but we engaged an external vendor, and a consultant to help us with those calculations, just because we didn't have anybody internally, quite frankly, who knew how to do it. But we selected a partner who is very close to our business, who helps us with a lot of our franchise locations, because H&R Block, we've got 10,000 tax offices, nationwide. And so having someone who is also close to our business, we're with someone who knows the business really well, we have a longstanding relationship, and they've done really good work that we feel confident in those numbers that we're putting out.
Mark Fasken: Yeah, that's great. I think even that is a good point of realizing you can't do all of this internally, typically, right?
I think for, especially for a lot of companies who are on the smaller side, it's probably going to be almost impossible to be running an IR program where you have one or two people plus taking on all of these ESG responsibilities. So being aware that you're going to probably need a partner and finding somebody that you work well with.
How to build relationships with the rating agencies
Mark Fasken: I had a question on something that you mentioned because I think it's a really great point is, you know, staying on top of and building those relationships with the rating agencies. And so how often are you as a team revisiting all the different ratings? And then how often are you as a team actually in contact with the various rating agencies or having discussions about, maybe it's reclassifying or different scores that have come out or, maybe misunderstandings or miscommunications around certain metrics.
Jordyn Eskijian: Mm hmm. I think, for us quarterly, we've got contacts at each of our core and that was a part of our road map, right? So what are the key agencies that we want to stay in contact with? Who are we building relationships with? Because so much of what we do in our jobs is IR is relational.
And so when we put out a new marketing policy, or a new human rights, business practices and labor policy, how can we get those pieces of information flowed through and hitting our ratings as fast as possible, because a lot of times, you know, MSCI, they're going to update annually. And if we put out something that just misses their latest scoring update, we don't want to sit around and wait for a full year before those changes are reflected in our scores.
And so I think that, making sure you have relationships or contacts at each of your prioritized agencies is really important. And it starts as, we had one of our sell side analysts actually connect us, because at the bottom of their sell side reports, they were using, I think it was Refinitiv. They were using Refinitiv at the bottom of their sell side reports, and we weren't really pleased with how our scoring was sitting, and so we just reached out to our sell side analyst and said, Hey, can you connect us with someone here and just word of mouth asking people for, for contacts. And that worked really well and into our favor. Or just not being afraid to email the general email. I know it's kind of a black box and a little scary, but if you just keep responding to those general email inboxes, somebody's bound to, somebody's monitoring that thing so you're going to get a response eventually.
We try to really stay on top of it and maintain those relationships just to help ourselves and make things easier moving on. Even if it's just a quick touch base, that's like, " Hey, you know, X, Y, Z contact, things are going great at H&R Block this quarter.
Here are the things that we've done", you know, just something they don't even need to respond to, but we're here, we're responding that way. If a problem does arise, we've got that longevity kind of relationship of, Oh, I know this person, like she's emailed me before, or, you know, the IR team at H&R block, we've had three calls with them in the last three years, kind of that sort of thing.
And we also, whenever we put out new, so whenever our ESG report goes out, this year, we're launching our ESG report in tandem with our annual report. And so, whenever we send out our typical targeting our typical outreach. We've got a running list of not only the rating agencies and frameworks, but also investors that we've met with who have reached out to us specifically for ESG efforts, where we're going to be sending them those two documents and any of the important things that would be helpful for them to see.
Mark Fasken: Perfect. That's great. Okay. And my next question is around value. The big point of debate, I think, around ESG over the years has been what is the real value to the business? And, can you provide an example of how H&R Block's ESG strategy has created value for the company? I mean, you have this roadmap, and so I think that progress, tracking the progress is great.
How ESG adds value for stakeholders
Mark Fasken: I know you've gotten some feedback from investors on, you know, Europe and I don't know. I'm trying to understand what is a KPI that you would use to say at the management level, this is generating returns for the business and for stakeholders.
Jordyn Eskijian: Definitely. I think it's absolutely creating value for the company, and ultimately for our shareholders.
And that's our job in investor relations, right? Is to maximize value for shareholders. That should be the goal of every publicly traded company. And I think that ESG is a topic right now that has people's attention, from retail investors to big name institutional investors.
And it's important for companies to address it. And we've seen a lot of inbound interest from big name institutions who are interested in what we're doing from an ESG perspective, whether it be, what's your stance or what are you doing in the climate space and also from a social perspective. And, you're a tax preparation company, but how are you really making an impact? How are you helping people be better with their money? And so making sure that we're equipped to answer those things, and ready to tell those stories about what we're doing. Our scores are improving the way we're able to talk about these things with people externally and internally because our, our people care, you know, our associates, our tax professionals, they want to know what we're doing at our corporate headquarters.
From a recycling, from a paper reductions perspective. And I think that we feel really good about the progress we've made. We feel good about where we're at and about the path we're on. And I think from a European perspective, I think Europe is a lot farther ahead than the United States.
We've talked to a few European investors and H&R Block has been picked up by their own internal class methodologies. And so they've been looking at H&R Block because their company has its own sort of scraping methodology to pick up companies.
And one of the things I mentioned earlier when we were putting together a roadmap, was we conducted a gap analysis of the agencies or frameworks. And one of the frameworks we did this for was MSCI. So we did an MSCI gap analysis. And we chose MSCI specifically because we had been hearing from our European investors that they look mostly at MSCI and Sustainalytics.
And so I think that making sure you're keeping a pulse. This is something we do really anytime we talk to an investor on this topic or things outside of ESG, our capital allocation practices, you know what we're doing with the dividend, what we're doing with share repurchase. Anytime we talk to somebody, we're asking them, what are you looking for?
Are there any requirements that a company has to have in the ESG realm before you can take a position? What do you think about ESG? Just to keep a pulse on what our current shareholders, what our current investor base thinks. And what our targets are, our outreach contacts, how they're thinking about things.
If we would like to become a part of their, you know, if we think we're a good match.
Mark Fasken: And just anecdotally, I mean, there's a bunch of benefits that you mentioned there. I mean, I really like your point about having employees of the company, many of them are probably looking for progress and for the company to be thinking about about these things and thinking about the environment and social.
Does your ESG strategy impact targeting performance?
Mark Fasken: As it relates to investors and targets, have you found that there have been instances where you've been able to say, we get meetings or have investors who have taken positions who wouldn't have before, because you didn't meet some of their requirements?
Jordyn Eskijian: Yeah, I will say one of the institutions we've been talking to, and you can see in just in 13 F filings, who's holding who, but T Rowe Price, for example, is one that comes to mind and they have a new impact fund that they're piloting.
And we had a couple introductory calls with them because we were picked up in their own internal methodologies, as a company that is doing really good things on the ESG front, because of our new mobile banking solutions, Spruce and the heart behind Spruce. It's a mobile banking product for the financially vulnerable, the financially underbanked population.
And we'll be sharing more about it in our ESG report. That's going to come out a little bit later this year, but we've received great feedback from clients that Spruce, that the tools that we're using from a social perspective, that this product or this platform has given clients the visibility into, and the control over their personal financial lives that they've been missing.
And so I think just little things like that, what are you already doing in your business that you can be talking about? Cause I think there's a lot of things that you're already doing that you don't think can get you credit for things. But when you go through and you're looking at all of those question IDs, and when you're looking at all the different categories, you're like, Oh, my gosh, we totally do.
And, you know, associate engagement survey. That's something we do every year, and I can get credit for that towards like MSCI or towards my, you know, if I just mention it in my SASB index, I get credit for that? Okay, totally. That's such an easy win. And so I think it takes a lot of time, but just reading through those different categories, taking the time to be a little meticulous and in the weeds, it goes a long way.
And those are really great, easy wins to be able to go and turn around and tell your management team. It's " Hey, here's five things that we didn't disclose last year, didn't talk about last year that we are doing this year. And here's the one to one result". Or if you're not sure how to talk about something, I know that one of the things we do is we just, pull up competitors, and it doesn't even have to be anybody in the industry, but we can look at, okay, who's someone who does talk about this and what do they say about it, and use it as precedent or use it as proxy, and then transform it to fit our own business and our own story.
Mark Fasken: And so that's speaking to impact. And it sounds like the ESG program and HR block is making a lot of impact. And we've already talked a little bit about. Performance or progress. And you've mentioned a few times having that plan, but I'm sure that that plan is evolving all the time and changing all the time, depending on changes in the industry, as you've mentioned, are happening constantly.
Other measurement strategies for ESG
Mark Fasken: You mentioned the plan, you mentioned staying on top of the rating agencies, watching the rating, seeing how those are progressing and changing. Are there any other ways in which you measure the progress of the ESG program at HR Block?
Jordyn Eskijian: I think, externally, it comes down to your primary and your secondary rating agencies that you're looking at in the scorings. And then internally going back to that roadmap.
Did we disclose what we wanted to disclose? Did we get those initiatives across the finish line that we said that we were going to do in year one, in year two, wherever you're at in that journey? But I think it really is, I think progress is the name of the game. You're not always going to see that one to one, oh, we put out a new responsible marketing policy or, oh, we talked about product accessibility in this new report that we put out, and you might not see that transferred into your scoring right away, but I would say just being patient with that. And I think as long as you can talk about the progress that you're making and the efforts that you're putting forth, I think from our experience , that's what the investors care about.
Like when we get an introductory email and they're like, Hey, we want to talk to you about climate. Like, why are you not doing this? Why do you not have this in play? It's all about these companies are doing this, why do you not have this? And I think if you can just get people on the phone and explain to them, we're looking into these things.
We are aware that other companies are doing this. Here's where we're at in our journey, and just really walking them through, we're not just not putting out a net zero emissions target right now. It's like, no, we want to make sure that everything we put out there, we feel super comfortable with that our legal team have looked at.
We want to do things right. We want to do things in the timing that makes the best sense for our company, not because we're getting external pressures from macro environmental trends that are happening. And so I think if you can just really explain to people why you're at where you're at, why you're doing the things you're doing, and just take them through the progress that you have made.
We've been able to have some really awesome conversations with investors, and really understand more of what they're looking for, which is really beneficial because I think, we've talked about it at the very beginning of this call, at Block, our ESG priorities are driven by investor demands, regulatory requirements, and our purpose.
And really at the end of the day, it boils down to those three things with investor demands at the forefront, because they're the people who are taking a stake in the company. And so making sure that we're listening to what they have to say is of the utmost importance.
Mark Fasken: Absolutely. And I'm sure that it's also helpful if you aren't doing something or haven't done something at that point in time, being able to communicate to that investor or to whoever that stakeholder is, to say, maybe we haven't done it yet, but it is on our roadmap. Do you present that roadmap to investors ever?
Jordyn Eskijian: It's not something we've shared publicly at this point in time, but we've got a lot of eyes on it internally. Our board is aligned. Our management team is aligned. And I think that what comes out of those conversations that's really exciting is when we have a conversation with those investors and they're saying this is what we want to see from you guys by this point, we can go back and we can look at our road map, and we can say, okay, we've got it for five years. This institution is really looking for 10 years out. So how can we continually be evolving this roadmap to stay relevant, to stay on top of the trends. And there have been times where we thought something was really important. We did a whole gap analysis to a rating agency that we thought was super important. We had been hearing a lot of things and then come to find out, you know, there are places where our efforts would be better placed and so we've had to pivot and I think that that's just a part of the journey and we're all learning together, and I think that nobody has all the answers.
I think that it's still, you know, talk about multifaceted, talk about ever changing. I think the landscape is just all of those things. And, just being able to talk about what you're doing to be a little bit dangerous, know enough about everything. And just be able to share that, that narrative of progress and be open to what, to what the investment community has to say.
How to keep up-to-date with best practices and changes to the ESG landscape
Mark Fasken: And to that point about ever changing and knowing enough, let’s go to our final question, which is how, how do you stay informed about incoming or emerging ESG trends, regulations, best practices. What are some of the sources that you are subscribed to or reading constantly?
Jordyn Eskijian: Yeah, I think, word of mouth is part of it. Just professional contacts and friends in IR, in the industry just passing things along. If you see something interesting, just shooting it to a professional colleague. I think that we have phenomenal partners at Leaders Arena, which is a little plug.
They're our consulting team who have just been so instrumental in our ESG journey, helping us build that roadmap, helping us with those gap analysis. They really help us stay up to date, and shoot over relevant articles, or news that comes out that's applicable to our business. And I think just the news in general, professional organizations, I know NIRI will send out things in their newsletter that's relevant.
And one of the things that I, I listened to, as far as a subscription, it's free on the podcast app, you know. We love podcasts. We're on one right now. Exactly. But I think MSCI has a podcast on the podcast app called ESG. Now that is a really easy, it's a 20 minute listen.
Whether you're on your way to work or over lunch, working out, prepping, earning stocks, whatever it is. I think that having information or news that comes from the source. If you're disclosing, or you want to get better, or you want your MSCI scores to improve, go listen to what MSCI has to say about the topic.
If you're interested in knowing more about how to disclose or how to better map to TCFD, go look at TCFD's resources. And I think just knowing where your priorities lie and what frameworks are most important to you or most applicable to your business, look at those sources as the, the, the place to go.
Mark Fasken: Awesome. Jordyn. Those are all my questions for today.
Jordyn Eskijian: Thank you so much. Thanks so much for having me, Mark.
