In keeping with our commitment to stakeholders, we will:
- Continue to recognize the importance of our quarterly dividend to shareholders. We have a history of delivering consecutive quarterly cash dividends for 77 years and increased the dividend 32 times in the last 31 years
- Invest approximately
$1 billion in 2023 to replace and expand water and wastewater utility infrastructure and to replace and upgrade natural gas utility infrastructure, leading to significant reductions in methane emissions that occurs in aged gas pipes - Continue to publish our award-winning Environmental, Social and Governance (ESG) report highlighting the company’s commitment to environmental stewardship, sustainable business practices, employee safety, diversity and inclusion, customer experience, and community engagement
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Advisor Access spoke with
Advisor Access:Would you provide an overview of
Since becoming CEO in 2015, we have consistently grown earnings per share, customer base, market cap, and annualized dividend, and made significant ESG commitments. Our customer base has grown from nearly 958,000 customers to over 1.8 million customers. During this time annualized dividends have increased from
Finally, there has been a plethora of stories highlighting the need for investment in infrastructure across the
AA:
CF: Nearly a third of Essential’s stock is owned by retail shareholders, many of whom have enjoyed our long history of paying dividends. Our most recent increase of 7% not only marks the 32nd increase in 31 years, but also the 77th consecutive year of quarterly dividend payments.
We take great pride in our long, consistent record of delivering shareholder value and believe our dividend policy is indicative of our financial strength. Our dividend payout target remains in the 60–65% range.
AA:In June,
CF: We recognize transparent and detailed ESG reporting is important to many of our constituencies. While it was not originally labeled “ESG,” our work on environmental, social, and governance issues has always been a priority at
Our most recent ESG Reporting Update, which is available for download on our microsite at ESG.Essential.co, was published in
- SASB and ESG Metrics Index - A pamphlet of key ESG metrics updated for 2021, inclusive of
Sustainable Accounting Standards Board disclosures and additional information - TCFD Report - Climate change reporting consistent with the recommendations of the
Task Force on Climate-Related Financial Disclosures - CDP Report - A copy of Essential’s filed 2021
Carbon Disclosure Project (CDP) questionnaire - AGA Sustainability Template - Greenhouse gas emissions (GHG) reporting consistent with industry standards set by the
American Gas Association - ESG Commitment Progress Tracker - A graphic, updated for mid-2022, showing Essential’s progress towards its stated ESG commitments regarding GHG emissions reduction, employee diversity, and supplier diversity
The SASB and ESG Metrics Index also briefly detail key ESG highlights from the past year, including the opening of Essential’s state-of-the-art water testing laboratory, the launch of the new Employee Resource groups, and the formation of a talent recruitment partnership with the Pittsburgh Energy Innovation Center. Recognizing the company’s ESG leadership is what led to Newsweek naming Essential among America’s Most Responsible Companies for 2022 and
AA:Essential has committed to achieve, by 2035, a 60% reduction in Scope 1 and 2 greenhouse gas emissions from a 2019 baseline. How does the company intend to do this and what progress has been made so far on this significant objective?
CF: In
As you may be aware, many utility companies have made net zero commitments, but most are based on the expectations and anticipation of new technological developments, which are not certain. While net zero is our aspiration, we are proud that our current commitment is achievable, and we will provide regular updates to stakeholders with transparency. Like many of our peers, we are actively exploring technologies like hydrogen and renewable natural gas that can be blended alongside traditional natural gas and reduce emissions. Innovation has been at the heart of our company for over 135 years and that will continue as we help shape the future of energy in America.
AA: Essential has also set goals to increase employee and supplier diversity. What steps has the company taken and has it made strides to achieve this goal?
CF: It is critical that our workforce and supply chain accurately reflect the diversity in the communities we serve. We may have a 10-state footprint across the nation, but our impacts are felt locally in every community we operate. Our customers interact with team members who are also their neighbors. We purchase supplies and services from vendors who are also, on a personal level, our customers. This level of interconnection and interdependence is central to who we are and how we operate. Only when we foster a diverse, equitable, and inclusive company are we able to take greater advantage of diverse ideas, perspectives, and experiences that make Essential stronger and more effective. When our communities thrive, all our stakeholders benefit, and through our hiring and purchasing decisions we can influence this dynamic greatly.
We have made two important commitments, each of which is now factored into executive compensation. The first is that we will increase the amount we spend with diverse suppliers to 15% of our controllable spending, up from about 9% when we made the commitment. Through mid-2022, we have reached 13% and have strong momentum. We are collaborating with our Tier 1 suppliers to identify and account for certified diverse Tier 2 suppliers. We participate in networking events with both vendors and peers that have mature supplier diversity programs. Our supply chain group is also a member of various councils and industry working groups specializing in sharing best practices and resources on supplier diversity.
The second commitment is that, based on an analysis of the demographics of the communities we serve, we will achieve 17% employees of color, up from about 14%. This was based on a detailed review of the local demographics of our service areas, with the intent to reflect Essential’s team diversity with the neighborhoods we serve. We have a range of diverse recruitment tactics, many of which are supported through diversity associations and job boards for minorities, veterans, and women engineers, and recruiting new talent from local community colleges and city-based universities. But diversity in hiring is not the only element of success. We also need to build an equitable and inclusive workplace to retain and develop diverse talent. Essential regularly conducts education and implicit bias workshops to foster better understanding of points of view and how preconceived notions impact relationships at work. We also host Diversity, Black, Women’s, and Pride Employee Resource Groups to ensure our employees feel supported in their professional growth at all levels.
AA:How does the focus on ESG impact Essential’s bottom line?
CF: Essential’s ESG performance and financial performance are inextricably linked as a utility, as much as or perhaps more so than any other industry. It has been this way for our company since its inception, over a century before ESG began to play a more overt role in the capital markets and investment community. For over 135 years, our local communities have entrusted us with a humbling and critical responsibility: safeguard and deliver natural resources for life, both now and for future generations. Essential would not exist today, let alone be in such a sound financial position, if it did not excel at ESG.
We earn a regulated rate of return on the investment on the installation of new water main, which also leads to reduced water and gas leakage harmful to the environment, which in turn makes production costs more efficient. We have built a state-of-the-art testing lab, which both helps protect drinking water quality for our community while boosting our ability to meet regulatory standards and avoid noncompliance costs. We have set supplier diversity targets, which has provided an opportunity for us to reevaluate our vendors and seek lower costs while supporting our local economy. These are just three of countless examples of how ESG and financial success mutually reinforce each other at Essential. Over the next 10 years or 25 years or even another 135 years, this relationship will not change, and our company will continue to pioneer innovation on ESG while delivering strong financial performance.
AA: Is there anything else you’d like investors to know about
CF:
A fixture of the Essential leadership team,
Prior to his role as CEO, Franklin was president and chief operating officer. A 30-year veteran of the company, Franklin has held executive roles in public affairs, customer service and operations. In addition to serving as the chairman of Essential’s board of directors, Franklin is active in the community and serves on six nonprofit boards, including as director and past chairman of the
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The material, information and facts discussed in this report are from sources believed to be reliable, but are in no way guaranteed to be complete or accurate. This report should not be used as a complete analysis of the company, industry or security discussed in the report. This is not an offer or solicitation of the securities discussed.
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