On Tuesday, I participated in a webinar on ESG (environmental, social and governance) issues hosted by IR Magazine, Corporate Secretary, and Intelligize, where I had the pleasure of unveiling some eye-opening numbers that we recently pulled from our platform. They tell a fairly dramatic story about the increasing importance of ESG issues to public companies and their investors.
Titled “ESG Matters: Materiality and a Growing List of Questions from the Street,” the webinar (available to watch here) was moderated by IR Magazine’s digital editor Ben Ashwell, and the panelists were:
- David Burdziuk, director of IR, Suncor Energy
- Sally Curley, founder and CEO, Curley Global IR
- Marc Butler, director of thought leadership, Intelligize (aka yours truly)
While ESG does refer to environmental, social, and governance issues, the preliminary matter of defining “ESG” is hardly as easy as that. As the webinar opened, the panelists emphasized that our understanding of the term ESG has been broadening in recent years. David noted that as a concept, ESG has become flexible enough to include matters of cybersecurity, for instance, while Sally highlighted the evolution of the term “sustainability.” Asset managers no longer think of it as just an environmental term, she said, but also a reference to an enterprise’s ability to remain in business over time. Although it is not the “S” in ESG, it’s an instructive example of how the meaning of such terms can evolve.
The definitional problems, of course, only muddy the question of which ESG issues are material in the sense of demanding reporting. Regardless, it was clear to all panelists that the materiality of ESG issues depends on the specific company to which they are addressed. The societal push to limit screen time for kids may not be important to many issuers, but, as David pointed out, it could quite easily become material for a company like Apple. Sally chimed in with an additional tip well worth noting for IR professionals. She said that whenever an issuer reports an assessment of its performance on ESG issues, it should ensure the assessment is repeatable, measurable and capable of being audited.
As for my own contribution, I pulled data from the Intelligize platform in advance, and was happy to share some intriguing results with the audience. I ran searches on a number of different types of filings, wondering if we’d see any pattern in how frequently ESG issues were raised year over year.
The results offered plenty of surprises. First, perhaps counterintuitively, in S1 registration statements, ESG reporting has dropped by a full 40% since last year. That’s a sharp decline. In a similar if milder surprise, we discovered that mention of ESG issues as risk factors in public filings has plateaued.
But these findings were balanced by others that harmonized with a popular perception (echoed by David and Sally’s experience) that ESG issues are being discussed with unprecedented volume and intensity. My research revealed that mentions of ESG topics are:
- Up 12% in the PX14A filings commonly used by activist investors;
- Up 14% in 20F filings by foreign and private companies;
- Up 38% YTD in 10Ks
- Up 98% YTD in proxy season ballot measures
- Up 123% YTD in earnings call transcripts
That last figure indicates just how closely analysts are now watching ESG issues. Certainly, for them, ESG topics feel more material than ever before. For our full discussion on how issuers are wrestling with the issue of materiality, I encourage you to check out the webinar.