The importance of ESG is highlighted by the fact that more than two thirds (68 percent) of corporate governance professionals polled have personally interacted with investors on the topic over the past 12 months. The most common types of interaction are conducting ESG-focused conference calls (24 percent of respondents having taken part), having group meetings with ESG analysts (23 percent) and attending ESG-focused conferences (22 percent). Governance professionals at larger companies tend to have more of these direct interactions. Only 21 percent had no such engagement over the past year, compared with 44 percent of respondents at smaller firms. At larger issuers, the most common type of interaction with investors is ESG-focused conference calls at 45 percent; for smaller companies, it is meetings with ESG analysts at 21 percent. Overall, larger companies are discussing ESG issues with investors more frequently than smaller firms. Almost half (44 percent) of respondents at $5 billion-plus issuers say they have talked about environmental policy with investors at least once a quarter over the past year, with 15 percent saying it has been talked about each month. This compares with 24 percent of respondents at smaller companies who have talked about environmental policy once a quarter or more frequently. By contrast, more respondents at smaller companies (67 percent) talk on a quarterly or more frequent basis with investors about governance matters than their colleagues at bigger firms (55 percent).
Who has primary responsibility for your company’s ESG communications?
Have you done any of the following over the last 12 months?
How often have you discussed the following with investors over the past 12 months?
ESG ratings Another ESG-related challenge for companies’ engagement teams is responding to requests for information from the variety of ESG rating agencies and index providers seeking to give investors insight. It is an area filled with complexities for issuers due to the nature of the data at issue – often based on intangibles – and how it is collected and compared. Among those taking part in Corporate Secretary’s research, companies respond on average to 7.5 information requests/questionnaires from ESG rating agencies/index providers each year. That equates to one every seven weeks. Not surprisingly, larger companies that attract more attention and have greater resources tend to respond to more requests (7.8 on average per year) than do smaller firms (7.4 on average per year). There is a wide disparity between the frequency with which these requests are responded to. Overall, more than a quarter (27 percent) of respondents don’t respond to any, although only 11 percent of large companies do not. That may be a result either of resourcing levels or the number of requests received, or a combination of the two. At the other end of the spectrum, 6 percent of respondents are filing more than 11 responses each year. That said, there is broad interest among companies in keeping tabs on their ESG ratings. Overall, almost two thirds (64 percent) of governance respondents monitor their ratings at least once a quarter. Larger companies are more likely to monitor ratings on a quarterly or more frequent basis (81 percent) than smaller companies (51 percent). Almost one fifth (19 percent) of respondents at smaller firms say they never check their ESG ratings, while just 4 percent of larger companies pay no attention.
How many information requests/questionnaires from ESG rating agencies/index providers do you respond to each year?
How regularly do you monitor your ESG ratings?
There are both potential advantages and disadvantages to companies in releasing information about ESG issues. Themes emerge in respondents’ comments about some of the benefits to such disclosure. These include satisfying investors’ interests, taking control of the narrative about your company and enhancing the company’s public standing.
What are the main benefits of ESG disclosure?
‘There is a clear rise in the demand from our shareholders for robust ESG dialogue and disclosures. They understand the relationship between ESG and business value, and the integral role ESG considerations play in forecasting performance, measuring risk and assessing a company’s ability to sustain competitive advantage over the long term. And importantly, ESG issues are key drivers in our strategy, purpose and philosophy. Articulating our corporate narrative without ESG considerations would be telling an incomplete story’
– Rishi Varma, general counsel, Hewlett Packard Enterprise
Themes also emerge about the challenges of preparing ESG disclosure. These include handling the quantity of data involved and ensuring its accuracy and relevance, as well as dealing with the variety of metrics and standards used in the industry.
What are the main challenges of preparing ESG disclosure?
‘One of the challenges in focusing ESG disclosures is that ESG concerns vary by investor and stakeholder, and while helpful guiding frameworks have been proposed, there is no universally adopted standard for measurement or disclosure. Accordingly, we engage deeply and continuously with our investors and stakeholders to learn what is most important to them and how we can most effectively report on our ESG progress, risks and opportunities’
