Telling your ESG story is essential in the post-pandemic world
On February 6, 2018, something interesting happened during a first quarter earnings call held by Becton Dickinson and Company (BD), a US medical technology firm.
Though the update proceeded much as might have been expected – with a run-down of the company’s long-term strategy, highlights from the quarter and a discussion of its financial performance and outlook – CEO Vincent Forlenza surprised some listeners in his closing remarks.
He introduced a new slide that provided a brief update on the firm’s four-pronged sustainability approach that centered on innovation, access, efficiency and empowerment.
Though small, this move was nonetheless an important first step in permanently changing the tone of BD’s earnings cycle, placing a new focus on long-term impacts.
‘While we have always been focused on ESG and creating shared value, we have received feedback from the investor community about its increasing relevance to investment decisions,’ said Forlenza.
Today, that relevance has grown. ESG strategy is now a crucial component of corporate and investor communications, and increasingly a formative part of the quarterly earnings cycle.
A recent Goldman Sachs report finds that not only are firms increasingly discussing ESG in earnings calls, but also that the CEO is increasingly the focal point of these discussions, providing a strategic thrust that speaks to a corporate’s wider strategy. Analysis by FactSet of the S&P 500’s earnings calls from June 15 to September 5, 2021 shows that there was a record high in the number of firms mentioning ESG – up to 150 companies.
Not only that, but companies that mention ESG factors in earnings calls are also performing better. Goldman Sachs’ analysis of earnings transcripts from the past five years among companies in the S&P 500, the STOXX Europe 600 and the ASX 200 finds that those mentioning particular ESG keywords ‘displayed better ESG performance, momentum and target settings versus peers with no ESG commentary in earnings calls’.
But simply adding a slide on ESG at the end of a presentation will not cut it anymore in a post-pandemic world where ESG topics address wider questions regarding corporate purpose. Generic, box-ticking approaches will not hold any sway with the market; instead, showing you are considering ESG as a core risk or driver of value is crucial to gaining the trust of your investment community.
This best practice report will examine the evolving practice of including ESG talking points on your earnings call, including tips for companies at any stage of developing their ESG practice, and an exploration of tying these processes into your wider annual IR program.
