The road to change is a long one, but there is progress in many areas. A working paper just published by the National Bureau of Economic Research has highlighted the positive impacts of companies getting involved in environmental, social and governance (ESG) matters, in this case diversity, equity and inclusion (DEI). 

The Big Three and Board Gender Diversity: The Effectiveness of Shareholder Voice reveals that thanks to the gender diversity campaigns run by the “Big Three” (BlackRock, Vanguard and State Street) the average number of female board directors at US companies grew by 50% from 2016-2019 alone. Although the 2019 total (just under) 20% is still too low, that pace of change is highly encouraging for future stakeholder investment campaigns. 

Managing stakeholder expectations is a sensitive topic that board directors and senior business executives need to be more comfortable with. Our ESG and Climate education programs can help you address that, and other relevant ESG or climate-change subjects, so that you and your company help shape a better, balanced tomorrow. 

1. New proxy season recommendations. International corporate governance advisors Glass Lewis has issued fresh voting recommendation policy guidelines for the 2023 proxy season in the United States. Director accountability will be right in the spotlight in the new year: Glass Lewis will broadly recommend votes against the nomination and governance chairs of Russell 1000 companies that do not “provide explicit disclosure concerning the board’s role in overseeing environmental and social issues”. They will issue the same voting recommendation for Russell 3000 index boards that do not have at least 30% gender diverse directors, and at companies in the Russell 1000 index when their board does not have at least one self-identified member from an underrepresented community. In terms of climate change, Glass Lewis also expects comprehensive disclosures of oversight duties and climate risks from companies that are known to be heavy emitters: “Boards of these companies should have explicit and clearly defined oversight responsibilities for climate-related issues.”

2. Greenwashing crackdown in Europe. Three European supervisory authorities have put a call out to the public to help them uncover companies in the EU financial sectors who are making false claims about their sustainable products or business practices. Banking, financial markets are all under the public microscope. People have until January 10, 2023, to submit information. The ESAs are the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority. At the same time, the European Securities and Markets Authority (ESMA) has published a consultation paper that proposes strict criteria for investment funds using the words ESG or sustainability in a fund’s title. The public consultation will close in mid-February, with final guidelines published later in the year. 

3. Crunching the numbers. The Sustainability Board has published a Data Book to go behind the scenes of its primary 2022 report. There was plenty of positive news: the report identified 151 ESG-engaged directors on relevant committees, a 27% rise. There were also 125 female board directors on those committees, an 18% increase. In all, 80% of the boards surveyed had relevant sustainability committees, up 26 points from 2019. However, the number of ESG-conscious or competent directors is stubbornly low: 151 (12%) of the 1,260 directors surveyed. The overall 2022 TSBR is based on a survey of the largest 100 companies in the Forbes Global 2000 list for 2022

4. Green investor data. The Taskforce on Nature-related Financial Disclosures (TNFD) has updated its framework that aims to improve corporate reporting around nature-related data for investors. This third iteration includes new disclosure recommendations related to supply chains based on stakeholder interactions and data. It also improves focus on engagement with rights-holders and aims to align nature with the climate targets of companies. There is also guidance on making risk and opportunity assessments, as well as what metrics to use to support that analysis. TNFD has sought feedback around the world from businesses, financial institutions, governments, regulatory and standards setting bodies and Indigenous Peoples to create the framework. The final version will be published in September 2023. 

5. ESG priorities in the Americas. Morningstar Sustainalytics has published an Americas supplement that takes a deep dive into corporate ESG trends in the region. In terms of E, S and G, environmental concerns (54%) far outweighed social (24%) and corporate governance (23%). Budget constraints and lack of human resources (both 33%) are the biggest barriers for those surveyed  in terms of executing ESG programs. And the majority (58%) now have a documented ESG strategy. The supplement takes data from the Morningstar Sustainalytics Corporate ESG Survey Report 2022, which surveyed 556 corporate social responsibility and sustainability professionals around the world, including 168 from the Americas. 


Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.

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