August 26, 2020

Providing Guidance: Where are We Now?

Last week, the NYT DealBook column said that shipping giant, A.P. Moller-Maersk, not only reinstated full-year financial guidance but also pegged it higher than pre-pandemic levels.  If your company is on the fence about what to do, you’re not alone as companies seem to be all over the map. 

A recent AlphaSense Analyst blog analyzed trends in companies providing or withdrawing quarterly or annual earnings guidance and says recent data shows continued uncertainty. Recapping Q1, the blog notes there was an unprecedented number of companies that withdrew guidance due to market turbulence that resulted from Covid-19. After reviewing Q2 updates, the blog says some companies have begun reinstating previously withdrawn guidance, while others maintained their ambiguous position and declined to provide guidance – in other words, companies are still sitting amid uncertainty, although some sectors lean more one direction than the other.  Here’s some takeaways:

– Since the huge spike in guidance withdrawals this Spring, companies have taken different approaches to providing guidance Q2 earnings, with a near even split between companies providing guidance and those declining to do so

– Consumer Discretionary companies declined to provide guidance most often, accounting for 19% of companies not providing guidance this quarter

– Information Technology companies account for 17% of companies declining to provide guidance and 24% of companies sharing guidance this quarter, showing a split in confidence across the sector

ESG Disclosure Trends: SEC Filings Increasingly Highlight Disclosures on Company Websites

A recent White & Case report summarizes ESG disclosure trends of the top 50 of Fortune 100 companies by revenue.  It’s a good look at where disclosure is headed as all of the information was pulled from SEC filings and it’s notable how much human capital and environmental disclosure was included in the filings.  When comparing 2020 data to 2019, it’s important to note the effect of the Covid-19 pandemic and the current social climate and how that has placed focus on companies’ management of ESG issues.  Here’s some of the report’s highlights:

– In 2020, every company surveyed increased its ESG disclosures in at least one category in their proxy statements compared to 2019

– The largest increase in ESG disclosures came in human capital management, in fact 90% of the companies surveyed included some form of HCM disclosure in their 2020 Form 10-K or proxy statement, increasing 8% from 2019

– 29% of the 2020 filings increased their environmental disclosure from 2019, with a significant increase in the amount of quantitative disclosures, such as information on greenhouse gas emissions reductions and renewable energy use

– Other ESG categories on the rise in 2020 include company culture, ethical business practices, board oversight of E&S issues, social impact/community and E&S issues in shareholder engagement

The report provides a few things for companies to think about that includes beefing up disclosure on human capital management, environmental, and board oversight of E&S issues – if companies haven’t already done so.  One tricky issue for companies is deciding where to include ESG disclosures – in SEC filings or on company websites.  The report says 84% of the companies surveyed referred readers to disclosure on the company’s website from their 10-K or proxy statement with an increasing number using their SEC filings to high-light for investors that enhanced ESG reporting is available on the company website.

Bloomberg Joins Mix with Proprietary ESG Score

We’ve blogged before about the various ESG ratings – here’s an entry about Morningstar and Sustainalytics joining up and now we can add Bloomberg to the mix.  Earlier this month, ThinkAdvisor reported that Bloomberg launched its own proprietary ESG score, available to Bloomberg Terminal subscribers.  Initially, the score will cover E&S for over 250 companies in the oil and gas sector and it will also include board composition scores for over 4300 companies.  For board composition, here’s an excerpt from Bloomberg’s press release:

The Board Composition scores enable investors to assess how well a board is positioned to provide diverse perspectives and supervision of management, as well as to assess potential risks in the current board structure. The quantitative model is designed by Bloomberg governance specialists and utilizes Bloomberg’s management and board level data. The scores rank the relative performance of companies across four key focus areas of diversity, tenure, overboarding and independence.

– Lynn Jokela