If you aren’t already getting ESG-related questions during your earnings call Q&As, you probably will be soon. According to this recent Nasdaq MarketInsite article, 65% of Russell 3000 firms covered ESG topics in their Q1 earnings calls this year – with mentions jumping especially quickly for these topics:
– Climate transition – covered by 24% of Russell 3000 companies in Q1 2022, compared to 16% in Q4 2021
– Human capital management – covered by 25% of Russell 3000 companies in Q1 2022, compared to 18% in Q4 2021
– Supply chain management – covered by 23% of Russell 3000 companies in Q1 2022, compared to 17% in Q4 2021
– “Sustainability” – covered by 19% of Russell 3000 companies in Q1 2022, compared to 14% in Q4 2021
– Company culture – covered by 19% of Russell 3000 companies in Q1 2022, compared to 16% in Q4 2021
The prevalence is even greater among the “MSCI USA ESG Leaders” Index, with climate transition coming up in nearly half of Q1 calls (that number may be even higher now).
According to Nasdaq’s research, part of the reason that ESG is coming up more often is that sell-side analysts asking about it during earnings call Q&As. Although topics vary by industry sector, most companies need to be especially ready to answer about their climate transition plans, because analysts are asking 3-4x as many questions about that than any other ESG topic.
That tracks with last week’s announcement from the New York State Comptroller that it’s evaluating publicly traded oil & gas companies to determine whether they’re ready for transition to a low-carbon economy, along with the New York State Common Retirement Fund’s latest progress report on its Climate Action Plan. As part of the Comptroller’s 2019 Climate Action Plan and goal for a “net zero” investment portfolio by 2040, the Fund has already divested from 55 companies.
While ESG is more likely to be discussed in large-cap earnings calls, Nasdaq’s research team says it is starting to trickle down to mid-caps – and will likely reach small-caps eventually too. This Investment Monitor article takes an even deeper dive – tracking how ESG mentions in earnings calls align with UN Sustainable Development Goals.
To make sure that your company is on the right track, join us virtually on October 11th for our 1st Annual Practical ESG Conference. Here’s the full agenda – and in light of the fact that climate disclosures are keeping everyone up at night, we’ve just added a new session to help you jumpstart those efforts. Sign up online, email email@example.com, or call 1-800-737-1271. You can also bundle the Practical ESG Conference with our “Proxy Disclosure & 19th Annual Executive Compensation Conferences” for a reduced price.
– Liz Dunshee