As colleagues, we are true believers that ESG frameworks can help companies address risk, increase transparency in reporting and strengthen relationships with investors, employees, customers, suppliers, regulators and communities.
Given the explosive growth in ESG investing and reporting, media reporting naturally followed. The first tranche of media stories focused on the financial or business perspectives, including whether there was a link to materiality and risk. As Covid-19 tightened its grip around the world, it seemed a shift began to occur in media accounts during summer 2020. Images of pollution-free canals, wildlife returning to once-populated areas and deserted city streets were part of a new global stillness. It was as if the Earth was recovering, while humanity was coping with a global lockdown.
To verify our anecdotal perceptions, we sought to research to what degree certain media outlets published articles that demonstrated this heightened awareness of climate impact, the business and investor shifts to address employee health and safety and the wellbeing of customers.
We also wondered whether the articles could serve as bellwethers, or precursors, to forecast upcoming proxy season issues or new areas for investor activism. In other words, did the reporting on the pandemic intensify these company-to-investor issues and initiate new conversations between companies and investors?
What we searched for
During the months of July and August 2020, Molly Higgins – a Colby College student – became our research assistant. We provided the parameters, including a list of news outlets to check on a daily/weekly/monthly basis, depending on publication schedules. Molly tracked 24 ESG-related terms, including:
- CEO compensation (or comp proposal)
- Climate change (or climate impact)
- Corporate accountability
- Corporate governance
- Corporate purpose
- Corporate sustainability or sustainability
- Diversity
- Employee health and well-being (or well-being)
- Environmental, social, governance
- ESG
- ESG correlation to performance
- ESG negative screening (or screens)
- ESG positive screening (or screens)
- ESG proposals (or ESG shareholder proposal)
- ESG rankings
- ESG ratings and stock returns
- ESG screens
- ESG screening
- Governance
- Human capital management
- Impact investing
- Responsible investing
- Socially responsible investing
- Two degrees Celsius
We selected the aforementioned categories to determine whether there was a greater emphasis on some ESG topics than others. We were aware, of course, that the propensity of reporting during the summer of 2020 was influenced by the pandemic and wondered whether the social or ‘S’ side of ESG might be covered more prevalently than other categories. There are 10 separate categories for ESG, and that helped us note how the media differed in their descriptions of several ESG components.
The media outlets we chose included some of the most prominent in the US: Wall Street Journal (WSJ), Los Angeles Times, The New York Times, The Week, Fortune, Pensions & Investments, TIME, Washington Post, USA Today, and Bloomberg Business.[should that be Bloomberg Businessweek? If not, it shouldn’t be italicized as Bloomberg Business is a company, not a publication]
Our analysis: It depends on what you read
The articles are clearly a reflection of the times in which we were/are living. From the overt mentions of the 24 topics catalogued, the top three categories that emerged are: environmental, social and governance, including the shortened ESG acronym (40.21 percent), climate change (25.56 percent) and diversity (21.32 percent). We found that:
- ESG mentions dominated four major publications: the WSJ, Los Angeles Times, The New York Times and Pensions & Investments
- These same four publications had the top number of references to climate change, along with the Washington Post
- The Wall Street Journal, Los Angeles Times, The New York Times and Pensions & Investments covered diversity issues far more than the other publications.
The fourth category, which appears well down in the count, is governance, at 4.75 percent of the total. The same four publications are the leaders in publishing articles that mention a variety of governance matters. One publisher, TIME, published 58 articles, of which three had a climate focus. The vast majority (the other 55) of the articles are stories on social justice, stemming from a summer of significant racial unrest.
The ESG-related categories, including ESG correlations, negative, positive, shareholder proposals, ratings, rankings, screens and screening, do not register significant numbers of articles. We surmise that these issues were not as pronounced in the publication space due to the greater need to focus on the overarching ESG issues, not the specialized investment details.
Takeaways for 2021 proxy season
The three top categories provide a roadmap for the continued dialogue between board members, management and investors as we progress through the spring 2021 proxy season.
ESG issues have primarily centered on the social side; employee health and safety, as well as the safety of customers, is a significant factor in engagement discussions. Investors have asked that boards begin to link part of executive pay and compensation packages with specific measurements for E, S and G factors.
Boardroom diversity remains a focus of investors and stakeholders as they seek more representative board members, with skillsets to take up the emerging issues of human capital management and employee wellbeing, technology expertise to adapt sales and business needs in an online environment and techniques to expand the customer base safely and securely. The demand for board diversity has become squarely focused on the role played by the CEO to show progress in this area. Diversity targets for executive pay and compensation packages are in the news.
Engagement on climate issues became heightened as countries implemented quarantines for citizens and travelers. Global manufacturing companies, emitters of greenhouse gasses, slowed production or, in some cases, shut down. Once production was restarted, the dialogue picked back up. The recognition that much of the climate-related concerns are man-made became a viable discussion between companies and their stakeholders.
A look to the future
ESG, with its three main areas, tended to be lumped together, but the prevalence in the number of mentions in major news publications shows that ESG issues were front and center last summer across the country. The staggering number of ESG references, given the global situation last June, July and August, speaks to the publishing houses trying to keep up with the demands for ESG information from their readership. At that time, it was becoming clear the pandemic was not going to spare any countries, industries or demographics.
As investors and stakeholders evaluate what they and companies learned from the pandemic in 2020 and as companies implement lasting changes to their business models, true leaders of ESG will become the best-in-class companies. Timing came into play as we moved from the fall to winter 2020. The 2021 proxy season may be too soon for certain shareholder proposals to be filed or investor dialogue to be concluded.
Companies can be sure that by fall 2021 and in early 2022, the way they have addressed ESG-related Covid-19-specific impacts and reported on material and non-material facts and risks will be followed carefully by the media. These issues will remain important to key stakeholders: employees, customers, investors, suppliers and regulators. While companies may have been given a slight reprieve due to the overwhelming circumstances of the pandemic, the media spotlight will continue to be focused on ESG.
Sally J. Curley, IRC is CEO, Curley Global IR, LLC and Carol Nolan Drake, J.D. is CEO and founder, Carlow Consulting, LLC
