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The top trends in ESG disclosure from Fortune 100 companies

June 27, 2022, 10:30 AM UTC
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SEC filings are revealing which ESG topics are on the rise in 2022.
Igor Borisenko—Getty Images

Good morning,

The U.S. Securities and Exchange Commission filings of some of America’s largest public companies are revealing key trends in ESG disclosures and investor focus this year. 

“We surveyed the 100 SEC filings (10-K annual reports and proxy statements) of 50 companies in the Fortune 100,” Maia Gez, partner at international law firm White & Case and leading member of its Public Company Advisory Group, told me. “And we looked at 12 categories of ESG disclosure in these SEC filings. Out of those 12 ESG categories, we identified the top categories—the categories with the largest increases in disclosure—over the past year.”

The top three ESG categories on the rise in 2022 listed in the report are environmental matters, human capital management, and environment and social goals and targets.

As the SEC is proposing rules that would mandate comprehensive climate change disclosures, the largest increase in categories of ESG disclosure compared to 2021 was environmental matters. All 50 companies surveyed included environmental disclosure in their 2022 filings, according to the report. This covered a range of areas, including investments in sustainability, recycling and renewable energy use. 

The analysis provides examples of company statements. Here’s one on investments in environmental sustainability: We have a long-standing and substantial commitment to sustainable business operations, from the products and services we offer to our customers; to our store construction, maintenance and operations; to our supply chain and packaging initiatives; to our ethical sourcing program. As we strive to operate sustainably, we have focused on protecting the climate, reducing our environmental impact, and sourcing responsibly, and we have set specific, measurable goals to drive progress in these areas.

Meanwhile, human capital management represented the second-largest increase in ESG disclosures. In 2022, 49 out of 50 companies included disclosure on diversity or related initiatives, up from 43 in 2021 and 29 in 2020. There’s increased disclosure on current or historical quantitative metrics, including the percentage of employees who are women or people of color and information on corporate initiatives to improve gender and ethnic diversity, White & Case found.

The research also showed an increased disclosure on topics such as employee health and safety, talent management and development, employee engagement, and pay equity. There’s also a trend in including current or historical quantitative metrics on employee turnover and retention rates.

“Some of these human capital topics disclosed are a reflection of societal and related developments in the world, as well as challenges when it comes to human capital management,” Gez explains. “For example, this past year, we had trends such as employee retention issues in terms of the Great Resignation. Now the survey found increasing disclosure on retention.”

A company statement on talent retention: In 2021…our Employee Engagement Index, an overall measure of employee satisfaction with the Corporation, was 88%. Our turnover among employees was 12% in 2021 and 7% in 2020. Our pre-pandemic levels of turnover in 2019 and 2018 were 11% and 12%. Additionally, [we] provide a variety of resources to help employees grow in their current roles and build new skills, including resources to help employees find new opportunities, re-skill and seek leadership positions…In 2021, more than 26,000 employees found new roles within the corporation.

For the first time in White & Case’s annual survey, environmental and social (E&S) goals and targets took a spot in the top three ESG topics on the rise. The research found that 49 out of 50 companies included some form of E&S goal or target.

“This is the future of ESG in many ways,” Gez says. “More and more companies are expressing what they intend to do and setting targets and goals, including quantitative ones, that then can be used to measure development and progress against those goals. That includes financial commitments—such as, ‘We’re going to invest this much into ESG type projects or sustainable efforts.'”

An example of one of the company’s financial commitments: In April 2021, we committed $1 trillion to sustainable finance by 2030, which builds on the work we outlined in our updated Sustainable Progress Strategy. This commitment includes extending our prior five-year, $250 billion environmental finance goal to $500 billion by 2030 through which we will finance and facilitate an array of climate solutions such as renewable energy, energy efficiency, sustainable transportation and circular economy and $500 billion in social finance including affordable housing, diversity and equity, economic inclusion, food security and healthcare.

Rounding out the seven ESG topics on the rise: corporate culture, board oversight of environmental and social issues, social impact and community, and environmental and social issues in shareholder engagements.


See you tomorrow.

Sheryl Estrada
sheryl.estrada@fortune.com

Big deal

The state of financial services compliance, a new report by SteelEye, a compliance and data analytics company,
found that 23% of U.S. firms surveyed cited managing controls/risks in the business as their biggest compliance challenge. Overall, 88% of respondents in the U.S. and U.K. said their compliance expenditure has increased over the past five years, and just 11% said it had remained flat, according to the report. Regarding U.S.-based firms surveyed, overall, 77% reported increases in compliance expenditure of more than 25% over the last five years. In comparison, 56% in the U.K. had seen similar spending increases. But this figure increased to 79% of large firms in the UK, reflecting the added complexities post-Brexit. The findings are based on a survey of 170 senior compliance decision-makers in financial services across the U.K. and U.S.

Compliance chart

Courtesy of SteelEye

Going deeper

In the U.S. and around the world, inflation is high and getting higher, a Pew Research Center report, takes a look at where inflation is highest and lowest across 44 countries. "In 37 of these 44 nations, the average annual inflation rate in the first quarter of this year was at least twice what it was in the first quarter of 2020, as COVID-19 was beginning its deadly spread," according to the report

Leaderboard

Ruth Rhei was named CFO at Mass Luminosity, a global technology and experiential company. Prior to joining Mass Luminosity, Rhei served as managing partner and principal at Arden Capital Management, a financial structuring firm established in 2020 to address the economic disruption caused by the COVID-19 crisis. Rhei’s previous experience includes serving as the head of strategic lending in the Americas for Deutsche Bank TCA. Before Deutsche Bank, she was head of sourcing for Stabilis Capital Management. She also spent several years in Goldman Sachs’ Capital Markets and Special Situations Group, Citibank’s Fixed Income Group, and Societe Generale in Capital Markets and Commodity Finance.

Todd Smith was named CFO at Wheels Up Experience (NYSE: UP), a private aviation company, effective June 30. Smith joins from General Electric where he served in a number of senior global Finance roles over his 25-year career, most recently as global head of financial planning and analysis and CFO for GE Corporate. He has served as CFO for several GE business units, including Gas Power Systems, Capital International, Healthcare Life Sciences, Capital Real Estate and Commercial Finance. He began his career with GE in 1997 as a member of the financial management program and then spent over five and a half years on GE's Corporate Audit staff.

Overheard

“It's going to take months and months, and maybe two years to bring inflation back down.”

—David Malpass, president of the World Bank Group, thinks getting prices back under control could take years, as said on CBS’s Face the Nation.

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