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Corporate Governance

ESG Disclosure in 2020 Proxy Statements

ESG Disclosure in 2020 Proxy Statements

Proxy season began with a sharp focus on ESG, driven by large asset managers and vocal asset owners. COVID-19 further heightened attention to human capital and supply chain management. It’s against this backdrop that we took a quick look at 50 S&P 100 proxy statements filed as of mid-April to learn how boards and companies are communicating on ESG topics.1 

Elevated Board Involvement

70% opened the proxy with a letter to shareholders that highlighted ESG/governance developments as well as other business achievements, up from 62%. These letters may feature the expertise of first-time director nominees or spotlight the results of engagement activities – with shareholders and other stakeholders.

In total 20% of reviewed companies included a letter for the first time this year or elevated the signatory. For example, while a company’s 2019 letter might come from the lead independent director, its 2020 letter might come from that individual and the Chair & CEO.

Similarly, as more companies disclose director participation in (not just oversight of) investor engagement, some companies also have begun to state the portion of shares outstanding represented specifically in conversations with board leaders. The Southern Company stated, “In 2019, the Lead Independent Director and the Chair of the Compensation and Management Succession Committee directly engaged (without the CEO present) with stockholders representing about 25% of our outstanding shares.”

ESG Disclosure Proxy Statements Chart 1

These developments are notable given the growing focus of ESG in letters and shareholder engagement.

Greater Engagement on ESG

86% disclosed that engagement covered climate change and environmental sustainability, up by one-third. These conversations may include how the board oversees ESG; company efforts to align ESG disclosures with external frameworks (e.g., SASB, TCFD); progress on SDGs; how sustainability is being integrated with corporate purpose; and ways that ESG may be integrated into financial reporting.2

Human capital and corporate culture also were addressed, while traditionally separate topics, such as compensation and ESG, continued to converge. Engagement topics included the use of ESG metrics in executive compensation; how the board oversees people (e.g., recruitment, retention, employee engagement and effectiveness); and diversity and inclusion (e.g., equal pay, median gender or minority pay, and protection from workplace harassment).

Intel Corporation shared insights in its investor engagement conversations on ESG topics, and – more generally, its integrated approach to business strategy and environmental and social sustainability, as well as the impact of ESG metrics on executive compensation.

ESG Disclosure Proxy Statements Chart 2

The number of ESG discussions, company-investor activities and director participation continue to grow. 

More Voluntary Disclosure

92% featured their ESG initiatives (up from 82%), including through a section on “ESG highlights.” This section is often used to communicate current sustainability initiatives, progress on existing goals or the announcement of new goals. Companies, such as Starbucks and Lockheed Martin, used different approaches. For example:

  • Narratives: Noting the company’s use of an ESG disclosure framework, creation of a Chief Sustainability Officer position, or completion of a climate-focused risk assessment
  • Numbers: Reporting based on one or more disclosure frameworks, measures of the company’s environmental and social impact, or sustainability targets (e.g., efforts to reduce energy usage, carbon emissions and waste; to direct supplier spending to minority- and female-owned firms; or to support educational opportunities)
  • Graphics: Featuring the company’s SDG priorities, showcasing external awards and recognition for workplace and environmental practices, or an organizational chart showing how the board oversees various management teams on ESG

Companies also are increasingly including ESG in compensation disclosures. Some use metrics reflecting an integrated business and sustainability strategy, e.g., targets for operational water-use efficiency, sustainably-sourcing raw materials, reducing greenhouse gas emissions. Others have long incorporated operational or environmental health and safety measures. Some, too, include succession planning, diversity and inclusion, employment engagement, and organizational design targets.

These ESG disclosures are often intended to drive attention to the company’s sustainability report/website and to communicate the board’s long-term approach to oversight responsibilities.

Boardrooms Shifting

78% disclosed that at least one board committee is charged with overseeing environmental sustainability matters, while 68% of compensation committees stated that they oversee human capital matters or had a title that included a “people” component (up from 70% and 58%, respectively). Note, the actual number of committees overseeing each of these topics is likely greater; there may be a lag between practice and what is codified or disclosed. In 2020, for example, after updates to committee charters reflecting shifts in responsibilities, Bank of America changed the name of its Compensation and Benefits Committee to the “Compensation and Human Capital Committee” and changed the name of its Corporate Governance Committee to the “Corporate Governance, ESG, and Sustainability Committee.”

In terms of director skills, 42% of reviewed companies associated at least one director with expertise in environmental policy, sustainability, corporate responsibility or “ESG.” While this is an increase from last year’s 30%, the nature of this expertise may not be clearly defined. In comparison, about 47% of boards consistently disclosed directors with human capital expertise.

Along with providing more detail on director skills, expertise and perspectives, boards also are disclosing more diversity information. This year, 68% (up from 56%) provided aggregated “diversity” numbers based on gender and race/ethnicity and/or nationality; these boards averaged 47% diversity. Altogether the reviewed boards averaged 30% women directors, and 44% of the total had at least one director under the age of 50, averaging 11% of the board.

ESG Disclosure Proxy Statements Chart 3

As board committee responsibilities reflect an increasing focus on ESG as a business imperative, board diversity, too – once a “social” consideration – has been recognized as providing strategic, risk mitigation and operational benefits, including improved leadership decision-making and company performance.

1. For more information, see Nasdaq Corporate Services’ June 2019 review of S&P 100 disclosures, Where Board & Investor Priorities Intersect. For this article, we reviewed proxy statements which were available as of April 15, 2020; disclosures for the same 50 companies were reviewed to provide a consistent basis of comparison for 2020 and 2019.

2. For more information, see Nasdaq Corporate Services’ February 2020 report, What Boards Need to Know: How Investor Engagement Is Changing, as well as the Sustainability Accounting Standards Board (SASB)Task Force on Climate-related Financial Disclosures (TCFD), and United Nations Sustainable Development Goals websites.

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Kellie Huennekens


Kellie Huennekens is Head of ESG Research at Nasdaq.

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