Everyone Is Talking About ESG, But What Are You Doing About It?

Scan the agendas of investor relations conferences in recent months, and you’ll notice that ESG topics factor heavily in the mix. Even when the subject matter is not solely ESG, the conversation tends to veer in that direction – a reflection of the growing importance of ESG to all stakeholders.

What once felt like an uphill battle is now a strategic imperative for many organizations: according to our research, 60% of investors believe companies that integrate ESG into their business strategy will outperform over the long term.

The recent spotlight on supply chain disruptions is further increasing the conversation about ESG up and down the value chain. Today, it’s not enough to consider your own internal ESG story/strategy, but it’s critical to think about how it influences and impacts your entire supply chain.

Setting the stage, here is current investor sentiment on ESG according to our Corbin Advisors proprietary buy-side research:

• 84% report ESG has meaningfully increased in importance as an investment factor in the past two years
• 56% believe companies that integrate ESG into business strategy will outperform over the long term
• 47% report reading the CSR Report only “sometimes” while, 88% say the Investor Presentation is a leading source of information

Meaningful integration of ESG into business strategy is becoming table stakes. Now what? How can companies bring that ESG vision to reality and why is it important to do so?  

An increasing priority                                                      

ISS reports a significant increase in the number of ESG shareholder proposals submitted during the 2022 proxy season; 875 YTD in 2022 (this does not include the fall meetings to come) compared to 868 in all of CY 2021. The largest uptick in proposals submitted are environmental-related, with 170 YTD 2022 compared to 115 in all of CY 2021.

This comes as 62% of investors report that ESG is a high priority at their firm, with 44% saying it has become a greater priority over the past 12 months in particular. Stakeholders at all levels, including customers (and customers’ customers) and prospective customers, employees and prospective employees and regulatory agencies are taking increasing notice. The SEC proposed rule on additional climate-related disclosure brings more of a quantifiable focus to ESG, and it’s the quality of disclosure that matters now more than ever before.

In 2021, 92% of S&P 500 and 70% of the Russell 1000 published a CSR report. It’s not just large companies; 49% of the smallest half by market cap of Russell 1000 companies published a CSR report. Many companies disclose and then don’t experience or perceive a real return on their efforts – so how do you activate your ESG efforts?

Activating your ESG strategy

Artfully executed, an ESG strategy likely includes an ESG report, which is a multi-faceted effort that includes coordinating various departments throughout the organization, collecting data from across the company, analyzing that data, storytelling and design. It’s a heavy lift and you should get the credit you deserve; it’s not about doing more; it’s about doing the right things.   

Activating your ESG Strategy to make ESG work for you as part of long-term value creation.

Here are 5 ways to leverage the hard work you put into the ESG report to maximize ROI:

1. Create SMART goals (Specific, Measurable, Attainable, Relevant, Time-bound). Include short, mid and long term goals and periodically report on progress to goals. According to our research into recently published CSR reports, 96% listed goals/KPIs. Referring back to those goals and showing progress over time demonstrates consistent commitment to your ESG strategy.
2. Meaningfully incorporate ESG across all communication channels and into all of your public disclosure. Consider your annual report, proxy, and earnings calls. On a related note, issue a press release when you publish your ESG report, a best practice. In our research, 44% of companies issued a press release.
3. Distill down the most investor-centric information from your ESG report and create a separate standalone ESG-dedicated investor presentation. We found that just 12% of companies did this, despite it being a fairly low / risk high reward way to drive attention to the key investor-related points in your report. With ESG reports including more and more data, distilling what is most meaningful can help make for a more memorable experience for your investors.
4. Similarly, distill down key takeaways and publish a one or two page ‘ESG fact sheet’ that can be used by HR and Sales as a follow-up piece for prospective customers and employees. According to our research, 42% of companies did this. ESG is relevant across your organization and can be used as part of efforts to recruit top talent and win new business. A fact sheet is a convenient way to communicate a clear and consistent message.
5. Host an ESG-dedicated webcast for current and prospective investors. Only 6% of companies in our study held an ESG-dedicated webcast, which offers a chance to further leverage your ESG report and gauge interest with your investor community.
   For clients where we have supported the development of a topical ESG presentation and conference call, the results have been impressive and returns tangible: in every instance, the webinar has served to activate investor interest and investment, with clients receiving emails requesting a meeting to learn more while the webinar was inflight and 13F data showing position increases and initiations by firms / funds with a proclivity toward ESG.

These are exciting times indeed in the world of ESG. To make the most strategic impact, make sure you are activating your ESG across the organization and throughout all communications.

Leahruth Jemilo, Vice President & Head of ESG, Corbin Advisors