Holiday season is upon us around the world.
In European households over the past few centuries, badly behaved children (or maybe even board directors) would get a lump of coal in their Christmas stocking. Those days may be coming to an end; the International Energy Authority (IEA) brought festive cheer in its recent Renewables 2022 report, which concluded that renewable energy sources are on course to overtake coal as the world’s primary source of electric power by 2025.
This transition will have a positive impact across many environmental, social and governance (ESG) topics. As board directors and senior business leaders take a well-earned pause before plunging into 2023, getting better educated and equipped to deal with these topics would be the perfect topper in their stockings. Our world-class ESG and Climate education programs can take care of that festive wishlist for you.
As always, please keep your news leads and comments coming to mathew.loup@competentboards.com or join the conversation on LinkedIn when we post this weekly digest.
1. End-of-year report time. There is a plethora of ESG and sustainability reporting at this time of year. Shearman & Sterling’s Corporate Governance and Executive Compensation Survey 2022 puts the 100 largest public-listed companies under the microscope. Some key findings include:
- More than half (60%) of the companies had incorporated ESG metrics into their executive compensation programs, a 19% year-on-year rise
- Seventy-three companies have set a net zero carbon or greenhouse-gas emissions target
- More than two-thirds (71%) of the top 100 companies now have 30% or more female representation on their boards, a 22% increase
- The vast majority (84%) believe that a “social purpose” is important to their company
- Cybersecurity or data security experience is increasingly important, with 56% of companies identifying directors with that skill set in their matrix
2. Canada lagging behind on ESG. PwC Canada has unveiled its second examination of the ESG maturity of the country’s top 250 publicly traded companies. 2023 Canadian ESG reporting insights shows that many are falling behind in the global race to net zero, with only 30% having set any formal targets. The majority (77%) fail to disclose a Task Force on Climate-related Financial Disclosures (TCFD) report, which could leave them vulnerable and unprepared for the slew of upcoming mandatory reporting requirements. Only just under half (48%) of the 250 Canadian companies surveyed report their process for identifying, assessing and managing climate risks. Although the companies have focused on gender and LGBTQ2+ inclusion in their diversity reporting, there was not as much attention paid to Indigenous affairs. Despite the 94 calls to action in the The Truth and Reconciliation Commission of Canada’s final report, fewer than one in five companies (19%) had a reconciliation action plan.
3. Looking to the future. New regulations, rising inflation and geopolitical upheavals are just three of the more than 30 major risks that MSCI has highlighted in its 11th annual ESG & Climate Trends to Watch for 2023 report. Companies and institutional investors, such as pension funds, sovereign wealth funds and asset managers, have more than ever to assess and manage in the new year. Key themes included:
- The impacts of new disclosure regulations in different regions on asset managers, institutional investors and corporations
- Supply chain innovation such as tracking goods using blockchain technology and mining of e-waste
- How new corporate board demographics could affect climate change and other proxy voting trends
- Worker unrest, such as railway and postal strikes plus the upswell in human rights movements around the world
- Insurers and banks planning expand their scope of carbon emissions tracking
- Future outlook for ESG assets such as green bonds and nuclear energy
4. Youth will have its fling. A new study of investors in Singapore and Hong Kong has revealed the importance placed by millennials and generation-Z professionals on ESG. More than two-thirds (70%) of those surveyed between 25 and 39 said ESG was the priority for them, and 68% actively seek out sustainability reports before making an investment decision. Top sustainability issues for these investors included climate change, health and wellbeing, education, economic growth, poverty, gender equality (8%) and affordable clean energy (7%). Wealth management firm Saint James’s Place Asia surveyed more 2,700 investors for the Money Relationship Monitor 2022 – Wealth Through the Generations report.
5. Diversity on the rise in UK boardrooms. The freshly-minted 2022 UK Spencer Stuart Board Index reveals that women have an increasing voice at senior levels in the UK. The index, which looks at board governance practices at the top 150 FTSE companies, found that 20 women now chair these boards, compared with 14 last year. On top of that, there are now 16 female CEOs and 25 female CFOs at these FTSE board tables. In all, 26 boards have reached gender parity, compared with 15 in 2021 and just 10 in 2020. Even more impressively, the large majority (82%) of ESG committee chairs are women. Other ESG-related data showed that 46 boards of the boards surveyed had ESG-related committees, 15 more than last year. Just under half (48%) of new directors were first-timers, compared with 34% in 2021. Of those, 54% were female.
Mathew Loup is Competent Boards’ Director, Marketing & Communications. Follow Competent Boards on LinkedIn.
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