The largest U.S. companies are disclosing their environmental, social and governance (ESG) policies at historically high levels, according to Corporate Governance Outlook 2022, a new report from Equilar, which features commentary from Orrick and DFIN.

In 2021, nearly 82% of Equilar 100 companies—the 100 largest U.S. companies by reported revenue—either mentioned or disclosed their ESG policies, an increase from just 10.3% of companies in 2017. Companies are also electing to go into greater detail in their proxy disclosures more than ever before, with 47.5% providing full ESG disclosures in 2021 compared to 3.1% in 2017.

“For many years, companies could satisfy shareholders on most ESG issues relatively easily,” said Carolyn Frantz, Senior Counsel at Orrick. “Those days are behind us. Institutional investors have increased their sophistication on ESG issues, and have more specific expectations of companies, as well as a greater number of available tools to gather the information they desire.”

Of course, among the many notable issues that fall under the ESG umbrella is diversity. Over the last few years, diversity, particularly at the board level, has captured the spotlight from investors and other key stakeholders, such as Nasdaq whose board diversity listing rules were approved by the SEC earlier this year. Companies are facing great pressure to have diverse directors that bring a new perspective to the table.

Disclosing information related to diversity can be a critical step to show investors that a company is making an effort. According to the report, in 2021, 89.9% of Equilar 100 companies included board composition disclosures related to gender, nearly nine percentage points higher than the 80.8% of companies that did the same for ethnicity or race.

“Companies that do not yet display desired levels of such board diversity, yet may be working towards it, can explain their board evaluation and director recruitment efforts in greater depth— what they are doing to achieve the desired diversity going forward,” said Ron Schneider, Director of Corporate Governance Services at DFIN. “We think this type of creative storytelling is a good thing, provided it highlights relevant aspects of diversity without lumping them into one overall ‘diversity bucket’ that investors will want unpacked into its components.”

Other key report findings include:

• After reaching a peak of 183 in 2017, the number of social and environmental-focused proposals has since fluctuated, falling to 139 in 2021.
• Say on Pay failures more than doubled since 2017, as 3.4% of Equilar 500 companies failed Say on Pay in 2021.
• The percentage of Equilar 100 companies mentioning or disclosing topics or processes related to shareholder engagement rose to 93.9% in 2021, a 3.2% increase from 2020.
• During 2021, 21.5% of Equilar 500 companies elected to tie executive bonuses to an ESG-related performance metric.

Contact us directly or fill out a request form for a full copy of the report.

About Equilar

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