Impact Investing Conference

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ESG Policies Emerging as a Corporate Priority National Association of Plan AdvisorsESG Policies Emerging as a Corporate Priority National Association of Plan AdvisorsESG Policies Emerging as a Corporate Priority National Association of Plan Advisors

Impact Investing Forum 2024

London. April 24-25, 2023.

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Corporate execs are working harder to stay ahead of the issue, as more investors are using ESG criteria to evaluate risks and growth opportunities within companies. Nearly half (48%) of senior executives from publicly traded and private companies responded to a survey that asked them to confirm that they have an ESG strategy. 33% of public companies and 14% of private companies rated ESG as essential to their business goals. 34% of respondents said they had not yet adopted ESG strategies, but that they plan to do so within the next one-to two years. However, only 26% of private companies and 2% of public companies said they have not yet adopted an ESG strategy or are planning to do so in the future. The law firm Thompson Hine conducted a nationwide survey of senior executives and in-house counsel to learn more about their ESG practices. The survey included 134 executives from a variety of industries, companies sizes, and locations. It had a public/private ratio between 36% and 64%. The firm wanted to know about their ESG practices and programs, the nature of disclosures they provide or plan to provide, their short-term and long-term ESG-related challenges and needs, and the delegation of ESG oversight responsibilities within their company. They also wanted to know how they measure their success in meeting ESG goals. The report highlights that companies are trying to prioritize their objectives with so many processes and protocols under the ESG umbrella. However, even the best-intentioned business leaders face significant difficulties in achieving this goal due to the lack of a consistent reporting framework. ESG has been made a priority by the Biden administration, with the SEC as well as the Department of Labor planning guidance in the coming weeks. According to the report, companies face increasing pressures. Those that fail to show transparency and embrace accountability in these areas could be subjected to decreased investment, performance, and reputational damage. Heidi Friedman, a partner at Thompson Hine, says that ESG initiatives are being demanded not only by shareholders and investors, but also by all stakeholders including consumers and the wider public. “Regulators are increasing their focus on ESG issues with the SEC’s proposed ESG rulesmaking expected in October. These issues are important for companies to consider if they have not started. Panelists at the NAPA 401(k), Summit discussed this issue. They noted that ESG factors are being considered in corporate RFPs. This includes questions about purchasing and procurement policies. Top Concerns Whether public or private, companies reported that data collection/verification was the most pressing ESG concern in the next year (52% public and 43% private). Public companies had the top three most pressing concerns in the near future. Staffing (27%), regulatory activity (27%), and green initiatives (34%). Private companies had the highest concern about staffing (24%). ESG Disclosures The survey revealed that diversity, equity and inclusion (DEI) is the most important focus of companies when it comes to ESG disclosures they are currently making or intend to make. This was 95% for public companies and 63% in private companies. In addition, public companies are most often disclosing information regarding board oversight of environmental and sustainability issues (78%) and ethical business practices (75%), while private companies are focusing on ethical business practices (50%) and community involvement/charitable giving and human capital management (both at 44%). The survey found that three quarters of public companies include ESG disclosures in annual reports, on company websites, and in sustainability reports (76%). Public company communications also include internal communications (48%) and proxy reports (24%). Private companies, however, reported that they rely mainly on their internal communications (31%), as well as their company websites (22%), and sustainability reports (17%) when making disclosures. Industry and Company Size. The Financial Services industry seems to be the most forward-thinking industry in terms of ESG as a business objective and having a strategy. The report notes that no respondents to the industry chose to have an ESG strategy or plan to adopt it. Respondents in Real Estate reported that 29% of respondents considered themselves leaders, and 43% had an ESG plan in place. Respondents from the Health Care industry reported the highest percentage of respondents who had no ESG strategy and no plans for adoption (38%), while there were nearly equal numbers of respondents who had one. The Manufacturing industry had the second lowest percentage of respondents reporting “no ESG plan in place and no plans for adoption” (12%) while the highest percentage (37%) reported that they intend to adopt an ESG policy within the next one to two years. Companies with annual revenues below $50,000 don’t consider themselves to be at the forefront of ESG, and 29% do not plan to implement ESG strategies. Thompson Hine points out that while leadership and implementation numbers were higher in larger companies than in smaller ones, 27% of those surveyed had revenues over $500 million and 6% had plans to implement ESG strategies. Companies with revenues between $500 million to $1 billion, however, were more committed to ESG than those with less revenue.

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ESG Investing Conference