ESG/Sustainability: Is the Topic Coming Up On Earnings Calls?

Pamela Styles principal

There is growing evidence of attention to ESG/Sustainability in mainstream investing. Global ESG/Sustainability investments are now 30 percent of all professionally managed funds with significant growth both in the U.S. and Europe. Assets Under Management allocated to inclusionary ESG/Sustainability investment strategies are overtaking exclusionary strategies.

Sustainability is the umbrella term that encompasses many associated acronyms. ESG is the acronym commonly used in the U.S., while in the UK and Europe, SRI (Socially Responsible Investing) or CSR (Corporate Social Responsibility) are more common.

ESG = Environmental & Energy, Social Responsibility and Governance

Companies are producing annual sustainability reports in growing numbers and advertising inclusion in various sustainability indices and related third party ratings, e.g., DJSI, MSCI, FTSE4 Good Index, STOXX ESG Leaders Index and Newsweek’s Global 500 Greenest Companies. [2]

Sustainability reporting has been mostly separate from traditional company financial reporting and discussion. But is this still true?

I used AlphaSense to test whether ESG/Sustainability is finding its way into company earnings calls and related disclosure — the short answer is: Yes.

ESG In Earnings Press Releases

I found several examples in bulleted highlights at the top of earnings releases that include reference to sustainability indices inclusion, e.g., Alcoa ($AA) and Cardinal Health ($CAH). The more frequent reference to sustainability appears in company tag lines at the bottom of the release, e.g., Hormel Foods ($HRL), Campbell’s Soup ($CPB), Talisman Energy ($TLM), Societe General ($GLE) and Soft Bank (Sprint Corp) ($S)).

Earnings Call Transcripts and Earnings Call Slides

With the exception of an occasional Q&A item, I found most of the prepared company remarks related to sustainability are by international companies, e.g., Turk Telecom ($TTKOM), Enagas SA ($ENG) and Infineo Technologies AG ($IFX.F). This makes sense, given the earlier adoption of sustainability by UK / European investors and companies.

Highlighting inclusion in major sustainability indices and ratings appears to be the extent to which sustainability is currently referenced in U.S. company earnings releases. It will be interesting to watch whether U.S. companies follow the European trend, and in particular, when they begin to discuss sustainability successes in context of ROI and shareholder value in the earnings reporting forum.

Approach

The scope of my research filtered AlphaSense to only include U.S., Canadian, and European companies with greater than $2 billion market cap. Other than for the first chart below, I searched for the most recent two years. My query started with ESG and Sustainability and expanded to related queries. The initial query resulted in 262 documents from 99 companies in 10 sectors and 36 industries. 

AlphaSense Sustainability table

I wanted to see if AlphaSense could be used to get a sense over time as to how many companies are referencing ESG and Sustainability in earnings calls and related investor communications. The results of searching ESG and Sustainability by calendar year in AlphaSense to find all the press releases, call transcripts, IR presentations and proxy filings (Schedule 14A) since 2010 are shown in the following table.

More time could be spent to expand the search, but this table shows that AlphaSense can be a useful tool in ESG / Sustainability-related research.

  • The eight companies in 2010 that were found by the search to reference ESG/Sustainability in their investor communications documents (majority Schedule 14A Proxy only) include:
    • Emerson Electric ($EMR), Chesapeake Energy ($CHK), CR Bard ($BCR), Gentex ($GNTX), Google ($GOOG), St. Jude Medical ($STJ), EQT Corp. ($EQT) and Vectren Corp ($VVC)
  • 2012 is the first year with evidence of ESG/Sustainability performance comments in an annual analyst conference by Baxter ($BAX).
  • 2013 marks a sudden addition of ESG/Sustainability-related press releases and presentations, both analyst conferences and earnings calls. Finmaccanica (Italy) ($FNC.MI) mentions ESG/Sustainability in its earnings call slides. Nokian Tyres (Finland) ($NRE.F) includes ESG/Sustainability reference in its earnings press release.
  • 2015 data is partial year only, through October 12, 2015.

The prevalence of disclosure varies from sector to sector. Results of the first simple “ESG and Sustainability” query, filtered for the most recent two-year period, provide a glimpse at sector and industry breakdowns in the charts below.

AlphaSense Sustainability chart

AlphaSense Sustainability chart

Pamela Styles is principal of Next Level Investor Relations LLC, an Investor Relations consultancy with dual IR and ESG/Sustainability specialties.

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