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Apr 25, 2022

Boards’ ESG discussions increase amid investor interest in oversight, survey finds

Most respondents report investor queries about board governance structures and ESG processes

A large majority of boards are discussing ESG topics more frequently than in the past amid investor scrutiny of how they are approaching their oversight responsibilities in the area, according to new research from Corporate Secretary into how ESG is being addressed in boardrooms.

Risk oversight is a core duty for all boards, and ESG issues raise an array of potential risks ranging from physical damage due to an increasingly extreme climate to poor financial performance or reputational damage due to a lack of diversity among employees and board members.

Globally, 80 percent of governance and sustainability professionals surveyed say there has been a slight or large increase in the frequency with which their company’s main board is discussing ESG issues compared with two years ago. Sixty percent report a large increase compared with three years ago. Just 1 percent say there has been any kind of decrease in the frequency of discussions.

Almost half of respondents at mid-cap companies say there has been a large increase in the frequency of board-level ESG discussions over the past two years. All respondents at large-cap companies say there has been an uptick to some degree, compared with 71 percent of those at small-cap companies.

The Corporate Secretary report is based on an online survey conducted between December 2021 and February 2022. The study comprises responses from 210 industry professionals including general counsel, corporate secretaries and sustainability and compliance officials.  

Among respondents globally, board diversity is the ESG issue most frequently cited by respondents as having been discussed by their board over the past year. This varies significantly depending on the size of the company. Almost all (94 percent) respondents at mega-cap companies say the topic has been discussed, compared with 76 percent of those at large-cap firms, 85 percent of those at mid-caps and 63 percent of those at small-cap companies.

Most companies are facing investor questions about how their boards are set up to address ESG matters, according to the research. Globally, 55 percent of respondents say that in the past 12 months investors have asked about their board’s governance structure and processes around ESG issues. Among mid-cap respondents, that figure is more than three quarters (77 percent), compared with 69 percent of mid-caps, 63 percent of large caps and less than half (40 percent) of small-cap companies.

Board members’ experience and expertise in dealing with ESG issues has become a topic of interest among directors, governance professionals, investors and other stakeholders, and features in a growing number of proxy statements. Almost two thirds (65 percent) of respondents at mega-cap companies say investors have asked about the board’s skills in relation to ESG issues. This compares with just under half (47 percent) of those at mid-caps, around one third (34 percent) of large caps and almost a quarter (24 percent) of small-cap companies.

Click here to access the full report.

Ben Maiden

Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...