During each corporate earnings season, it is not unusual for companies to comment on their ongoing corporate goals and initiatives. Given the growing focus on environmental, social, and governance factors by investors, did companies in the S&P 500 comment on these factors during their earnings conference calls for the second quarter?
To answer this question, FactSet searched for the term “ESG” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from June 15 through September 5.
Of these companies, 60 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls. Although this number is only 12% of the companies in the index, it reflects a 100% increase compared to the number of companies citing “ESG” in the previous quarter (30) and is the second highest overall number of companies going back at least four years.
What drove the substantial increase in citations for “ESG” during in earnings calls in Q2 relative to Q1? At the sector level, nine of the 11 sectors recorded an increase in the number of companies citing “ESG” on a quarter-over-quarter basis. However, the Energy (+6), Consumer Staples (+5), and Industrials (+5) sectors witnessed the largest increases in the number of companies citing “ESG” on earnings calls in Q2 compared to Q1. These three sectors accounted for more than half (16) of the total increase (30) for the index.
It is important to note that a large number of S&P 500 companies that did not cite “ESG” on earnings calls for Q2 2020 did address racial equality and justice issues. Overall, 144 S&P 500 companies (including 125 companies that did not cite “ESG” on their earnings calls) cited at least one of the following terms in reference to racial equality or justice issues on their Q2 earnings calls during this time frame: “equality,” “inequality,” “justice,” “injustice,” and “racism.” In Q1 2020, just two S&P 500 companies cited at least one of these terms over a comparable period in reference to racial equality or justice issues.
It will be interesting to see if S&P 500 continue to discuss ESG and racial equality and justice issues going forward.