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 third 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 September 15 through December 5.
Of these companies, 31 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls. Although this number is only 6% of the companies in the index, it reflects a 29% increase compared to the number of companies citing “ESG” in the previous quarter (24) and the highest overall number of companies going back at least three years. At the sector level, the Financials (9) sector had the highest number of companies of all 11 sectors discussing “ESG” on Q3 earnings calls. However, the Materials sector had the largest increase (+3) in the number of companies citing “ESG” on earnings calls in Q3 relative to Q2.
Broadly speaking, almost all the companies that discussed ESG on their earnings calls in Q3 either discussed their own corporate ESG initiatives and reporting (20) or discussed ESG-related businesses, products, or services (10).
However, the distinction between a company’s own ESG initiatives and ESG-related businesses, products and services may be blurring. As Xylem noted on their earnings call last quarter, “…we don't have a sustainability strategy that sits separate from our business strategy. They go hand-in-hand.”
It will be interesting to track the number of S&P 500 companies that cite “ESG” in their earnings calls going forward to see if the recent rise in these citations continues.
Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).
The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.