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.