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 first 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 March 15 through June 5.
Of these companies, 31 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls. Although this number reflects a 158% increase compared to the year-ago quarter (12), it also reflects a 56% decrease compared to the previous quarter (71). At the sector level, nine of the 11 sectors recorded a decrease in the number of companies citing “ESG” on a quarter-over-quarter basis. However, the Energy (-11), Utilities (-11), and Real Estate (-8) sectors witnessed the largest sequential declines in the number of companies citing “ESG” on earnings calls.
What drove the substantial decrease in citations for “ESG” during earnings calls in Q1 relative to Q4?
The impact of COVID-19 may be responsible for the decline in the number of S&P 500 companies discussing “ESG” on earnings calls in Q1 compared to Q4. While only 31 S&P 500 companies cited the term “ESG” on Q1 earnings calls from March 15 through June 5, 474 S&P 500 companies cited the term “COVID-19” on Q1 earnings calls during this time frame. Many of these 474 companies spent a significant amount of time on their earnings calls discussing not only the financial impact of COVID-19 on their businesses, but also the policies and programs they implemented to assist their employees and communities at large in dealing with the virus. As a result, some companies may have placed a higher priority on discussing COVID-19 than ESG initiatives on their earnings calls for Q1, which potentially could have contributed to the sequential decrease.
With economic lockdown policies now being eased across the country, 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 upward trend of the past year resumes in the next few quarters.