Do S&P 500 Companies That Discuss “ESG” on Earnings Calls Have Higher “ESG” Ratings?

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 (ESG) factors by investors, did companies in the S&P 500 comment on these factors during their earnings conference calls for the fourth quarter?

Searching for Mentions Across Conference Call Transcripts

FactSet Document Search (which allows users to search for key words or phrases across multiple document types) was used to answer this question. Through Document Search, FactSet searched for the term “ESG” in the conference call transcripts of all the S&P 500 companies that conducted earnings conference calls from December 15 through March 14.

Of these companies, 155 cited the term “ESG” (in reference to environmental, social, and governance factors) during their earnings calls. This number marked the highest overall number of S&P 500 companies citing “ESG” on earnings calls going back at least 10 years. The previous record was 153, which occurred in Q2 2021.

Given the record-high number of S&P 500 companies that cited “ESG” on their earnings calls for Q4, did these same companies have higher ESG ratings relative to the S&P 500 companies that did not cite “ESG” on their earnings calls for Q4?

Correlation With ESG Ratings

Using Truvalue Labs SASB scores (which are derived from a natural language analysis of a range of data sources regarding company performance and sorted into 26 ESG categories defined by SASB) for each S&P 500 company, FactSet calculated an average Insight score (which measures a company’s longer term ESG track record) and an average Momentum score (which measures the trend of a company’s performance over a trailing 12-month period) for these two groups of companies. The companies that cited “ESG” on their Q4 earnings calls have a higher average Insight score (57.9 vs. 54.7) and a higher average Momentum score (56.2 vs. 54.2) than the companies that did not cite “ESG” on their Q4 earnings calls.

Based on Q4 2021, it would appear that companies that are making more progress on their ESG initiatives and scoring higher on ESG ratings may be more prone to discuss their ESG initiatives and their progress during their earnings calls. FactSet will continue to monitor the ESG scores of these two groups of companies going forward.

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