ESG Mentions on S&P 500 Earnings Calls Reach Lowest Level Since Q2 2020
FactSet, a global provider of financial data and software, recently identified a noticeable decrease in the dialogue on Environmental, Social, and Governance (ESG) factors among S&P 500 companies in Q1 2023, with a 23% decrease from the previous quarter marking the lowest ESG mention count in earnings calls since Q2 2020.
This noticeable decline in ESG discussions among S&P 500 companies could signal a shift in corporate priorities, warranting closer scrutiny. Investors focusing on responsible investing may need to reassess their strategies, while corporations may have to reconsider the potential impacts on their ESG ratings. This trend underscores the importance of consistent engagement on ESG issues among stakeholders.
In the course of the recurring corporate earnings seasons, businesses frequently delve into their ongoing strategic objectives and initiatives. This naturally brings up the question of whether S&P 500 companies addressed environmental, social, and governance (ESG) aspects in their Q1 earnings conference calls.
To investigate this, FactSet's Document Search tool was deployed. This utility allows users to pinpoint specific words or phrases across numerous document formats. Using this feature, FactSet scrutinized the usage of the term "ESG" within the conference call transcripts of all the S&P 500 companies that held earnings conference calls between March 15 and June 9.
The findings revealed that a total of 74 companies among those analysed made reference to "ESG" during their earnings calls. This represents the smallest number of S&P 500 firms invoking "ESG" in their earnings calls since Q2 2020, when the count stood at 57. A high of 156 was achieved in Q4 2021, but since then, the trend has been largely negative, with four out of the five last quarters recording a quarter-over-quarter decrease. Specifically, the Q1 2023 figure was down 23% from Q4 2022.
Breaking the data down by sector, Financials and Health Care led the way, with 11 firms each from these sectors referring to "ESG" in their Q1 earnings calls. Collectively, they made up 30% of all S&P 500 companies that broached the topic of "ESG" during these calls for Q1 2023. However, eight out of the eleven sectors saw a quarter-over-quarter decline in the number of firms mentioning "ESG" in their earnings calls. The steepest falls were observed in the Industrials and Information Technology sectors, with a drop of 5 and 4 companies respectively.
A noteworthy observation is that although the use of "ESG" on earnings calls dipped sequentially in Q1, there was a converse uptrend in the number of S&P 500 companies bringing up "AI" (Artificial Intelligence) during their earnings discussions, according to FactSet data.
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