New data has revealed that over 75% of all S&P 500 companies use at least one ESG metric to guide their pay and bonus levels according to The Conference Board, showing that companies are increasingly gauging their future success against important ESG factors. Additionally, according to a dataset by ISS almost 20% of metrics used to judge executive pay plans were related to environmental and social metrics.
Some have argued that tying executive pay to these goals will function as a positive incentive towards environmental improvement. This strategy is not without critics, however. The Financial Times quoted several senior investors arguing that these metrics can be “fluffy” and subjective that could promote counterproductive and short sighted business practice.
Following last week’s news that BlackRock was supporting fewer ESG proposals than last year, it has also been revealed that Vanguard has followed the trend – supporting a mere 2% of ESG related shareholder proposals this year.
Despite the promising growth of ESG in the last five years, the 2022-2023 proxy season has seen several major funds shrinking from environmental initiatives in a trend that threatens to become a large-scale regression.
Major investment funds and asset managers have had a chequered record in supporting environmental measures at shareholder meetings. Think tank Planet Tracker found earlier this year that major investment funds had voted against biodiversity measures between 80-100% of the time between 2010 and 2022.
According to an internal study conducted jointly by Whitbread and Turley Economics, Premier Inn hotels each contribute to an average of £3 million spent in local businesses annually by guests, staff and the hotels themselves.
As part of its ongoing ESG strategy, known as “Force for Good”, Whitbread has increasingly tried to quantify its contribution to local communities in all aspects of the business, trying not only to bring jobs, but economic uplift for local residents as well.
New reports have emerged revealing that long expected rule changes by the US Securities and Exchange Commision (SEC) that would more explicitly tie ESG factors into financial decision making are expected in October. These rules would require companies to include certain climate related disclosures in initial filings and annual financial reports, a step forward for the US, which has lagged behind the EU in affirmative ESG regulation.
These changes are likely to face legal challenges almost as soon as they are implemented, given that some will inevitably argue that they go beyond the purview set for the SEC by Congress.
The current Supreme Court has tended to side against rule changes that they perceive as too radical, arguing that issues of importance ought to be directly legislated by congress. This was a justification for clawing back Environmental Protection Agency rules regulating water pollution. If this SEC rule fails in the courts, it will make the path to further ESG regulation much more difficult.