Article 3

2020-10-12 Zenia Simonella

Waiting for ESG(D)

The pressure from institutional investors on Boards of Directors in regard to ESG themes (Environmental, Social, Governance) is growing. The construction of sustainable business models increasingly shapes the choices of investors, to the point that they may decide not to invest in companies that dedicate little attention to the subject. Thus, the construction of sustainability reports and the reporting of non-financial information are not aspects of mere compliance, but become tools for company policy. In the pages of some international newspapers, it has been argued that the acronym ESG should include the letter "D" (Diversity) to enhance awareness and increase accountability on the issue.[1]

The attention to this theme is growing at least from a formal point of view, and the board members who have to deal with it require guidelines to link it to business strategy and adopt managerial tools to promote it.[2] 

What is the position of board members on ESG? Are they dedicating sufficient attention to these issues?

In the PWC report Turning Crisis Into Opportunities,[3] we find some responses.

With respect to 2019, there is an increase in the number of board members interviewed[4] who stress the importance of addressing the issues (the percentage went from 54 to 67 percent), while 45 percent state that they are now fully a part of the BoD's agenda (compared to 34 percent in 2019). In particular, the attention to social issues has grown (rights, environment, inequality, and immigration), at least in words. Those most sensitive to social issues and attentive to linking ESG themes to the business strategy are women board members (compared to men board members).

In the case of the issues of diversity and inclusion, 84 percent of board members state that much more should be done, but only 39 percent say that the goals have been entered into the strategic plan. So for now, there's a lot of talk, but little action.

In the long run, however, we can see a change, in part because the number of women who manage investment funds is increasing: they have gone from 3.5 percent in 2016 to 11 percent in 2020.[5] We should hope that the change comes quickly, though, because as John M. Keynes said, in the long run we are all dead.     

[2] "Le linee guida in materia di diversità e inclusione", Assogestioni, September 23, 2020. 

[4] These are board members who sit on the BoD of American companies. 693 people answered the survey (76 percent men, 24 percent women).

[5] "Alpha female report 2020", CityWire, 2020.