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Corporate executives are suddenly talking ESG on quarterly earnings calls

ImpactAlpha, May 28Environmental, social and governance, or ESG, issues are getting more airtime this earnings season as investors seek out healthy businesses that can drive long-term value creation. ESG is in the spotlight “as investors pay greater attention to business continuity efforts and how issuers are weathering the Covid-19 storm,” Edelman’s Jeremy Cohen told IR Magazine.

Even pre-dating COVID, pressure has been growing on executives to address long-term strategies on quarterly earnings calls.

Last year, CEOs made grand pledges to stakeholders. Investors are demanding more information. “Companies need to find ways to talk about these issues in credible ways,” says Brian Tomlinson of the CEO Investor Forum, which documents the shift toward communicating long-term value creation, quarter by quarter, in “ESG and the Earnings Call.”

  • Fuller disclosure. The sustainability of its Nespresso product drives growth, Nestle claimed on an earnings call last year. Becton, Dickinson and Co. is sharing sustainability highlights. Jones Lang LaSalle, Johnson & Johnson and Phillips have convened separate ESG calls for investors. United Health Group, Best Buy, Cognizant, Ingersoll Rand and P&G are talking long-term during investor days.
  • Removing obstacles. The status quo has benefited from the lack of standards for ESG reporting, modest sell-side analyst expectations and limited earnings call bandwidth. Researchers are increasingly linking ESG to value and risk, crediting a focus on workers, customers and governance for ESG outperformance amid the COVID uncertainty.

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