Perhaps not, at least, not yet.
ESG is an acronym for Environmental, Social, and Governance. There has been much interest surrounding it. In fact, according to a new study by Nuveen, the attention on ESG-focused investments has become all the more important during these turbulent times of COVID-19.
In the Fall of 2019, the top CEOs in the U.S. declared that the Corporation's purpose is to benefit all stakeholders (and not just shareholders). This means a commitment to:
(1) Delivering value to customers;
(2) Investing in employees through education and training, in addition to fostering diversity, inclusion, dignity, and respect amongst the employee base;
(3) Dealing fairly and ethically with suppliers;
(4) Supporting and participating in local communities and embracing sustainable business practices; and
(5) Generating long-term value for shareholders as well as a commitment to transparency and effective engagement with shareholders.
RISE IN GLOBAL INTEREST IN ESG INVESTING AND ANALYSES
Investors are increasingly demanding more ESG disclosures from corporations and incorporating these metrics into their investment models. While corporations are committed to corporate citizenship and investors are hungry for more transparent disclosures, it appears that these sought-after metrics are not part of the required disclosures in financial reporting, nor is there a standardized framework to report ESG metrics.
The good news is that organizations like the Sustainable Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) continue to collaborate and actively establish standards for ESG disclosures in the U.S. and worldwide.
Even the SEC has cautiously moved closer to requiring ESG disclosures for public companies. “ESG is no longer a fringe concept,” says a SEC subcommittee report, and is "an integral part of the larger investment ecosystem.”
For close to 50 years, the SEC has periodically contemplated whether ESG disclosures are material and should be incorporated into its integrated disclosure regime for SEC registered Issuers.
SEC Investor Advisory Committee, May, 2020
How do Investors Get to ESG Data NOW?
In the longer-term, E, S, and G all matter. Whilst the standardization of the 'E' and the 'S' in the ESG continues to evolve, jurisdictions worldwide, like the European Union, continue to march forward with mandating ESG disclosures. At least in the U.S., the 'G' is a treasure trove already for many investors.
For example, the Securities and Exchange Commission requires companies to disclose detailed quantitative and qualitative compensation information of senior executives in proxy statements. Additionally, companies have to disclose the criteria used to compensate senior executives and correlate them with company performance.
Investors need to assess the alignment of management interests to that of long-term value creation for shareholders. There are detailed disclosures of the board of directors' makeup and their compensation in the proxy statement in a similar vein.
While there is relatively more focus on executive and board compensation and composition as measures of key governance indicators, let us not forget the auditor.
In response to corporate catastrophes like Enron, companies are required under SOX to disclose the fees they pay to their auditors for audit services, additionally, they also need to disclose fees for non-audit services, tax, and other types of consulting services. This relationship between audit and non-audit fees can be used as a measure of auditor independence. As we all know, the independence of the auditor is essential to investors since auditors exercise their independent judgment on whether the financial statements produced by the company are following GAAP.
Structuring the 'G' in the ESG: Good Corporate Governance Promotes Investor Confidence
At idaciti, we’ve always been passionate about data and making it easily accessible, consistent, and timely. That is why our foundation is based on XBRL structured data. Moreover, we have innovated and leveraged the XBRL framework to ‘XBRL-ize’ the unstructured corporate governance data in the proxy statements and other disclosures to be automatically available when the filing hits EDGAR. Our technology is poised to XBRL-ize corporate sustainability reports once there is consistent reporting across companies, and it is more than just a voluntary disclosure exercise.
We currently have full coverage of audit fees and additional non-audit fees for all listed companies in the U.S. We plan to release detailed executive and board compensation data later this year for the Fortune 500 companies. Same as other data sets we offer, we will provide traceback of each data point directly to the location in the source documents so that you can analyze the numbers AND read the context within which the compensation is discussed.
Marrying the quantitative and qualitative data is what idaciti is all about. It’s this convergence of data which we believe gives you the edge in your analyses.
idaciti will partner with you to make E-S-G as easy, hopefully, as 1-2-3.
Try idaciti applications for free and see for yourself how you can access audit fees and other corporate-governance related data points with full traceability to the source disclosures. Use our Disclosure Research to discover what ESG topics take the spotlight in the financial reports and what ESG topics are on the rise in 2020.
Please contact info@idaciti.com to arrange a short introductory/on-boarding call and get free trial licenses of the idaciti applications for you and your research team. After the trial ends, you can still access idaciti Lite (interactive trending and benchmarking available) for as long as you like.
