A new report produced by Insightia, a Diligent brand, reveals mounting pressure on organizations to enhance climate disclosures, with ESG proposal filings hitting record levels
New York, June 27, 2023 | U.S. organizations are proactively preparing for Scope 3 reporting, with 63% of the 500 largest U.S. public companies voluntarily reporting on Scope 3 emissions, according to a new report from Diligent, a leading GRC SaaS company.
The ESG 2023 report produced by Insightia (a Diligent brand) in association with Vinson & Elkins, highlights how issuers are being held accountable for emissions reporting on a global scale, with regulators, standard setters and investors alike calling for mandatory Scope 3 reporting.
The sustained pressure to enhance climate disclosures underscores the need for clear and consistent insights into climate performance, as well as the ability to benchmark ESG data against industry peers to optimize shareholder engagement.
“Regulatory developments are set to revolutionize how companies globally are held accountable for their ESG policies and practices,” said Josh Black, editor-in-chief at Diligent. “With a myriad of new requirements to juggle, it’s increasingly important for leaders to be proactive in addressing ESG-related risks and opportunities. This is especially true for those in high-risk sectors such as energy and utilities.”
Among the report’s top findings:
Reporting on Scope 3 emissions goes global:
- Emissions-intensive sectors face sustained pressure to enhance their net-zero commitments, with climate change shareholder proposals winning 32.4% and 36.7% average support in the U.S. energy and aerospace/defense sectors, respectively, in the first five months of 2023.
- U.S. issuers are proactively preparing for Scope 3 reporting, with 63% of the 500 largest U.S. public companies currently voluntarily reporting on Scope 3 emissions.
Pressure mounts on issuers to enhance ESG disclosure:
- Although average support for E&S shareholder proposals appeared to fall over the last two years, the number that passed remains elevated and more ESG requests are being withdrawn for agreements. Twenty-six E&S proposals won majority support at S&P 500 companies in 2022, compared to 18 and 30 in 2020 and 2021, respectively.
- ESG metrics in compensation are becoming the norm. Seventy-three percent of the S&P 500 tied executive compensation to some form of ESG performance in 2021, up from 66% in 2020.
ESG activism out of favor with hedge funds:
- Rising inflation has placed ESG activism on the backburner for traditional activist hedge funds. 3.3% and 7.4% of environmental and social activist demands have been at least partially successful in the first five months of 2023, compared to 5.7% and 13.9% support, respectively, in the same period a year prior.
- Activist campaigns launched by primary or partial-focus activists have featured environmental and/or social demands in the first five months of 2023, compared to 43 in the same period a year prior.
The report is powered by Diligent’s newly launched ESG module in Insightia One. In partnership with ESG platform Clarity AI, the module gives organizations and investors greater clarity into ESG scores and how a company’s climate data measures against the wider market.
About the report
Data from Insightia’s Activism, Voting, ESG, and Governance modules, as well as Diligent’s Compensation and Governance Intel (CGI) and Manzama solutions, run from January 1 to December 31, 2022. 2023 data is as of May 31, 2023. Further data are available on request, although bespoke analysis may take 48 hours. For more information, please email insightia.info@diligent.com.
About Insightia
Insightia, a Diligent brand since January 2022, is a market-leading SaaS company formed in 2020 through the merger of Activist Insight and Proxy Insight. Launched in 2012 and 2013 respectively, these companies had quickly risen to become leaders in their fields.
About Diligent
Diligent is the global leader in modern governance, providing SaaS solutions across governance, risk, compliance, audit, and ESG. Serving more than 1 million users from over 25,000 customers around the world, we empower transformational leaders with technology, insights and confidence to drive greater impact and lead with purpose.
