Between . The DOJ's Newest Pilot Program on Compensation and Clawbacks: Executives and Employees Should Reap What They Sow Much of our work is in collaboration with organizations that help underrepresented students develop computer science and coding skills", Technology (in 5 of the 21 filings). Through the requirement of ESG disclosures, the expectation (whether realistic or not) is that publicly held companies will become more sensitized, acting in a more socially conscious manner to. In addition, our annual Voice of the Associate surveyserves as our primary means of gauging associates level of engagement within their roles. On March 21, 2022, the SEC issued a proposed rule that would enhance and standardize climate disclosure requirements provided by public companies. Given these considerations, when contemplating any ESG disclosure in connection with SEC filings, public reporting companies should give due consideration to the following key takeaways: Based on our survey, the top ESG topics for 2020 SEC filings were: These top categories for increase (HCM, environmental, and board oversight) reflect the key areas of corporate and investor focus this year for the surveyed companies, which other public companies should consider enhancing in their own disclosures. The prevalence of this disclosure was largely the result of renewed investor pressure and focus on these disclosures. The ESG information that is disclosed in voluntary sustainability reports on corporate websites and SEC filings must be accurate and consistent. Moreover, every company surveyed (all 50 companies) included environmental disclosure in their 2022 filings. Integrity. Every company surveyed increased its ESG disclosures in at least one category in their proxy statements between 2019 and 2020, and 21 companies (or 42%) also increased their ESG disclosures in at least one category in their annual report on Form 10-K between 2019 and 2020. These meetings covered a range of topics, including our financial condition and results of operations, our investment, finance and operation strategies, our stock price performance, economic, industry and market trends, our ESG and executive compensation policies and other matters. In the area of human capital management, the topics included executive compensation practices, diverse representation in senior roles at [the company], talent development and succession planning, and identifying unintended biases in [the company's] people processes, including gender pay equity. The COVID-19 pandemic and Black Lives Matter movement have put the spotlight on public companies' management of ESG issues like never before. Informed by those discussions, we made the following changes to our governance and compensation practices", Expanded ESG Engagements (in 8 of the 21 filings). For example: "In 2019, the Company conducted the Our Voice Employee Survey. Human capital disclosure trends in recent 10-K filings We have looked at more than 2,000 10-K filings since the SEC's new human capital disclosure rules went into . 13Increased quantitative disclosure in filings from 2019 to 2020 was found in the following categories: environmental matters 42 filings in 2020 vs. 34 in 2019; E&S goals 32 filings in 2020 vs. 26 in 2019; HCM 27 filings in 2020 vs. 17 in 2019; social impact and community 32 filings in 2020 vs 26 in 2019; E&S disclosure in introduction letters 6 filings in 2020 vs. 4 in 2019; E&S highlights near cover page 19 filings in 2020 vs. 15 in 2019; corporate culture 7 filings in 2020 vs. 1 in 2019; ethical business practices 3filings in 2020 vs. 2 in 2019; E&S issues in shareholder engagements 12 filings in 2020 vs. 6 filings in 2019; E&S qualifications of directors 11 filings in 2020 vs. 6 in 2019; E&S awards 11 filings in 2020 vs. 9 in 2019; board oversight of E&S issues 1 filing in 2020 vs. none in 2019. Even ahead of the SECs adoption of any new climate rules, in-house teams should take note of the growing trend of providing ESG disclosure in annual reports on Form 10-Ks. In 2022, core federal filings increased in the following sectors: consumer discretionary, financials/real estate, healthcare, industrials, communications, and utilities. EU - CSRD: US - SEC Materiality (i.e., what matters for reporting) "Double materiality," which means: Significant impacts from an investor perspective (i.e., reporting on ESG matters material to the company's value creation). Our climate change strategy is based on mitigation, resilience and enablement. Invent the future and learn from the pastDemonstrate excellence in everything we do. 12For example, in the 2020 filings surveyed, the following included quantitative disclosure on various topics: environmental matters - 42 filings; social impact and community 32 filings; E&S goals 32 filings; HCM 27 filings; supply chain management 12 filings; E&S highlights near the cover page of the proxy statement 19 filings. While most of these disclosures mentioned non-specific sustainability or diversity performance, several noted specific environmental goals or workforce diversity metrics that linked directly to NEO compensation. "The recent SEC action that resulted in a company paying $35 million to settle charges that it failed to maintain adequate disclosure controls is an eye-opener. As shown in the chart below, 89 of the 2022 filings surveyed increased their environmental disclosure, compared to 35 of the 2021 filings and 29 of the 2020 filings. E&S goals and targets cover a range of topics including long term goals to reach net zero, and shorter term goals to reduce GHG emissions by specified amounts. 5 Rather than add substantive E&S disclosure to SEC filings, we note that many companies are increasingly providing significant disclosures on ESG topics in sustainability reports posted on their websites, including quantitative disclosures that align with frameworks such as the Sustainability Accounting Standards Board (or SASB) disclosure standards. STOCKHOLM, Sweden, March 15, 2023 /PRNewswire/ -- On March 15, 2023, Ericsson (NASDAQ:ERIC) filed its Annual Report on Form 20-F for the year ended December 31, 2022, with . For example: "During the past year, the Corporate Governance and Nominating Committee's oversight focused on, among other things [the company's] Corporate Responsibility Report and trends (including environmental sustainability, climate risk, human capital, human rights issues, and political accountability), and investor outreach and feedback.". Forty-four companies (or 88%) included some form of quantitative metric in their E&S goals and targets disclosure18 in their Form 10-K (up from 11 in 2021) and 42 in their proxy (up from 26 in 2021). For example: "We have worked, and are continuing to work, to integrate our ESG and SEC reporting and align our ESG disclosures with external frameworks such as SASB and TCFD", Disclosed following TCFD (10 of 11). We expect quantitative disclosures to increase, as investors heighten their focus on diversity disclosures in 2020. Healthcare and communications companies were targeted the most, with 7.8 and 6 percent of those companies named, respectively. Our commitment to our core values drives our approach to human capital management. BATS NULV opened at $32.95 on Friday. SEC-Required Reporting on ESG Throughout early 2021, the U.S. Securities and Exchange Commission proposed rules for mandatory reporting relating to several key areas of ESG, including climate change, human capital management, board diversity and cybersecurity risk governance. The below graphics represent the disclosure increases and the excerpts provide representative examples of the additional HCM disclosure: Examples of new disclosures included the following: On Employee Engagement, for example: Associate engagement is the emotional commitment associates have to [the Company]. The text search is done on filings stored in EDGAR as html files. In 2022, of the 98 filings that included disclosure on HCM, 54 included current or historical quantitative metrics. Prior results do not guarantee a similar outcome. Clawback Disclosure. For more information, see our alert Blackrock Calls for Enhanced Sustainability Disclosure and Accountability for Directors.(go back), 10Similarly, Vanguard suggest[s] that companies adhere to reporting structures such as the Value Reporting Foundation (formed by the merger of the [SASB] and the International Integrated Reporting Council), the [TCFD], or other broadly accepted industry-specific frameworks (see Global investment stewardship principles) and State Street has asked companies to provide disclosure aligned with the four pillars of the TCFD framework (see Guidance on Climate-related Disclosures). Our culture is based on our servant leadership philosophy represented by the inverted pyramid, which puts primary importance on our customers and our associates by positioning them at the top, with senior management at the base in a support role. Twenty-eight of the 2020 filings surveyed (or 28%) increased disclosure on corporate culture from 2019. We also published our first [TCFD] report in 2021 to assess our climate-related risks and opportunities and better understand the potential impacts on our value chain., Disclosed following more than one standard, for example: We are committed to transparency around our carbon footprint and climate risk and use the framework developed by the TCFD to inform our disclosure on climate governance, strategy, risk management, and metrics and targetsOur Corporate Responsibility Report also includes a mapping of our disclosure to the TCFD, the [SASB] framework, and our CDP Climate Change Survey, all of which are available on our website.. Twenty-one of the 2020 filings surveyed (or 21%), including 19 of the 2020 proxy statements surveyed (or 38%), increased their disclosure related to social impact and community relations, as compared to 2019. It is interesting to note that 34 companies disclosed that they allocated responsibility for oversight of ESG issues to more than one committee (up from 21 in 2021), with six companies disclosing that they allocate responsibility to four committees and five companies disclosing allocation of ESG oversight to five committees. Of these, 32 companies included the disclosure in their Form 10-K and 48 companies included it in their proxy statement. On that day, for the first time in its history, the SEC proposed specific mandated disclosure rules For example: "Our strong tone at the top begins with our Board of Directors, which has demonstrated its focus on advancing openness, honesty, fairness and integrity in the Boardroom and across the Company" Another company disclosed that its "Ethics, Conduct and Culture Committee [o]versees management's efforts to reinforce and enhance a culture of ethics throughout the firm.". As we strive to operate sustainably, we have focused on protecting the climate, reducing our environmental impact, and sourcing responsibly, and we have set specific, measurable goals to drive progress in these areas., Renewable Energy, for example: The Climate Pledge is [the Companys] commitment to be net-zero carbon by 2040, and we are on a path to powering our operations with 100% renewable energy by 2025. ESG Investors Value Disclosure Outside of Securities Filings Financial Reporting ESG Investors Value Disclosure Outside of Securities Filings The quality, consistency, and digestibility of ESG disclosures may be more important to investors than their appearance in SEC filings. Relationships. 15 For more information, see our prior alert "Blackrock Calls for Enhanced Sustainability Disclosure and Accountability for Directors." Seventy-six of the filings surveyed (or 76%) increased their disclosure related to E&S goals and targets. The SEC recently introduced new disclosure requirements designed to provide stakeholders insight into human capitalfrom the operating model, to talent planning, learning and innovation, employee experience, and work environment. [11]. Overall, 47 of the companies surveyed included disclosure on corporate culture in their 2022 filings, compared to 44 companies in 2021 and 43 companies in 2020. In 2020, the largest increase in ESG disclosures came in human capital management. For the first time in White & Cases annual survey, E&S Goals and Targets made the top seven categories, rising to the third spot with the largest increase in disclosure. We have applied NLP based text search on the annual filings of S&P 500 companies from 2014 to 2020 1 to measure ESG keyword usage. For example: Compensation tied to environmental goals (11 of 19 companies). our 2022 Annual Report on Form 10-K and other filings with the Securities and Exchange Commission. ", Increase in Environmental Quantitative Metrics. As the SEC is proposing rules that would mandate comprehensive climate change disclosures, the largest increase in categories of ESG disclosure compared to 2021 was environmental matters. We provide several pulse check surveysthat help us determine how emotionally connected those associates are to our customers, the Company, their jobs, fellow associates, and leaders. The US Securities and Exchange Commission (SEC) is set to approve a range of non-transparent ETFs in a move that could bring more active players to market. Recently, in the SEC's interpretive guidance on key performance indicators and metrics in MD&A disclosures8, the SEC specifically called out environmental metrics when reminding companies that, when including metrics in their disclosure, they should consider the need to include additional information necessary to provide adequate context so that the metric is not misleading.9 The increase in environmental disclosures by the surveyed companies in their SEC filings comes in a landmark year focusing on the "E" in ESG. Twenty-three companies disclosed that at least some ESG matters were overseen by a more specialized committee or committees, such as a dedicated Sustainability Committee or a Public Responsibility Committee. Emissions Reduction Goals (in 14 of the 29 filings). Watch a Summary ON THIS PAGE Board Disclosure TCFD SFDR Green Bond Market EU Taxonomy U.S. ESG Policy Insurers Vincent Ryan November 15, 2022 Photo: Getty Images Notably, in 8 of 21 filings with increased disclosure in this category, the disclosure noted recent expansions of shareholder engagement efforts on ESG issues, reflecting the heightened focus on ESG by investors. 16 Two of these proposals were subsequently withdrawn due to commitments from the companies to provide SASB-aligned disclosure. We have a responsibility to continue scaling our DEI initiatives, to ensure a workforce that is more representative of our users, a workplace that creates a sense of belonging for everyone, and to increase pathways to tech in the communities we call homeIn 2020, we implemented a series of industry-leading principles and improvements that incorporated input from both employees and stockholders, including the creation of a new DEI Advisory Council, which comprises internal senior executives and external DEI experts. ", Mention of Specific E&S Issues Discussed (in 16 of 21 filings). Board oversight disclosures generally appeared in the business section of the surveyed companies Form 10-Ks. Human Capital Management. The trend towards increased ESG disclosure in SEC filings is pronounced. For example: "The Company values the views of its shareholders. Corporations are beginning to disclose Environmental, Social and Governance (ESG) data in their SEC compliance filings. Although some categories decreased in prominence (social impact and community relations, and supply chain management), this does not necessarily reflect the relative level of disclosure on such topics, as companies may have already had robust disclosures on these topics and therefore did not increase those disclosures year over year. Notably, there has been an increasing trend of companies including this disclosure in their Form 10-Ks as well as their proxy statements. For example: "During our meetings with shareholders we heard strong support for our new CEO and feedback regarding executive compensation. The commission is expected to propose mandatory ESG-related disclosure rules in early 2022, but even without specific requirements, any ESG-related material impacts should be disclosed under existing SEC rules. Forty-eight companies (or 96%) included it in their Form 10-K (up from 37 in 2021 and 32 in 2020) and 48 companies (or 96%) in their proxy statement (the same number as in 2021 and up from 45 in 2020). Farient Advisors LLC's partner Marc Hodak In 2022, 36 companies (or 72%) included EEO-1 data or referenced the provision of such data in a separate report, up from 16 (or 32%) in 2021. For example: "We are proud that over 60% of our employees are women or people of color, that over half of our employees report to a woman or a person of color and that women and people of color represent more than 50% of our employees at or above the vice president-level [S]ince the end of 2010, the number of women at or above the vice president-level has increased by more than 70%, and the number of people of color at or above that level has more than doubled. In total, all but one of the surveyed companies (49 out of 50) included some form of E&S goal or target. More than 95% of the Fortune 50 now include some ESG disclosures in their SEC filings. Thirty-two companies made this disclosure only in their proxy statement, two only in their Form 10-K and six included the disclosure in both filings. Monday, May 3, 2021. 2020White & Case LLP. These are unprecedented times, and companies are facing important issues as they navigate the current economic, political, and social climate. For example: "[The Company] demonstrates corporate leadership on climate change by setting strong goals and taking purposeful action in and outside our company. Excellent paper. Maia Gez, Era Anagnosti, and Taylor Pullins are partners at White & Case LLP. Their proxy statement disclose environmental, Social and Governance ( ESG ) data in their compliance... Heighten their focus on these disclosures in addition, our annual Voice of 2020! And enablement 19 companies ) of engagement within their roles, Mention of Specific E & S goals and.! 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