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This year’s analysis of corporate sustainability disclosure highlights both the disruption to annual reporting by the COVID-19 pandemic and the movement toward greater disclosure of ever-evolving sustainability practices.
Compared to 2019, disclosure has declined across many of the environmental and social practices examined in this analysis. The drop in disclosure is primarily due to reporting delays caused by the pandemic, with many companies reporting their sustainability data later than usual.1 For this reason, readers are urged to use caution when comparing year-over-year data and resist attributing significant decreases in disclosure to a broader trend.
At the same time, the analysis reveals notable increases compared to the previous year in certain key areas such as the disclosure of climate-risk reporting, human rights, and water stress exposure. Worldwide, the representation of women on company boards is increasing, as is the number of companies that link executive compensation to sustainability metrics. These areas stood out this year and provide an indication of what is to come.
Insights for What’s Ahead
The trend toward disclosing climate risks in financial reports is accelerating as regulatory and investor attention on the impact of climate change continues to mount. Overall, more companies are including climate risks in their SEC 10-Ks or equivalent annual reports. In the UK, the number of companies doing so more than doubled compared to last year. These increases likely follow the sustained focus of mandatory and voluntary regulatory initiatives on the topic of climate change. Large institutional investors, such as BlackRock, have explicitly called on companies to address climate risks in their reporting.2 And the EU’s Taxonomy Regulation, signed into law in 2020, requires financial institutions to make climate-related disclosures by the end of 2021.3 Given the regulatory and investor attention to this topic, we see this trend accelerating.