US Companies wind-down talks of ESG, DEI and Sustainability in Earnings Calls
What’s happening?
After the re-opening from lockdown and with news of George Floyd’s death, US companies heavily increased talks and announcements of ESG & DEI goals setting ambitious goals and quotas to meet. This growth sustained from Q2 2020 to Q1 2022 where mentions of words & phrases such as “ESG”, “DEI”, “Environmental, Social and Governance”, “Diversity, Equity and Inclusion” and “Sustainability” in earning calls rose 196%.
In Q1 2022, stock indexes like the Dow Jones, NASDAQ and S&P 500, all started seeing dips in stocks from their all-time-highs post-pandemic. A quick decrease in mentions of the aforementioned words & phrases started; from Q1 2022 to Q2 2023, there was a -39% dip.
Why are companies decreasing talks about ESG & DEI?
- Frustrated Investors: With decreased returns, investors wanted companies to focus on performance and operations instead of social causes that may not be beneficial for the bottom-line.
- Conservative Groups: Political leaders & conservative groups started boycotting brands that were too “woke”. Examples of this include Carhartt, Bud Light and Target who were all targeted by these groups for pushing LGBTQ+ campaigns and faced enormous backlash.
So what are happening to these ESG & DEI programs?
There seems to be no evidence of the retrieval and slowing down of these programs. Emission reductions, social causes and DEI employee training all seem to be ever-present; just less talked about in earning calls. This strategy is likely to avoid weighing on contreversial issues that may cause companies to be victim of boycotting or sidelining a specific group or demographic.
According to a KPMG survey released in October of 2022, 45% of US CEOs said their ESG initiatives helped improve financial performance, up from 37% the year prior.
