T. Rowe Price Report Says ESG Disclosure Issues was #1 Topic Among Worldwide Companies in 2019

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T. Rowe Price reported today that environmental, social, and governance (ESG) disclosure issues became the number one topic in its engagements with the managements of companies around the world in 2019.

The company said that the rising risks associated with climate change will impact virtually its entire universe of portfolio holdings to varying degrees. Because of this, climate change alongside other ESG factors is being increasingly factored into analysts' evaluation of company fundamentals.

ESG is being ingrained into the investment processes of many firms. For one example, in March, Barclays Research announced the launch of “ESG Fundamental Research,” which highlights the environmental, social, and governance impact of companies under coverage by Barclays’ analysts — similar to T. Rowe Price’s initiative.

Also in March, institutional investors unanimously confirmed that ESG risks and opportunities played an increasingly important role in their investment decisions and their evaluation of portfolio companies during the past 12 months. That was according to Morrow Sodali’s annual Institutional Investor survey, which highlighted several interesting findings, including:

• Climate change is at the top of investors’ ESG agenda. All companies, regardless of their sector, should expect increased investor scrutiny on how they approach this issue.
• Investors expect to be privy to the inner workings of the board, underlining the importance of board/shareholder engagement.
• In general, pay-for-performance continues to dominate as a key pressure point for investors, but increasingly the emphasis is on how companies and boards respond to shareholder concerns and negative votes.
• Many investors express a need for more explicit non-financial information, which they see as an important indicator of underlying corporate culture, integrity, and sustainability. With regards to climate change factors, it is of primary importance to investors that companies clearly show what the connection is to their financial risks and opportunities.

It's clear from recent news that ESG will continue to play an important role in which factors organizations prioritize when contemplating investing moves.