Summary
Stakeholders, analysts, and shareholders are increasingly scrutinizing firms’ sustainability disclosures in their assessment of management quality. This paper explored the state of S&P 500 companies’ transparency by analyzing their Bloomberg ESG (Environmental Social Governance) disclosure scores. Additionally, the effects of industry sector, firm size, and governance practices on transparency are examined.
Methodology
Data were retrieved from Bloomberg using the financial analysis environmental, social, and governance function for companies comprising the S&P 500 index. Descriptive statistics are provided on each of the three components separately (ESG). Nonparametric procedures are used to test for significant differences in transparency within each of these three areas based on industry sector.
Insights & Implications
— The highest level of transparency is found on governance and the lowest on environmental.
— There is much variability in the percentage of S&P 500 companies disclosing information about specific social policies (e.g. child labor).
— Significantly, higher ESG disclosure scores are observed for S&P 500 firms with larger boards of directors, with boards that are more gender diverse, that allow CEO duality, and that link executive compensation to ESG scores.
— Large-cap companies (a company with a market capitalization value of more than $10 billion) have significantly higher ESG disclosure scores than mid-cap companies (companies with a market capitalization between $2 billion and $10 billion).
Location of Article
This article can be found online here.
