Two-thirds of institutional investors now say they will be pressing companies for more robust diversity disclosures, specifically aligned to the EEO-1 disclosure framework, according to the
EY Center for Board Matters’ recent investor survey. The study, which interviewed more than 60 investors with over $38 trillion in assets under management, found that a similar percentage of investors will also demand increased climate risk disclosures including specific decarbonization and emissions-reduction strategies. Highlights from the study include:
- Executive Compensation. About a third of investors said they will prioritize executive pay in 2021, especially the impacts of COVID, tying ESG goals to pay, and how pay aligned with the treatment of employees through the pandemic.
- Human Capital Management. About a quarter of investors are prioritizing human capital strategy including the health and safety of the workforce, job retraining and engagement. The study highlights some investors’ suggestion that the Compensation Committee should be given responsibility for overseeing workforce matters and engage directly with the CHRO on the “employee experience.”
- The most requested HCM metrics were workforce diversity (85%), pay equity (58%) and turnover (50%).
- Tips for ESG Reporting. Investors pushed for consistent or standardized frameworks such as SASB to support comparability. Unsurprisingly, they also pushed for more quantitative data, such as disclosure of metrics that the board uses to measure progress against ESG goals.
- Increasing Board Effectiveness. Investors continue to focus on board refreshment, with about 40% calling for stronger discipline around turnover, tenure and performance assessment. One interesting tidbit was the number of investors calling for the increased use of external resources for ongoing board education and to keep the board informed.
Investors continue to broaden their focus to include a number of previously untapped corporate activities, especially those related to climate and human capital. We expect to see a similar increase in interest from the Biden administration and Democratic SEC on a number of similar issues this year.
