Davis Polk shared the findings of its analysis of climate change and human capital management (HCM) disclosures in Form 10-Ks, proxy statements, and CSR reports of the top five S&P 500 companies by market cap in these six industries:
- Insurance (Fire, Marine & Casualty Insurance)
- Power Utilities (Electric & Other Services Combined)
- Health Care (Hospital & Medical Service Plans)
- Oil & Gas (Crude Petroleum & Natural Gas)
- Technology (Services - Computer Programming, Data Processing)
- Banking (National Commercial Banks)
Key takeaways include:
- Nonfinancial information that is not required by the securities laws to be included in SEC filings is typically disclosed via voluntary standalone CSR reports.
- Climate Change Disclosure
- Climate change disclosure in SEC filings tends to: (i) adhere to the SEC's 2010 climate change guidance, (ii) include comparable information and consistent topical coverage within industries, and (iii) vary across industries based on relevance and industry-specific factors associated with, e.g., the company's business, strategy, litigation, risks and impacts to financial condition.
- Climate change disclosure in CSR reports tends to: (i) be more consistent within and across industries, (ii) address (at length) topics not addressed in SEC filings such as LEED (leadership in energy & environmental design) certifications, paper or waste reduction, energy efficiency, land conservation and other information about the company’s view on its own carbon footprint; and (iii) include qualitative information.
- Nearly half of the companies have disclosed climate change-related risk metrics via their issuance of a TCFD report or a report informed by the TCFD core elements.
- HCM Disclosure
- HCM disclosure in SEC filings tends to address the number of employees and executive compensation information, although some companies included information in their proxy statements on other HCM topics such as D&I efforts, safety statistics, talent management, board oversight, political spending, and ant-harassment policies.
- HCM disclosure in CSR reports tends to: (i) be qualitative rather than quantitative, and (ii) touch on areas of potential significant interest to employees and other non-investor stakeholders, such as employee benefits and healthy workplace amenities, safety measures, employee performance programs, D&I awards, and employee leadership training.
The firm cautions companies to be mindful of the potential legal consequences associated with inaccurate disclosures (even voluntary disclosures) under the federal securities and other laws.
Appendix A sets forth a tabular summary of climate change and HCM disclosures by industry and the type of report used for disclosure (i.e., SEC filing / CSR report / TCFD report (for climate disclosures)).
See last week's report: "Small & Mid-Caps: E&S Website Disclosure" and numerous additional resources on our Sustainability, Human Capital/Workforce Management , and Annual Meeting/Proxy Statement pages. This post first appeared in the weekly Society Alert!