Orrick reported on risk factor disclosure practices among the S&P 500.
Among the key takeaways:
ESG Risk Factor Prevalence—Nearly 90% of the S&P 500 included an ESG-related risk factor in their Form 10-K for fiscal 2022, up from 47% in fiscal 2019.
ESG Risk Factor Focus—Climate-related risk factors (typically company-specific risks and, most commonly, physical risks related to business operations) were the most common ESG-related risk factor—reported by 82% of companies for fiscal 2021, compared to 45% for fiscal 2019.
Industry variations—More than half of companies in every industry reported a climate-related risk factor in 2022 (fiscal year 2021). Such risk factors were most prevalent among Energy & Transportation, Real Estate & Construction, and Manufacturing companies, at 92%, 86%, and 80%, respectively.
General vs. Specific—Using risk factor headings as a proxy, the percentage of companies reporting an ESG-related risk specific to their business as opposed to a general, non-specific risk nearly doubled from fiscal 2019 to fiscal 2021, from 43% to 80%. This post provides an example of each.