2022 was a notable year in the world of ESG. Here we explore the progress in ESG across various sectors over the year through SocialMarks analysis.
Social impact improvement varies by sectors. Insurance and finance are leading the way due to their market maturity, global presence, and stakeholder focus. These industries have a greater public focus and tend to better report on their ESG initiatives, with increased spending on ESG investment. 2022 saw increased social impact disclosure and reporting fast becoming the norm.
Financial Sector is taking care of its people
In a post-pandemic environment, financial firms increasingly focused their efforts on employee wellbeing and invested in resources for employees. Firms implemented programs to help employees manage their physical and emotional wellbeing, such as Goldman Sachs’ Mental Health and Resilience program and their Mental Health First Aiders initiative. 2022 also saw banks offering financial education initiatives for their customers as part of their broader commitment to greater economic empowerment. Initiatives are often targeted at vulnerable groups such as youth, ethnic minorities, and low-income communities.
Private Equity is creating ESG departments
In the world of Private Equity, operating models with an ESG focus have traditionally been underdeveloped. However, according to the Private Funds Leader Survey 2021, over 75% of private fund leaders now believe a stronger ESG vision and culture will drive value in their business. 2022 saw firms beginning to show a greater commitment to ESG. The recent transition to viewing ESG in a more favourable way is due to increased investor demands, new regulations, expectations of employees within firms and better alignment with the values of portfolio companies. Increased demands from investors on ESG compliance is the main driving force for this.
2022 saw the employment of dedicated personnel to support ESG endeavours, both internally and within portfolio companies, to help promote positive change and ensure that the best human capital strategies are in place. Over 20% of PE firms in our SocialMarks analysis of 30+ firms currently employ ESG personnel. Diversity is also something that firms are starting to address. A variety of approaches are being used, including improved recruitment practices to attract candidates from diverse backgrounds and the development of firm-wide diversity programs – 22% of companies have internal diversity programs.
The sector is very much in its preliminary stages of development and there is considerable work to be done. Across the sector, there is a distinct lack of reporting and publication of ESG activity.
Insurance Sector increases reporting on DEI
The sector is emerging as a leader in social impact. Top companies are differentiating themselves by disclosing more detailed information about employee wellbeing, volunteer programs, and outlining KPIs to accompany their social impact strategies.
Across the sector however, there is a lack of clear reporting on diversity programs. Some companies have started to disclose goals and targets for employees of colour – we expect a wider sector trend for the coming year will be the setting of targets for a broader range of underrepresented groups. 50% of insurance firms publish how figures currently sit for the ethnic breakdown of the company, yet not all of them accompany these with targets to make improvements. 25% of insurance companies in our SocialMarks cohort currently publish targets to improve company’s ethnicity makeup and 38% of companies publish targets aimed exclusively at Black employees.
Consultancy Firms continue as leaders in ESG
Historically, consultancy firms have been some of the most engaged in ESG and 2022 was no different. Over the course of the past few years, there has been a substantial increase in social impact reporting, as well as ESG investment. What makes consultancy firms leaders in ESG is their quality of reporting with comprehensive social impact strategies and definable KPIs – and KPMG ranks the highest. The Big 4 have an even gender split in the firm – with an average of 47% of women overall in the companies.
Real Estate focus on diversifying their workforce
Across Real Estate, there has been an increasing focus on gender inclusion over the last few years and more recently on social-economic, ethnicity and disability inclusion. There has been positive work in female leadership – with 71% of companies in the analysis publishing the percentage of women in leadership and the top-ranking company’s leadership roles are made up of 40% women. Some efforts have also been made to improve other diversity metrics. For example, the membership body Real Estate Balance was originally more focused on solely gender balance when it was formed in 2015 but they have now broadened their scope to include other diversity objectives. There is also now more of a focus on social-economic diversity. Since the September 2020 Bridge Group Report into social-economic diversity in the real estate sector identified that on average, real estate firms had a smaller proportion of employees from lower socio-economic backgrounds compared with, for example, leading accountancy and finance firms, the sector has worked towards changing this. Currently, 29% of companies publish diversity figures including ethnic minority breakdowns, LGBTQIA+, disability and veterans.
Who’s falling behind?
The industrials sector tends to be less developed in this sphere – with low diversity rates, unclear branding, and a larger focus on environmental issues. The focus on environmental aspects can also be observed across the Utilities sector too.
It is important to consider the rationale behind where sectors are in their ESG journey. The industrials sector includes the likes of manufacturing, transportation, construction, and mining. These sectors are influenced by factors like the company’s gender split due to the physical needs of roles in construction and infrastructure for instance. The location in which a company operates, and the location’s socio-economic climate influences a company’s ESG activity. However, companies in these sectors are beginning their journey – this is key. At SocialMarks, we are here to help them enhance their social profile and ultimately become sector leaders.
Enhancing social profile is more important than ever. McKinsey published a report in October 2022 which highlighted that tracking ESG metrics such as Diversity & Inclusion leads to better corporate interventions which in turn influences talent retention, which “has clear implications for cultivating a sense of inclusion.” Tracking ESG metrics means companies are happier, more profitable, and ultimately more successful.
2022 has seen significant movement in the realm of ESG, but across all sectors, there is work to be done. Interested in improving ESG in your company? Follow SocialMarks on LinkedIn or visit our website socialmarks.com for more.