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Company Board Members Taking Greater Notice of ESG – PwC

Climate change is increasingly becoming part of boardroom discussions across the US.

Company directors in the United States are embracing the opportunity provided by the pandemic to address ESG issues more fully, according to PwC’s 2020 Annual Corporate Directors Survey.

Views of directors with regard to ESG are changing, with 45% respondents saying ESG issues are regularly on the board’s agenda, a rise from 34% in 2019.

Disclosing company efforts on ESG-related issues should be a priority for management, according to 41% of the directors surveyed, an increase from 30% last year.

ESG issues are also playing a larger role in company strategy. Issues of human rights, climate change and gender inequality are increasingly becoming a part of boardroom discussions. Over two-thirds (67%) of directors said companies should take climate change into account when developing strategy, from 54% in 2019.

PwC noted an apparent divergence between director sentiment and perceived impact, pointing out that half of directors (51%) say their board fully understands ESG issues impacting the company, whilst only 38% think those issues actually have a financial impact on the company.

Male directors were found to be less likely to see a connection between strategy and certain ESG issues, with 60% female directors agreeing there is a link between the two, as opposed to just 46% male directors.

According to PwC, the board should play a key role in overall company messaging on ESG and ensuring messaging translates to the company’s disclosures. Board should ensure checks are in place “on what information is disclosed, where it is disclosed, how it is reviewed, and whether it fully reflects the company’s purpose and strategy”.

The survey found general agreement on the benefits of gender diversity, with 94% of directors saying it brings unique perspectives to the room. Four out of five directors (85%) agree it improves relations with investors and 72% agree board diversity enhances company performance.

This overwhelming agreement on paper does not yet reflect practice. Board leaders do little to invest in board diversity, according to 44% female directors, versus 20% male directors holding that opinion.

A total of 693 directors representing over half a dozen industries were surveyed by PwC for the report, titled ‘Turning crisis into opportunity’, drawn largely (75%) from companies with annual revenues over US$1 billion. Over three-quarters (76%) of the respondents were men and 24% were women.

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