Despite the polarising effect of ESG in US politics, corporate leaders have continued to improve their knowledge and skillsets in what has become a highly controversial area.

Research from New York Stern Schoo’s Centre for Sustainability reveals 43% of board members in the Fortune 100—around 1,100 directors—have one or more ESG “credentials”, compared with just 29% five years earlier (2018).

The number of directors with a “governance” credential or background almost tripled, while those with an “environment” qualification doubled. There was close to no change in the number of board directors with skills in the “social” category of ESG.

The number of ESG board committees rose from 22 to 89.

The figures support the idea that while right-wing and Republican politicians have ferociously derided ESG as part of the “woke mind disease”, corporates and their leaders have quietly intensified their attention and qualifications in ESG.

The report makes the case for the importance of ESG skills for board members, as policymakers intensify regulation around issues such as climate change and human rights. “Knowing the right questions to ask management on material ESG issues has become an important part of a board’s role,” the research report says.

“New regulation in Europe and North America and in many parts of the world is requiring more robust ESG reporting and disclosures for which companies are liable.

“In addition we are seeing a growing number of lawsuits against companies that have contributed to climate change, engaged in greenwashing, mistreated their employees, had human rights abuses in their supply chains, and so on.”

Great chemistry

The report names Dow Chemical as a standout board, with six of its members possessing environmental credentials including expertise in “renewables, climate, clean air and water tech, plastics reductions, nature and biodiversity and sustainable finance”.

Amazon has gone from two board members with ESG skills in 2018 to five now.

The report also identifies poor performance. Publix Supermarket “was the only Fortune 100 company with zero board members with ESG credentials”. It also has no ESG committee and no ESG rating.

Albertsons, another supermarket, has a board with just a single member holding ESG skills.

The report says JP Morgan “stands out as the bank with the fewest ESG-credentialed board members”, also with just a single director expert in ESG.

Regulations and rule making are driving the need for boardroom ESG skills.

Large UK companies have to use the Task Force for Climate-related Financial Disclosures (TCFD) and should hear this year whether they will be implementing new disclosure standards from the International Sustainability Standards Board (ISSB), a sister organisation to the body that sets International Financial Reporting Standards. The ISSB is now working on new reporting rules relating to biodiversity.

Brussels has been the most energetic jurisdiction in setting new rules and attempting to guide corporate behaviour. Over the past year, the European Union has introduced new sustainability reporting rules, using “double materiality”, as well as laws mandating reporting on environmental and human rights in supply chains.

The US Securities and Exchange Commission (SEC) has been attempting to introduce new climate risk reporting rules, but have had to place them on pause while lawsuits challenging their legitimacy play out. One commentator described the SEC framework as a “pig of a rule” .

The CFA Institute, a club for investment professionals, has attacked climate disclosures as struggling with a “high degree of inconsistency”.

As regulation expands globally to cover ESG reporting, and demands from some investors and stakeholders increase, boards will become ever more immersed in ESG issues, placing the right skills at a premium. Political controversy cannot trump that.