ESG Disclosure Language on the Rise in 10-K Filings

By Nick Mazing & Steve Soter

Public companies are adding environmental, social, and governance (ESG) language to 10-K filings in a big way: some terms are showing up three times more often than two years ago, our search of public filings found.

The United Nations Principles for Responsible Investment includes more than 3,500 signatories representing more than $120 trillion in assets under management, so there’s an appetite for ESG information. U.S. Securities and Exchange Commission Chair Gary Gensler has hinted at an all-but-certain proposal for mandated climate risk disclosures by the end of the year, but ESG language is already spreading.

Using Sentieo, a Workiva technology partner, to search disclosures, we identified several trending ESG terms in 10-K and 10-K/A filings.

“Net zero”

In April, President Joe Biden set “net zero” greenhouse gas emissions as a 2050 U.S. target. “Net zero” has been mentioned in over 140 10-K and 10-K/As so far this year, far surpassing the 60 filings in 2020 and 42 in 2019.

A large energy services company featured this language on the first page of its most recent 10-K filing: “We believe we have an important role to play in society as an industry leader and partner. We view environmental, social, and governance (ESG) as a key lever to transform the performance of our company and our industry. In January 2019, we made a commitment to reduce CO2 equivalent (eq.) emissions from our operations by 50% by 2030, achieving net-zero CO2 eq. emissions by 2050. We are investing in our portfolio of advanced technologies to assist customers with reducing their carbon footprint.”

“Gender”

“Gender” is a corporate topic in the “social” category of ESG. As we saw with “net zero,” there was a significant increase in 10-Ks and 10-K/As containing this word, included in more than 1,400 filings in 2021 year-to-date, versus 794 for 2020, and 738 for 2019.

For example, a global personal care company added the following language in its most recent 10-K filing: “We also seek to foster an inclusive work environment where each individual can bring their whole self, which helps drive innovation and enables us to better serve our consumers. We aspire to achieve equal gender representation globally and at key management and leadership levels.”

“Our values”

There is also an increase in general ESG language, such as references to reporting standards such as SASB or TCFD. One broad ESG term that stood out is “our values.” Over 450 10-Ks and 10-K/As mention “our values” year-to-date in 2021, versus only 155 and 120 for all of 2020 and 2019, respectively.

For example, a large industrial equipment company added this language in its latest 10-K filing: “Integrity, Excellence, Teamwork, Commitment and Sustainability provide the foundation for our values-based culture. Our diversity and inclusion principles are embedded in our values. Our values unite us, and reflect our diverse cultures, languages, geographies, and businesses, as [one] team.”

As public companies keep a close watch for changes in the regulated ESG reporting landscape and investors continue gravitating toward responsible investing initiatives, monitoring changes in filing language across peers and forms is essential to ensuring that disclosures are up to date and consistent with industry norms and expectations.

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