Proxy season: Scope 3 emissions and sustainability dominate earning calls

Analysing transcripts of 7,000 public companies’ earnings calls, mentions of ‘Scope 3’, the term given to a company’s indirect carbon emissions, were up 150% between Q3 and Q4 of last year. 

Moreover, public companies are discussing self-produced ‘sustainability reports’ 8% more frequently each quarter between Q2 2022 and Q1 2023, with ‘sustainability’ a more commonly used phrase in the investor relations lexicon of business leaders, shareholders, and analysts.

Of the terms and phrases analysed, researchers paid particular focus to ESG topics including ‘carbon emissions’, ‘renewable energy’, and ‘net zero’, as well as broader business themes like 'AI', 'recession' and 'layoffs'.

The report from Minimum, a data analytics firm, assessed how many times key terms were referenced during the investor relations calls of 7000+ public companies on Quartr (quartr.com), a platform providing access to company information. 

New legislation

Mentions of ‘Scope 3’ emissions, those further down in the value chain that account for 70% of most businesses’ carbon footprints, skyrocketed 150% during Q4 2022 earnings calls in the US, compared to the previous quarter. 

This is, in part, an outcome of the expected legislation from The Securities and Exchange Commission (SEC) that would require all public companies to disclose all Scope 3 emissions.

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Mentions of ‘sustainability reports’ rose by 8% on average each quarter between Q2 2022 and Q1 2023. It has become a staple of earnings call vocabulary and is the ESG term most frequently used by the organisations analysed by Minimum.

“As Scope 3 is increasingly discussed in earnings calls, it’s clear that enterprises and investors are preparing for significant climate legislation, including disclosure rules from the SEC," explained Freddie Evans, co-founder and CEO at Minimum.

AI and recession

Discussions around ‘AI’ have skyrocketed. ‘Generative AI’, a term that was essentially absent from Investor Relations vocabulary in Q2 2022, jumped by 1854% between Q3 and Q4 2022. 

AI is mentioned more frequently than key ESG terms such as ‘climate change’ and ‘greenhouse gases’ across the past four quarters of investor calls.

Renewable energy, meanwhile, was mentioned 617% more frequently than fossil fuels during earnings calls over the past year.

In addition, ‘recession’ was mentioned 76% more frequently than ‘net zero’, ‘carbon emissions, ‘carbon footprint’ and ‘climate disclosure’ combined. However, companies spoke about the recession 2% less in Q1 2023 than in Q4 2022, a potential indicator of markets beginning to stabilise and investor confidence returning.

“As Scope 3 is increasingly discussed in earnings calls, it’s clear that enterprises and investors are preparing for significant climate legislation, including disclosure rules from the SEC," explained Freddie Evans, co-founder and CEO at Minimum.

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