Investors call for more explicit sustainability metrics in 2023

• Russell Reynolds’ annual research of corporate governance trends is built from interviews with institutional investors, shareholder activists, pension fund managers and regulators
• Report details how investors and other key stakeholders are pushing for further integration of sustainability within business strategy
• Climate responsibilities have risen to the fore during the energy security crisis

London, February 7^th - Global leadership advisory firm, Russell Reynolds Associates (RRA), has released the eighth edition of its Global Corporate Governance Trends report. The 2023 edition of the report has found that sustainability remains top of the UK corporate governance agenda with regulators and investors tasking companies with deepening their Environmental Social Governance (ESG) commitments and setting measurable and actionable goals. Investors are especially keen to link executive pay with progress against corporate ESG targets.

The report predicts increased pressure on boards to tie compensation to ESG goals, and in some cases, investors may vote against boards who do not provide transparent, measurable metrics to deliver net zero. There is an emerging call from investors for companies to provide distinct actions that correspond to the pillars of E, S and G in order to unbundle Sustainability into more impactful strategies.

RRA expects there to be an increase in activist investor activity linked directly to sustainability. One key objective for this group in 2023 will be to continue to push back against siloed ESG initiatives that are not embedded in corporate strategy and to drive public transparency on pay for results.

Diversity and Inclusion continues to be a major theme as new regulation compels listed companies to ensure that female directors occupy at least one of four key seats around the board table, and that at least one board director comes from Historically Under-represented Groups.

Made up of interviews from multiple corporate governance stakeholders including institutional investors, regulators, advisors, shareholder activists, pension fund managers, the Global Corporate Governance Trends report accesses the corporate governance landscape in multiple regions and lists the most pressing issues for the year ahead.

Discussing the report, Managing Director at Russell Reynolds Associates, Caroline Raggett, said:

  Climate and social obligations are the seminal corporate governance issue of 2023. We expect the whole ESG agenda to dominate boardrooms across the UK as businesses grapple with increased regulatory burdens and a recognition from investors and other stakeholders that sustainability is the heart of a business's license to operate.

  We also predict we will see investors taking a bolder stance in insisting on ESG as an embedded and authentic part of corporate strategy, going as far as to challenge executive renumeration where they do not see progress in setting our or achieving stated sustainability targets.

  Whilst diversity and inclusion remains a key topic, there is a growing voice amongst investors to remind companies of their social obligations at a time of a cost of living crisis.  RRA expects to see investors call for more clarity and communication on social strategies.

Media Contacts

Russell Reynolds Associates: Sarah Carlyle, Marketing Director EMEA
Email: sarah.carlyle@russellreynolds.com

Hill+Knowlton Strategies: Ben Robinson, Senior Associate Director
Tel: +44 (0)7769 282 491 / Email: ben.robinson@hkstrategies.com