The end of the "Greta's effect": less environment and more health in company financial disclosure

26/05/2020 - By Andrea Greco

Originally published on Repubblica

Three months of coronavirus, and the worst collapse in history experienced by almost all listed financial instruments, have demonstrated the validity of good governance, and of sustainable business criteria. Not only: after years of focus on the environment, the pandemic has brought the "social" aspects related to sustainability to the fore.

This has been witnessed by the most recent performance and cash flow statistics published by two of the world's leading US-based asset management, Blackrock and Fidelity. The same conclusions emerge when reading the crisis through the lenses of "big data" operated by artificial intelligence, that has sampled thousands of corporate balance reports and regulations enacted from different countries, open sources and social media, up until late April. 

A study developed by Datamaran exclusively for Repubblica and citing its Covid-19 Tracker, indicates that ESG factors will be increasingly relevant for all stakeholders. However, in order to attract investors and other stakeholders, businesses will need to increase transparency in the communication of good practices, and to refocus on those issues more connected to the pandemic and more linked to geopolitical and health risks (represented by the "S" social and "G" governance factors).
What will the post-COVID19 ESG agenda look like?

The study also considers Italian blue-chip companies in the Ftse Mib index: 97% of them (35 out of 36) mentioned geopolitical risks in their disclosure, and that includes pandemics. Leading sectors are the banking sectors, consumer goods, financial and insurance markets.

The end of the “Greta’s effect”: less environment and more health in company financial disclosure

The 4 databases tracked by Datamaran, which analyze financial and sustainability reports (including integrated reports) as well as SEC filings, regulations (both mandatory and voluntary), global media and Twitter, converge in indicating the trends. The research states, among other things, that an increasing number of companies mentioned Covid-19 in their official 2020 corporate reports, with a net increase compared to previous citations of other coronavirus pandemics such as Sars and Mers. Geographically 57% of European companies are disclosing about pandemics, compared to 44 % of the US ones; this can also be attributed to different disclosure delivery timelines.

COVID-19 Tracker | Percentage of US and European annual financial reporting mentioning coronaviruses

The rate of companies that, either in this year's financial statements or in the 2019 financial statements recently filed, have mentioned their risk management initiatives, has significantly increased - whatever their risk stage (risk identification, risk assessment, mitigation initiatives aimed at curbing those same risks).

Annual Financial Report - Risk management stages discussed over time

“ESG trends do not seem to be negatively impacted by the Covid-19 crisis. On the contrary, ESG topics are now at the top of executives and board members’ agenda” - comments Datamaran CEO Marjella Lecourt-Alma. “The COVID-19 pandemic has demonstrated on a large scale the fundamental importance of these factors for investors. There is today much more attention on how listed companies treat employees and customers, what role they play in the community, as well as how they will contribute to the economic recovery”.

Top 10 topics

“We therefore need more transparency from companies on how they communicate their resilience to critical situations and greater attention to the assessment of materiality risks that are increasingly dynamic in today’s world.”

Has the pandemic marked the end of the golden years of the environment, with Greta Thunberg as a global heroine? Too early to say: but in the meantime, thousands of data certify the recovery of the social and "governance" aspects as essential areas to make companies' operations and profitability sustainable, to the detriment of what we have so far called, with a certain reductionism, "climatic".


Discover Datamaran’s live COVID-19 Disclosure and Regulation Tracker

The above research is a snapshot taken from a Datamaran’s live COVID-19 disclosure and regulation Tracker.

Thanks to AI technology, this tracker is automatically updated on a weekly basis, giving you immediate access to reliable insights into regulatory and financial reporting developments with a focus on risk management practices. 

The disclosure insights highlight the specific risk identification, assessment, mitigation and monitoring actions reported by companies.


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