U.S. Corporate Boards Suffer from Inadequate Expertise in Financially Material ESG Matters

Abstract

Corporate sustainability and ESG investing are increasingly front and center for U.S. companies as issues such as climate change, health care and inequity have more and more impact on the bottomline. We reviewed 1188 individual Fortune 100 board member credentials to determine whether companies with material ESG risks and opportunities had relevant expertise on their boards. We found that very few sectors and very few companies were adequately prepared at the board level for issues that were already affecting their performance -- for example one property and casualty insurance company has no environmental expertise on the board in a year experiencing $100 billion in damage caused by climate change--heightened extreme weather events. On another issue of growing materiality, cyber/telecom security, just eight directors of 1188 had expertise. We also examine COVID-19 and #blacklives matter as related to board credentials and make recommendations on how to improve board ESG governance.

Keywords: ESG, sustainability, corporate governance, CSR, board diversity, board governance