These disclosures are usually made through some form of annual ESG report or through several different reports covering various aspects of E, S and G. For example, Apple produces both an Environment Report, as well as an ESG Report and Index.
Leandro (Leo) Pongeluppe, Assistant Professor of Management at Wharton, was interested in analyzing how firms’ reporting on ESG factors has changed over time. To do this, he was interested in gathering both regular annual reports to shareholders (ARS) and ESG reports. The reports would be analyzed by the amount of environmental textual content and sentences with emotional content. In addition to analyzing the text, Leo was interested in analyzing these reports by looking at the color(s) they used, specifically at the pixels with green. In collaboration with a group of researchers, he had done similar analysis related to Brazilian firms but was hoping to test against a US-based sample to see whether the results were generalizable to other geographic areas. He was hoping that there would be a solution to gathering these reports that would not require searching the websites from each firm of interest.
Our research services team assisted with this project in the following ways:
Data source evaluation – ESG reporting is much more varied than standard financial reports and the subscription resources that include these reports may not do so consistently. Even if ESG disclosures are pulled together as a screening category, there is additional work necessary to identify the relevant reports when multiple files exist. We examined several resources that include these reports (Bloomberg Professional Service, Refinitiv Workspace, S&P Capital IQ and S&P Capital IQ Pro) to determine which would most reliably provide reports. We also identified potential issues related to trends in US firms’ use of the regular ARS that could impact the research. Many US firms are either not publishing separate annual reports and are instead relying on the 10-K filing as the sole annual document, or are publishing items they are calling “annual reports” that just include a brief cover sheet and then the 10-K. These reports would not have the desired color element.
Data extraction instructions – We developed a standardized method for pulling the reports. It is against the licensing terms to run a script in our subscription resources to extract reports, so we worked through the most efficient way to export them so that future Research Assistants would be easily able to extract additional reports by following the standard procedures.
We pulled a sample of more than 750 reports for a five-year period for firms that appeared in the Fortune 100 as proof of concept, making them available in shared storage folders. We also created a standard operating procedure document and a summary document indicating any gaps in coverage for each company.
The Lippincott research team can help you think through creative approaches to projects like this. Get in touch with your departmental subject specialist for assistance.