This report presents an overview of the main trends and issues related to sustainability policies and practices for corporate governance globally. Through an analysis of key policy issues, its objective is to support the adoption of corporate governance policies and practices that are aligned with the G20/OECD Principles of Corporate Governance.

Sustainability-related disclosure. In 2022, out of 43 970 listed companies globally with a total market capitalisation of USD 98 trillion, almost 9 600 companies representing a total market capitalisation of USD 85 trillion disclosed sustainability‑related information. The growing urgency in managing climate‑related risks and opportunities has generated greater interest by investors about companies’ greenhouse gas (GHG) emissions. Globally, 6 308 companies representing 77% of market capitalisation disclosed scope 1 and 2 GHG emissions in 2022, ranging from 43% of companies by market capitalisation in the People’s Republic of China (hereafter ‘China’) to 92% in Europe. Extractives and minerals processing is the industry with the highest share of companies disclosing scope 1 and 2 GHG emissions by market capitalisation (85%). Companies report scope 3 emissions less often. In 2022, companies representing 60% of market capitalisation reported scope 3 emissions, ranging from 9% in China to 87% in Europe.

Globally, an external service provider assures the sustainability disclosure of two‑thirds of the companies that disclose sustainability information by market capitalisation. Among the companies that disclose the name of the independent assurance provider, 82% of the sustainability reports were assured by an auditor and the rest by other assurance providers. The share of companies that hire the auditor of the financial statement to assure their sustainability disclosures varies widely across regions: from 17% of companies by market capitalisation in Japan to 70% in Europe. Globally, among the 2 957 sustainability reports subject to an independent assurance, 1 668 (56%) were partially or fully verified under limited assurance, while 405 (14%) were partially or fully verified under reasonable assurance.

Globally, 70% of companies by market capitalisation disclosed a GHG emission reduction target and nearly half of them set 2030 as the target year. However, the baseline year was available in only 37% of companies with a target, which undermines the ability of shareholders and stakeholders to assess what the GHG emission reduction targets mean in practice for a company.

Investor landscape. Climate change is considered to be a financially material risk for listed companies representing 64% of global market capitalisation. Companies considered to be facing risks related to climate change, human capital and data security have larger market capitalisation than the companies considered to be facing other sustainability‑related risks such as ecological impacts or human rights. These shares of market capitalisation can serve as a reference to policy makers identify and justify priorities when supervising and regulating capital markets.

An analysis of the 100 listed companies with the highest disclosed GHG emissions globally shows that institutional investors hold the largest share of the equity (41%) and that the public sector is also an important shareholder, with 18% of the equity. The ownership distribution is particularly relevant when considering the ability of investors to accelerate the transition to a low‑carbon economy through successful engagement strategies. Globally, the largest shareholder in each of these 100 highest emitting companies owns on average 24% of the shares, and the largest 20 shareholders own on average 54% of the shares.

While the adoption of existing green technologies by high-emitting companies is essential for the transition to a low‑carbon economy, the development of new technologies will also be necessary for a successful transition. An analysis of the 100 listed companies with the lowest disclosed GHG emissions relative to revenues and the highest research and development (R&D) expenditure or stock of patents per industry shows that institutional investors own 41% of the equity in these companies. These highly innovative companies have a moderately lower ownership concentration compared to the 100 highest emitting companies.

Some jurisdictions give companies the option to include the pursuit of public benefits in their articles of association. In Delaware, the number of private Public Benefit Corporations (PBCs) grew from 207 in 2021 to 332 in 2023, while the number of listed PBCs doubled from 7 to 14. In France, private sociétés à mission increased from 502 in 2021 to 1 276 in 2023, while the number of publicly listed sociétés à mission rose from 3 to 8 during the same period.

The boards of directors. Companies representing more than half of the world’s market capitalisation have a committee responsible for overseeing the management of sustainability risks and opportunities that reports directly to the board. In the United States, 75% of companies by market capitalisation have a committee responsible for sustainability, and in Asia (excluding China and Japan), Europe and other advanced economies, more than 50% have such a committee. Moreover, in almost 3 000 companies representing 53% of global market capitalisation the boards of directors oversees climate‑related issues, with higher shares in Europe, Japan and United States.

To fulfil their key functions in assessing the company’s risk profile and guiding its governance practices, boards can also take into consideration sustainability matters when establishing key executives’ compensation. This is the case for three‑fifths of companies that have executive compensation policies linked to performance measures and also include a variable component based on sustainability-related factors. Executive compensation is linked to sustainability matters in 80% of companies by market capitalisation in Europe and 60% in the United States.

Through lobbying activities, companies can influence climate‑related policies, laws and regulations. Among all the companies that self‑declared lobbying activities, almost one‑third belong to the two industries with the highest GHG emissions (extractives and mineral processing, and resource transformation), while only 2% of companies belong to the renewable resources and alternative energy industry.

The interests of stakeholders and engagement. Among the various ways to promote stakeholder and shareholder engagement, companies may establish mechanisms for employee participation and develop policies on shareholder engagement. Companies representing 14% of global market capitalisation include employee representatives on the board of directors, ranging from 62% in China, 38% in Europe and 11% in Latin America, to negligible amounts in other regions. In 2022, policies on shareholder engagement were disclosed by 81% of companies by market capitalisation.

Sustainable bonds. Over the past five years, corporate sustainable bonds (including green, social, sustainability and sustainability‑linked bonds) have experienced noteworthy growth as a source of capital market financing. In 2023, the outstanding amount of sustainable bonds issued by the corporate sector totalled USD 2.3 trillion globally. Europe has been the most active region in the sustainable bonds market with 45% of the global amount issued by non‑financial companies between 2014 and 2023. In 2022‑23, unlisted companies issued about half of the sustainable bonds in the non‑financial and financial corporate sectors globally.

A similar trend can be observed for investment funds that label themselves as sustainable or climate funds, which have received increasing net inflows since 2016. However, assets under management of sustainable funds still represent only 2.76% of the assets under management of the global investment funds market.

Recent regulatory and standard-setting developments:

• The International Sustainability Standards Board issued its first two standards IFRS S1 and IFRS S2 in June 2023, which were endorsed by the International Organization of Securities Commissions soon after.

• The European Commission adopted the first set of EU Sustainability Reporting Standards in July 2023, and they embarked on a full range of sustainability matters, including climate, pollution, water, biodiversity, workers and business conduct.

• The OECD updated in its Guidelines for Multinational Enterprises on Responsible Business Conduct in June 2023, including new recommendations for enterprises to align with internationally agreed goals on climate change and biodiversity, and to ensure lobbying activities are consistent with the Guidelines. 

• The International Auditing and Assurance Standards Board published an exposure draft of the proposed International Standard on Sustainability Assurance 5000 in June 2023.

• The International Ethics Standards Board for Accountants approved the exposure drafts of new ethics and independence standards for sustainability reporting and assurance in December 2023.

This report’s key policy messages:

• Sustainability-related disclosure frameworks may need to be flexible about the existing capacities of companies.

• Standard‑setters should work together to make their standards as interoperable as feasible, reducing the costs for companies that must disclose sustainability-related information according to various standards.

• Regulators in regions where voluntary assurance is a common practice may consider requiring large listed companies to obtain assurance of their sustainability-related information.

• Wherever high-quality assurance for all sustainability-related information disclosed might not be possible or is too costly, jurisdictions may require companies to obtain assurance of specific sustainability-related disclosures, such as GHG emissions.

• Investors and regulators may need to pay special attention to whether executives can choose to hire the company’s external auditor to provide sustainability-related assurance without the approval of the board, the audit committee or shareholders.

• Whenever included in a company’s reduction targets, market participants and relevant stakeholders should consider ways to encourage the disclosure of scope 3 GHG emissions.

• Regulators may consider requiring or recommending the disclosure of information relevant for investors to assess the potential of companies to develop new technologies that may contribute to the transition to a low‑carbon economy.

• The fact that institutional investors hold the largest share of equity in the 100 listed companies with the highest disclosed GHG emissions highlights the importance of corporate governance frameworks in facilitating and supporting shareholders’ engagement.

• Boards should ensure that companies’ lobbying activities are coherent with their sustainability‑related goals and targets.