The recent controversy involving Tractor Supply Company (see here and here) is still top of mind to many. With so much negativity around the company, there is one point of particular positivity – TSC’s stock price. Since the day before the company’s statement was issued (June 27), shares have increased roughly $16 as of yesterday afternoon ($12 of that coming from yesterday alone, which was a very strong trading day across the board). Stock price is typically thought to track ESG performance and reputation, so this is counter to what many ESG professionals expect. The reality is that sometimes ESG performance and stock price don’t correlate, although the timeframe embedded in such an analysis is important.
Earlier this week, Meredith blogged on CompensationStandards.com about a Farient Advisors memo that
“discusses the rise of climate metrics among a group of 500-plus exchange-listed companies in nine countries, based on research by the Global Governance and Executive Compensation (GECN) Group. Farient reports:
‘The use of environmental measures in [executive compensation] incentives has increased to 61% globally, with significant increases across the various regions. For example, in the U.S., 52% of large-cap companies now use environmental incentive measures, up significantly from 34% in 2022 and 8% in 2021.'”
No surprise that GHG emissions metrics are the most common environmental measure reported. Yet against that trend, investors brushed off TSC’s “withdrawal” of the company’s climate goals (similar to how investors have reacted to Big Oil walking back climate commitments). This comes at a time when many companies are realizing how hard, expensive and complex it really will be to meet climate commitments made in previous years.
If share prices continue to move counter to corporate ESG actions, could this be the beginning of climate commitment retraction? Will we see increased conflict in executive compensation measures between climate commitments and share price growth?
ESG leaders, staff and advisors: at least for the moment specifically in operating companies, consider backing away from talking about the importance and value of investor demands for climate commitments. Right now, market trends don’t seem to favor that argument. Instead, turn your attention to data gathering, mandatory disclosures, deeply understanding materiality in the context of your company and how you bring it all together to directly support business fundamentals.
For the sake of transparency, I don’t directly own any stock in TSC, nor do I know anyone who works there.
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