The Evolution of ESG Reports and the Role of Voluntary Standards

We examine the evolution of ESG reports from 2010 to 2021. The percent of S&P 500 firms releasing these voluntary disclosures increased from 35% to 86% during this time period, although the length of these documents experienced more modest growth. Using a neural network model and guided by voluntary standards that defined financially material ESG issues at the sector level, we explore whether the content in these reports has become more relevant to investors. On average, firms devote a majority of their reports to material topics. The relative amount of material information increased by 10% after the release of voluntary standards, but this increase was driven by firms that were not involved in the standard-setting process. Firms that were involved in this process increased material disclosures at similar rates while the standards were being developed, suggesting that they learned while doing, but other firms caught up after materiality was defined.