Optimising the G in ESG

Governance is the foundation upon which the environmental and social components of ESG are built. There is substantial evidence to suggest that a proactive approach to accountability and good governance ultimately yields better corporate returns.

To understand how well companies are governing ESG, Luminous’ Strategy & Insight team examined 39 Annual Reports from FTSE 100 companies. Using the London Stock Exchange’s industry labels, we analysed the most recent reports of the two largest companies in each industry by market cap.

Our latest issue of ‘Reporting Matters’ reveals the findings of our research in the FTSE 100 on how successful leading companies are adopting good governance approaches.

Our findings

In the context of our ‘Reporting Matters 7’ study, our key findings are as follows:

  • Nearly half of the sample presented an organisational chart that identified a designated ESG Committee or Non-Executive Director responsible for ESG matters.
  • 33% provided personal statements or letters by those in charge of ESG.
  • 82% of the companies sampled have invested resource into identifying a committee or Director to oversee ESG matters.
  • 18% of the sample did not identify any individual or committee with an ESG-related remit.
  • Over one-third of our sample was found to discuss the due diligence processes it undertakes in line with the EU Non-Financial Reporting Directive (NFRD).
  • 42% only referred to their non-financial due diligence processes through brief, vague and unsupported statements. and almost one-quarter did not overtly mention non-financial due diligence beyond the non-financial information statement.

Our recommendations

  • Detail your ESG governance structure, ideally using an organisational chart.
  • Explain the role of the person or committee in charge of ESG or sustainability in detail.
  • Consider including a personal letter or Q&A with the head of your sustainability committee in the Annual Report to demonstrate personal ownership.
  • Include commentary on ESG and good governance more broadly in your leadership statements, for example the Chairman’s introduction to the Governance Report, to demonstrate leadership commitment at Board level.
  • Detail your due diligence processes and relevant Codes of Conduct in your Annual Report so readers can understand them, ideally without referring to separate policy documents or your website.


At our launch event on 13 July, Luminous’ Stephen Butler, Investor Engagement & ESG Disclosure Director, Rachel Madan, Sustainability & Impact Director, and Nina Kefer, Consultant, along with Richard Davies, Managing Director of RD:IR, shared the outcomes of our proprietary research. They also offered practical advice on defining, reporting and engaging around ESG strategy, as well as how to optimise your ESG in your Annual Report and investor days.

If you would like to access the recording and slides from our event, please get in touch.

Download a copy here: