Investors face a significant blind spot when assessing companies’ alignment with ESG goals (Environmental, Social, and Governance): the lack of critical data on corporate lobbying activities. Without these insights, investors cannot determine if companies’ actions truly reflect their stated sustainability commitments.
The issue is pressing. Corporate lobbying often contradicts public sustainability claims, posing both reputational and financial risks. As Professor Alberto Alemanno of The Good Lobby explains, “Failing to provide investors with lobbying data creates, at best, an incomplete picture and, at worst, a deceptive one about the companies they invest in.“
Lobbying and ESG Goals: The Disconnect
A recent report by The Good Lobby highlights the gap between corporate lobbying activities and ESG objectives. Here’s what the findings reveal:
- Incomplete Data Coverage
ESG data providers monitor only a fraction of corporate lobbying activities—often less than 25%. Even leading firms like Moody’s and S&P cover just 40%, leaving investors with an incomplete understanding of companies’ political influence. - Framework Deficiencies
Current ESG evaluation frameworks lack mandatory requirements for transparency on political donations, trade association memberships, or corporate stances on legislative topics. - Prevalence of Voluntary Policies
Globally, 58% of ESG policies are voluntary. This lack of mandatory standards allows for inconsistent implementation, leaving gaps in accountability.
The Risks of Ignoring Lobbying Transparency
When lobbying activities go unmonitored, companies risk creating a distorted image. This not only misleads investors but also undermines trust among employees and consumers. Transparent lobbying is essential for responsible corporate governance.
As Alemanno notes, “A company can achieve high ESG scores while simultaneously undermining progress on these issues through legislative lobbying. Yet, this often escapes the notice of both investors and the companies themselves.”
A Call to Action: Integrating Lobbying in ESG Reporting
The Good Lobby proposes a straightforward solution: include lobbying activities in ESG reports. This would align sustainability objectives with corporate political actions, fostering greater transparency and accountability.
By addressing this critical gap, companies can build trust, mitigate reputational risks, and ensure their ESG goals reflect their real-world impact.