Many Boards Are Playing Catch-Up on ESG and Green Issues

Many corporate board directors aren’t confident about their ability—or their board’s—to oversee sustainability and social impact issues, even as companies pursue such goals and regulators want more disclosures on environmental, social and governance impact.

Eighty-three percent of directors surveyed said ESG topics were critical knowledge for directors, but less than half considered themselves to have “advanced” or “expert” level knowledge, according to a survey of board directors conducted in July by WSJ Pro in collaboration with the National Association of Corporate Directors.Directors of larger firms and listed companies expressed higher confidence, as did those in the energy industry.Respondents relied on external advisers to build their knowledge.

Other findings were that most believed sustainability efforts had brought real benefits and said ESG engagement with investors had been mostly positive. Directors also said the anti-ESG movement had an impact. They also reported that while about half of big companies had ESG targets—many linked to executive compensation—smaller, private companies lagged behind.

The survey’s 506 respondents covered a range of company sizes and included public, private and not-for-profit organizations from many sectors, with a concentration in financial services, industry, tech and energy. They said their ESG maturity level was across the spectrum: 4% self-identified as industry leaders, 27% as well developed, 36% as somewhat developed, 28% as early stage and 5% hadn’t started with ESG. Overall respondents rated their own ESG expertise slightly higher than that of their fellow board members.

Training up on sustainability

“As a board member, if you’re hoping that ESG is just a fad that will pass with time, we have enough data now from the last 2½ decades to know ESG is here to stay and boards need to be ready,” said Kristin Campbell, general counsel and chief ESG officer of Hilton Worldwide Holdings and board director at ODP and Regency Centers.

Campbell said boards must evaluate ESG as part of the company’s long-term strategy, otherwise activists, regulators, customers or someone else might do it for them, perhaps in a way that will be painful operationally or harmful to their reputation. “It’s that classic story of either you’re at the table or you’re on the menu,” said Campbell.

Alan Smith—responsible for the strategic management of the Church of England’s £10.1 billion (equivalent to $12.6 billion) perpetual endowment fund—said many boards had brushed up on ESG knowledge with in-house training, e-learning packages or advisers to run workshops. A former senior adviser at HSBC on climate and ESG risk and current First Church Estates Commissioner, Smith said he also found it helpful to see projects, such as offshore-wind farms, and speak to their operators in person.

“I think an integrated approach to board director education—of which one important part is getting on the ground and in the mud or on the boat—is very important,” he said.

More than two thirds of directors said their organisations brought in external advisers to complement or build board’s ESG skills, with most advisers providing subject matter expertise (44%), education and training (41%), or research and analysis (37%).

“What we know about ESG will change today and will probably change tomorrow,” Hilton’s Campbell said. “It’s the job of an external adviser to know what’s going to happen next week and next year, which is useful in keeping the board ahead of the game.”

Stakeholder engagement

Overall, investors were the most influential stakeholders on board decisions related to ESG strategy, followed by company executives, regulators and customers. For public companies investors were most influential, followed by regulators, while directors of private businesses ranked their customers as top with investors in second place.

Respondents ranked their ESG-related interactions with investors as largely positive or neutral. Seventy-one percent of directors of organisations with investors said their largest ones had engaged with the board over the past 12 months on ESG topics.

However, public and private businesses approached this engagement quite differently. Private company investors most often engaged with the full board or directly with management, whereas public company investors worked most often with individual directors or sometimes with the full board, but rarely with management.

Anti-ESG impact

The survey also examined the impact of the rising anti-ESG movement in the U.S. Many boards started their ESG journey in 2020, but, particularly in the last six to 12 months, the extent of the political backlash in the U.S. has made it more complicated, said Smith. “You had a wind that was giving companies and boards energy, and now you have a countervailing wind of political backlash,” Smith said.

As the pressure has mounted, there have been numerous reports of green-hushing—when a company scales back what it says about its climate and social initiatives in corporate communications. The survey found evidence to support this: 7% of directors said their company no longer publicly communicates about its ESG activities, and 14% said their board and management no longer use the term ESG when referring to relevant activities.

Respondents report substantive changes too. One in five said their companies are reassessing their approach to ESG, 12% said they have deprioritised ESG as a critical business issue, and 15% of directors, primarily in smaller private businesses, believe ESG is negatively affecting their business decisions and strategy.

Despite those changes, half of respondents believe ESG will continue to be an important driver of their business decisions and strategy. Nearly as many say their board and management remain committed to ESG as an opportunity for growth and a driver of long-term risk reduction.

Driving ESG performance

While most respondents said ESG is critical knowledge for directors, only 37% of their organisations have set a climate-impact reduction target, although that was 54% for large organisations. Nine out of 10 of those companies with a target said their boards monitored their progress toward those goals and four out of five believed they were achievable.

To encourage management to hit targets, over one quarter of respondents said their company had linked executive pay to ESG goals, and a further 29% were considering doing so in the next 12 months.

“If we’re going to be more serious about ESG and building it into a company’s long-term strategy then I think it needs to be tied to executive compensation like any other [key performance indicator],” Campbell said.

Nearly a fifth of directors surveyed said reducing the impact of climate change is a priority regardless of financial performance. Almost half said it is a priority but not at the cost of financial performance, while the remaining third said it isn’t a priority at all.

Many directors report real benefits from their ESG efforts. In particular it has enhanced their company’s reputation and brand value (57%), risk management and resilience (54%), and ability to attract and retain talent (44% and 40%, respectively).

Climate change was talked about more frequently in 43% of the boardrooms, while in 31% it actually decreased. The topic was discussed at most or every board meeting for 29% of respondents, 36% said it came up at some meetings, and 23% said it was rarely talked about. Only 11%—primarily small, private companies—hadn’t discussed it at all.

Smith said it was particularly important for smaller companies to keep climate change front of mind: “Those that say they aren’t doing anything yet are paradoxically the ones that may be hit first because they’re downstream of big companies setting more immediate net zero carbon neutral targets.”

As well as calling it a business differentiator for small businesses, Smith said a focus on climate impact reduction was “a survival mechanism.”

Reporting season has once again reminded investors that a strong profit does not guarantee a rising share price, and a large loss does not always trigger a sell-off. What matters most is how each result compares with expectations and, increasingly, what management says about the year ahead. During the August 2026 season, companies offering credible turnarounds or unexpectedly strong guidance were rewarded handsomely, while those flagging weaker margins, slowing demand or greater uncertainty were punished.

The following ranking draws on Morningstar’s review of 164 ASX-listed companies and measures each company’s share-price movement on the day it reported. This captures the market’s immediate response to the earnings announcement, before subsequent economic developments, dividends and company-specific news cloud the picture. Here are the five biggest winners, and the five hardest-hit losers, of the season so far.

The five winners

1. Bapcor (ASX:BAP): +41.0%

Bapcor delivered reporting season’s largest relief rally after presenting early evidence that its troubled automotive-parts business was stabilising. Although underlying revenue fell 1.8% to $1.92 billion and underlying NPAT collapsed 85% to $10.8 million, underlying EBITDA of $152.5 million exceeded guidance.

More importantly, working-capital initiatives released $68.5 million in the second half, lifting cash conversion to 109.4% and reducing net debt by 63% to $135 million. The statutory loss was $431.6 million, largely because of non-cash impairments. Investors focused on improving operational momentum, stronger liquidity and management’s expectation of modest FY27 revenue growth.

2. Zip Co (ASX:ZIP): +18.2%

Zip comfortably surpassed its FY26 targets, sending the buy-now-pay-later provider’s shares sharply higher. Transaction volume rose 23% to $16.7 billion, while cash earnings before tax, depreciation and amortisation jumped 58% to a record $268.9 million. Statutory profit climbed 46% to $116.4 million, and the cash operating margin expanded by 4.2 percentage points to 20%.

The strongest signal was guidance for FY27 cash earnings of $340 million—around 26% growth and above analysts’ forecasts. US transaction volume increased 42.5% and now represents three-quarters of group volume, offsetting weaker customer activity in Australia.

3. CSL (ASX:CSL): +17.3%

CSL’s result was hardly spectacular in isolation, but it cleared a market bar that had fallen dramatically following earlier downgrades and restructuring announcements. Underlying NPATA was US$3.1 billion, down 2% in constant-currency terms, while operating cash flow reached US$3.51 billion.

CSL maintained its full-year dividend at US$2.92 per share and completed a A$1 billion buyback. The real catalyst was FY27 guidance for approximately 5% underlying profit growth, compared with market expectations closer to 2%. After an extended period of earnings disappointments, investors interpreted the outlook as evidence that CSL’s core plasma business was approaching a sustainable recovery.

4. Judo Capital (ASX:JDO): +16.9%

Judo Capital demonstrated strong operating leverage as its specialist business-lending franchise expanded. Full-year profit before tax rose 34% to $168.1 million, while pre-provision profit increased 42%. Gross loans and advances grew 18% to $14.7 billion, reaching the top of the bank’s guidance range and comfortably exceeding broader system growth.

Deposits increased 24% to $12.2 billion, return on equity improved by 1.1 percentage points to 6.4%, and earnings per share rose 29% to 9.9 cents. Reaffirmation of the FY27 outlook gave investors confidence that loan growth could continue without sacrificing margins or credit quality.

5. Super Retail Group (ASX:SUL): +15.8%

The owner of Supercheap Auto, rebel, BCF and Macpac reported record sales of $4.2 billion, up 3.2%, despite cautious discretionary spending. Profitability went backwards: normalised profit before tax fell 7% to $306 million and normalised NPAT declined 2.8% to $226 million as transformation spending weighed on margins. Nevertheless, the result exceeded subdued expectations, online sales grew 5.3% and membership across the group’s loyalty programs reached 13.1 million. Investors were also encouraged by positive early FY27 trading, stable gross margins and continued market-share gains. A fully franked 33-cent final dividend added to the appeal.

The five losers

1. Hansen Technologies (ASX:HSN): –21.2%

Hansen’s historic result met expectations, but investors recoiled from its outlook. The utility and communications software provider achieved an underlying EBITDA margin of 31%, exceeding its 30% target, while generating strong cash flow. However, management designated FY27 an “investment and transition year”, signalling a roughly five-percentage-point margin contraction as spending on products, sales capabilities and organisational changes increased.

Revenue had already been broadly flat, leaving investors concerned that the investment program would depress earnings before new growth appeared. Leadership changes, including the chief executive’s departure, added uncertainty. Management expects revenue growth and margins above 30% to return in FY28, but the market was unwilling to wait.

2. Life360 (ASX:360): –19.4%

Life360’s headline growth was impressive: quarterly revenue rose 38% to US$159 million, subscription revenue increased 31%, and adjusted EBITDA climbed 53% to US$31.1 million. Monthly active users reached 102.4 million and paying circles grew 27% to 3.2 million. The sell-off reflected expectations rather than a collapsing business.

Net income fell 18%, the net margin contracted from 6% to 3%, hardware shipments dropped 18%, and full-year EBITDA guidance was merely maintained. After a strong valuation run, investors wanted a larger upgrade and clearer evidence that heavy investment in advertising, international expansion and artificial intelligence would generate additional earnings.

3. PEXA Group (ASX:PXA): –17.0%

PEXA reported a 7% increase in continuing-operations revenue and 12% EBITDA growth to $152 million, accompanied by a two-percentage-point margin expansion. Free cash flow increased 39%, suggesting the core Australian electronic-conveyancing platform remained highly profitable. Investors instead concentrated on management’s warning that property-transfer volumes could decline, alongside regulatory uncertainty surrounding the fees PEXA can charge.

The company is also continuing to invest heavily in its loss-making international expansion. Morningstar considered the market reaction excessive, arguing that structural transfer-volume assumptions had not materially changed, but the combination of softer near-term activity and regulatory risk overwhelmed the respectable headline numbers.

4. SEEK (ASX:SEK): –14.3%

SEEK produced solid FY26 figures, including 10% revenue growth to $1.20 billion, a 15% rise in EBITDA and 28% growth in adjusted earnings per share. It also lifted its fully franked annual dividend by 13% to a record 52 cents. Those achievements were overshadowed by falling paid job-ad volumes and cautious FY27 assumptions.

The statutory accounts included a $201 million loss from the SEEK Growth Fund and $377 million of significant items, making the headline result considerably less attractive. Investors were particularly concerned that economic weakness could limit volumes while the company continued investing in platform integration and artificial-intelligence products.

5. JB Hi-Fi (ASX:JBH): –12.3%

JB Hi-Fi’s full-year result was broadly respectable, with group sales rising 5% to $11.1 billion and underlying earnings per share increasing 6% to $4.48. The damage came from its current-trading update. Australian sales were almost flat during the June quarter and deteriorated further in July, while earnings in the core Australian electronics business fell 3.6%.

Housing-related categories were particularly weak as higher living costs and interest rates constrained household budgets. With JB Hi-Fi entering the season on a demanding valuation, an in-line historic result was not sufficient: the loss of sales momentum prompted investors to rapidly reduce their expectations for FY27.

Overall, the season showed that share prices react less to whether profits rose or fell than to the gap between results and expectations. Bapcor was rewarded for being less troubled than feared, while several fundamentally profitable companies were punished because their outlooks failed to justify elevated valuations.