Many investors and investment experts consider a corporation’s environmental, social, and governance (ESG) qualities to be important determinants of the value of its stock, but measuring those qualities is difficult. ESG qualities are numerous, diversely understood, and often vague. Verifying claims about them tends to be expensive, if even possible. Corporations issue public statements of ESG commitment, but, as Mobius, von Hardenberg, and Konieczny note (p. 162),
promises are cheap. So skeptical investors try to measure ESG reality, but that is hard to do.
Many ESG measures already very effectively capture inputs, but … measures that capture inputs don’t capture outcomes … and impacts, argues Jennifer Howard-Grenville.
social component of ESG typically includes
diversity and inclusion (D&I). According to auditing firm PwC,
The social element of ESG issues (specifically D&I) can be the most difficult for investors to assess and for companies to show continued progress. … There is a divide among stakeholders on … what the term even means.
Despite the differences, D&I efforts usually address a common catalog of classifications, including race, ethnicity, sex, sexual orientation, age, and disability.
Systems equally usable by persons with and without disabilities are termed accessible. Accessible buildings are equipped with features such as ramps and wide doors to accommodate wheelchair users. Accessible websites, mobile apps, email messages, and digital files are designed and constructed to avoid barriers that would particularly frustrate older persons and persons with durable and temporary disabilities. There are detailed standards in both domains: physical and digital. The latter are incorporated into law in about 20 countries. Article 9 of the Convention on the Rights of Persons with Disabilities requires states to promote digital accessibility. In the United States, thousands of federal lawsuits are filed annually claiming digital disability discrimination due to accessibility defects.
Even if most social ESG outcomes are hard to observe, website accessibility is not. Visiting a corporation’s website does not even require travel. Point your web browser to the website, and there it is.
Website accessibility may also predict other ESG outcomes and impacts. Accessible websites rarely just happen; they usually result from corporate decisions combined with effective governance. If an enterprise decides to prioritize social equity, inclusion, diversity, software quality, and risk mitigation, and it organizes, manages, staffs, and incentivizes itself to make those priorities real, then it tends to succeed in making and keeping its digital assets accessible, along with other ESG (and non-ESG) goals.
The accessibility of a website can be measured. There is substantial (even if incomplete) consensus on what makes a website accessible or inaccessible. The cost of measuring the accessibility of a single web page or transaction can range from pennies to hundreds of dollars, depending on the amount of human testing in the measurement process. More human effort tends to improve measurement quality. Fully automated measurement, however, is less costly and more auditable.
In November 2021 I used a fully automated procedure (version 7 of the
a11y procedure of Autotest) to measure the accessibility of the home pages of the websites of the 198 corporations that are in the portfolios of four ESG-oriented mutual funds. The funds are:
- AMDWX: Amana Developing World Fund
- CCVAX: Calvert Small-Cap Fund
- NALFX: New Alternatives Fund
- VEIGX: Vanguard Global ESG Select Stock Fund
For each web page, 427 tests were performed. Of these, 411 belonged to three test packages created by others (Deque Axe-core, IBM Equal Access, and WebAIM WAVE). I created the other 16 tests to capture additional accessibility problems. The results were aggregated into a score. A score of 0 would indicate that a page has passed all the tests. Any score greater than 0 indicates test failures.
In the table below:
- Each corporation name in the
Pagecolumn (with the fund or funds holding its stock shown in parentheses) is a link to the page that was tested.
- Each number in the
Scorecolumn is a link to the detailed results.
This table provides evidence that the portfolios of ESG-oriented mutual funds include corporations with a wide range of website accessibilities. None of these funds, evidently, applies a negative accessibility screen to rule out corporations that do not try, or try and fail, to make their websites accessible.
Such evidence is, of course, rebuttable. As the above-cited documentation notes, these tests, like all tests, are fallible, and different tests would produce different results.
Nonetheless, disregarding test results such as these may be reckless. The test packages employed in this procedure are available to anybody, and litigators run them to identify potential defendants in accessibility complaints. Of these 198 home pages, only one got a perfect 0 score on any of the test packages. Running those packages on one’s own website and either correcting or rebutting the reported defects would be prudent risk management.
Investors can easily run Axe-core, WAVE, and other accessibility testing packages in their web browsers. With more effort, they can install, run, and extend open-source testing software, such as Autotest. They do not need to request or compel accessibility disclosures. Web accessibility is self-disclosing.
Activist investors can do more than measure. Shareholder interventions for ESG typically urge management to report. For digital accessibility, however, activists can publish their own reports and urge management to make specific improvements. If a firm claims that deficiencies have been remedied, one can check the claim by rerunning the tests.
Because of its direct observability and measurability, website accessibility as a component can, at low cost, make an ESG index more comprehensive and less vulnerable to deception.