R&D notes

Accessibility: an ESG lie detector

Jonathan Robert Pool

A social outcome that corporations cannot hide

Introduction

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.

The 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.

Findings

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:

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:

Accessibility scores of web pages
PageScore (lower is better)
Pinnacle (CCVAX)258
Algonquin Power & Utilities (NALFX)304
Olo (CCVAX)385
MUFG (VEIGX)393
Starbucks (VEIGX)393
Kinsale Capital Group (CCVAX)395
Viad (CCVAX)396
Essential Properties Realty Trust (CCVAX)401
Community Bank (CCVAX)402
Boralex (NALFX)429
Silergy (AMDWX)434
Infratil (NALFX)444
LHC Group (CCVAX)446
NextEra Energy (NALFX)452
Kimberly-Clark de Mexico (AMDWX)464
Glacier Bank (CCVAX)478
American Water Works (NALFX)517
CDK Global (CCVAX)518
KPJ Healthcare (AMDWX)565
R1 (CCVAX)569
Lithia Motors (CCVAX)589
Shimano (NALFX)611
Recruit Holdings (VEIGX)614
Fleury (AMDWX)617
Tandem (CCVAX)620
CSW Industrials (CCVAX)628
Emergent BioSolutions (CCVAX)630
nCino (CCVAX)641
Nottingham Advisors (CCVAX)642
Sensient Technologies (CCVAX)660
Addus HomeCare (CCVAX)677
Sims Metal Management (NALFX)684
AZEK Building Products (CCVAX)685
Clearway Energy (NALFX)704
Clicks Group (AMDWX)721
Abengoa (NALFX)740
Haemonetics (CCVAX)763
South State (CCVAX)769
Middlesex Water (CCVAX)784
Performance Food Group (CCVAX)813
Chemed (CCVAX)817
Innergex Renewable Energy (NALFX)821
Unicharm (AMDWX)846
AAON (CCVAX)861
Sercomm (AMDWX)873
Shoals Technologies (NALFX)874
Naspers (AMDWX)897
BYD (NALFX)901
CubeSmart (CCVAX)901
Trane (NALFX, VEIGX)902
Progressive (VEIGX)909
Ormco (CCVAX)910
BIMB Holdings (AMDWX)966
ING (VEIGX)968
Northland Power (NALFX)973
National Vision Holdings (CCVAX)990
Hydro One (NALFX)995
Tempur Sealy International (CCVAX)997
Casella Waste Systems (CCVAX)1019
Kimball International (CCVAX)1030
Sunnova Energy (CCVAX)1032
Nobel Biocare (CCVAX)1044
Envista Holdings (CCVAX)1048
AMN Healthcare (CCVAX)1049
Techtronic Industries (AMDWX)1059
EastGroup Properties (CCVAX)1060
Atlantica Sustainable Infrastructure (NALFX)1063
Mueller (CCVAX)1075
Kansas City Southern Industries (AMDWX)1079
National Grid (VEIGX)1090
Lydall (CCVAX)1091
Hannon Armstrong (NALFX)1108
Qualcomm (AMDWX)1132
James River Group Holdings (CCVAX)1147
Sunny Friend Environmental Technology (AMDWX)1151
Panasonic (NALFX)1184
TPI Composites (AMDWX)1204
MSD (VEIGX)1210
Hexcel (CCVAX)1235
ACI Worldwide (CCVAX)1248
Barrick Gold (AMDWX)1267
Woodward (CCVAX)1271
Ambarella (CCVAX)1279
Microsoft (VEIGX)1305
Baxter (VEIGX)1306
Middleby (CCVAX)1347
Bangkok Dusit Medical Services (AMDWX)1355
Canadian Solar (NALFX)1362
EDP Renovaveis (NALFX)1372
Novartis (VEIGX)1376
Northern Trust (VEIGX)1384
Amerisafe (CCVAX)1390
First Citizens Bank (CCVAX)1406
Stock Yards Bank & Trust (CCVAX)1420
SM Prime Holdings (AMDWX)1436
M. Dias Branco (AMDWX)1460
Ford Otomotiv Sanayi (AMDWX)1471
Compass Group (VEIGX)1486
IHH Healthcare (AMDWX)1488
Minerals Technologies (CCVAX)1492
TI (VEIGX)1535
Asbury Automotive Group (CCVAX)1544
Unilever (AMDWX)1559
Commerce Bank (CCVAX)1604
CarGurus (CCVAX)1634
ENEL (NALFX)1657
Stride (CCVAX)1662
Dorman Products (CCVAX)1684
B3 (VEIGX)1700
Siemens Gamesa (NALFX)1711
Apria Healthcare (CCVAX)1717
Allison Transmission (CCVAX)1752
Diageo (VEIGX)1752
Owens Corning (NALFX)1757
ASM Pacific Technology (AMDWX)1771
DSM (VEIGX)1787
Visteon (CCVAX)1802
Landstar System (CCVAX)1805
OneGroup (CCVAX)1881
Syarikat Takaful Malaysia Keluarga (AMDWX)1894
Dana (CCVAX)1901
Schneider Electric (VEIGX)1923
Advantech (AMDWX)1925
ICU Medical (CCVAX)1948
Telekomunikasi Indonesia (AMDWX)1978
Ortho Clinical Diagnostics (CCVAX)1979
KaVo Kerr (CCVAX)2030
Michelin (VEIGX)2032
J&J Snack Foods (CCVAX)2045
Colgate-Palmolive (AMDWX, VEIGX)2063
Cohen & Steers (CCVAX)2101
Selective (CCVAX)2104
Inditex (VEIGX)2126
Kerry Logistics Network (AMDWX)2132
Signify (NALFX)2139
Brookfield Renewable (NALFX)2163
STORE Capital (CCVAX)2189
Accenture (VEIGX)2192
Inovalon (CCVAX)2240
National Instruments (CCVAX)2297
Wyndham (CCVAX)2361
Orsted (NALFX)2368
AIA Group (VEIGX)2412
Envestnet (CCVAX)2422
VF (AMDWX)2423
Taiwan Semiconductor (AMDWX, VEIGX)2482
ADP (VEIGX)2510
Terminix International (CCVAX)2512
BCE (Bell Canada) (VEIGX)2530
Hartalega Holdings (AMDWX)2531
Johnson Controls (NALFX)2544
Wolters Kluwer (VEIGX)2591
Indofood CBP Sukses Makmur (AMDWX)2673
Mercury (CCVAX)2712
Core Laboratories (CCVAX)2718
Brunswick (CCVAX)2786
Hikma Pharmaceuticals (AMDWX)2832
Koninklijke Philips (NALFX)2837
Prologis (VEIGX)2887
Independent Bank (CCVAX)2902
Silicon Labs (CCVAX)2921
Altair (CCVAX)2972
CBIZ (CCVAX)2972
Hong Kong & China Gas (AMDWX)2972
Veolia Environnement (NALFX)2985
Scotiabank (VEIGX)3003
Atlas Copco (VEIGX)3039
Xylem (NALFX)3111
Eversource Energy (NALFX)3194
M|GROUP Holdings (VEIGX)3248
Transalta Renewables (NALFX)3248
KCE Electronics (AMDWX)3275
Herc Rentals (CCVAX)3282
Ecolab (VEIGX)3362
TrustPower (NALFX)3380
Rio Tinto (AMDWX)3391
Applied Industrial Technologies (CCVAX)3413
Avangrid (NALFX)3466
NVIDIA (AMDWX)3738
Acciona (NALFX)3880
Vestas Wind Systems (NALFX, VEIGX)4086
Chefs Warehouse (CCVAX)4275
Terna Rete Elettrica Nazionale (NALFX)4354
Visa (VEIGX)4365
Saudi Telecom (AMDWX)4480
ASM Pacific Technology (AMDWX)4640
Home Depot (VEIGX)4817
Samsung Electronics (AMDWX)4892
Herman Miller (CCVAX)5105
Iberdrola (NALFX, VEIGX)5210
Steve Madden (CCVAX)6307
LG Household & Health Care (AMDWX)6619
Delta Electronics (AMDWX)6621
Capri Holdings (CCVAX)7558
Monolithic Power Systems (AMDWX)8645
Cisco (VEIGX)10608
John Deere (VEIGX)11128
Wilcon Depot (AMDWX)13903

Conclusion

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.