Materials and capital goods surprised us by taking pole position, driven by diversified boards, improving capital structures and a focus on efficiency and emissions. Technology is a close second. Meanwhile, heavy activist action within autos has seen the sector make moves toward better governance, while a focus on mitigating systemic risks sees financials moving in the right direction. Power & utilities and the region's conglomerates however, have struggled to get off the bottom.
Although this sector tops the charts, we see many cases of companies retaining dual CEO and chairman roles, with board diversity and transparency remaining a major bottleneck.
Major improvements here come from companies separating CEO and chairman roles, along with many filling their boards with more external directors.
The pandemic has reshaped healthcare systems globally and the sector is one of the top governance scorers, benefitting from strong business ethics, diversified ownership and stringent quality control.
The sector came in with the biggest overall ESG score improvements, and its scores for independence top other sectors. Regulatory oversight is constantly evolving.
The sector comes in with above-average scores and a decent improvement on 2018. The electrification and EV revolution, and heavy activist action, has contributed to improvements.
Coming in slightly above average for governance, the sector fails to shine in terms of environment and social. Increased activism since 2018 has raised awareness of weak corporate governance.
Government regulation and intervention are key reasons for the sector only just reaching the average score for governance.
Ranking top for environment and social, energy's score is dragged down by below-average governance. Lack of diversity on boards is an issue, while the push towards greener energy solutions will form major governance points to watch for.
Although beating its 2018 result, property has below average scores overall. Improvements will come from regulations driving developers to set up better capital structures and environmental targets.
Board diversity improvements have seen overall scores for the sector improve, but increasing government regulations, complicated corporate structures and dual class shares have weighed on governance.
With below-average governance scores, the sector is also among the lowest-scoring for environment and social. Conflicts of interests between parents and JVs can be an issue.
The power sector has one of the lowest governance scores, but its commitment to increasing renewable energy and reducing greenhouse gas emissions sees it do better for environment and social.
Coming in with the lowest scores for governance, environment and social, the sector is in clear need of genuine reform, which will require a regional effort.