There is a growing recognition that sustainability can have a significant effect on a company’s financial performance, and investors are increasingly integrating sustainability factors into their decision-making. So how do you optimise your Sustainability and Investor Relations teams to collaborate and clearly articulate the sustainability performance of your business?
Environmental, social, and governance (ESG) factors relevant to a company’s business can provide essential insights into management effectiveness and thus a company’s long-term prospects.
This topic was discussed at a recent roundtable hosted by SustainAbility London and Barclays entitled ‘Closing the Sustainability-Investor Relations Gap’. The event was attended by a broad range of business leaders from both the Sustainability and Investor Relations space, and the following four key areas emerged from the discussions:
1. Relationships worth working at
Relationships with investors matter. SRI-Connect and Extel’s Independent Research in Responsible Investment 2016 survey shows investors crave direct engagement with companies in addition to robust reporting, and some participants echoed that it is one-to-one company-investor engagement where their sustainability narrative is strongest and most impactful.
Participants were interested to learn from each other how they can bridge the internal IR and Sustainability gap from being an ad hoc and transactional relationship to more of an on-going one. A cross-functional integrated reporting working group was one example seen to bring teams closer on a more structured basis.
2. Dedicated roadshows
Holding dedicated ESG investor/SRI roadshows was recommended to ensure that all relevant matters are specifically discussed with analysts and investors. This helps to limit the rhetoric that sustainability factors are of lesser importance because no specific questions were asked. In addition, such roadshows help to meet investor needs for direct interaction.
3. Reporting: “Evolution to a strategic narrative”
ESG is moving from simplistic reporting matrices to being integrated into the corporate narrative presented to investors. Best in class examples see ESG information directly demonstrating how the business is creating long-term sustainable growth.
4. Materiality: One size doesn’t fit all
“Materiality” was cited as a problematic term given the myriad of definitions across companies when applied to a financial or sustainability context. Recommendations for solutions currently include a complete overhaul of the terminology; in the meantime, a conscious understanding of both sets of terminology when presenting information to investor audiences is required, differentiating where needed.
With thanks to Barclays, GlaxoSmithKline, JLL, London City Airport, Mitsubishi Corporation, RBS, SRI-Connect, Walgreens Boots Alliance and Whitbread who took part in the discussion.
The event was held under Chatham House Rule and so comments and quotes are unattributed.