This blog outlines practical guidance for Investor Relations Officers on how to approach sustainability, based on our research Closing the Sustainability-Investor Relations Gap. The guidance is also relevant for sustainability professionals who would like to integrate sustainability more into their company’s investor communications.
The solutions below have worked for companies that are leading in this space.
1. Foster an alliance with your company’s Sustainability / CSR / Citizenship team
Start by building a relationship with internal subject matter experts. If you don’t have a “sustainability” team, per se, consider reaching out to leaders in your Environmental Health & Safety, Human Resources, Risk, Public Affairs, Government Relations, or other teams who may manage social and/or environmental issues.
Caroline Portmann, Vice President, Sustainability Affairs at Credit Suisse reflected how, “Over the last few years, the Sustainability Affairs and Investor Relations teams have established a closer collaboration between key persons on both sides. This has proved to be a solid basis for an ongoing mutual exchange and efficient cooperation.”
Translate social and environmental issues into financial language as much as possible for investors.
2. Identify intersections between sustainability issues and your business model
Work with your colleagues to understand which social and environmental issues matter to the company, how they impact your business, and which are the highest priority (you should consider conducting a materiality assessment to help you prioritize those issues, if your company has not already). Translate those issues into financial language as much as possible (whether through quantitative data, or narrative, or both). SASB’s Industry Standards and the UN Value Driver Model are two good frameworks for this translation.
The ICT company SAP has carried out research to analyze the financial impacts of its material issues. For example, they found that a +/- 1 percentage point change in their Business Health Culture Index had a €75–85 million impact on operating profit. They share this statistic, and other relationships between financial and other issues, in their integrated annual report.
3. Ask investors what language and metrics they use
Mainstream investors are increasingly using ESG information in their decision-making, so find out exactly what they want to know about your company so you can meet their needs.
Brazilian bank Itaú Unibanco’s Sustainability and IR executives organized a series of meetings with investors to learn what mattered most to them. The Sustainability team now focuses more on numbers and results, and less on narrative, because that is what investors are looking for.
4. Prioritize which surveys to respond to
Companies are increasingly asked to provide information to research firms via surveys. Identify the surveys that matter most to your investors and reply to those to help ensure that the company information that is reaching your investors is accurate.
Identify the surveys that matter most to your investors and reply only to those to help ensure that the company information that is reaching your investors is accurate.
A few years ago, Anheuser Busch InBev decided to just focus on the surveys of Sustainalytics, MSCI, Vigeo, among others. Hugh Share, former Senior Global Director, Beer & Better World, commented, “We knew it was a bold move to not respond to some external questionnaires, but we didn’t see any negatives from being more focused. In fact, it enabled us to spend our time and energy on improving programs that key investors were most interested in.”
5. Build on existing tools and channels
Integrate sustainability information into your existing investor communications, such as regular calls, roadshows, and other engagements. This includes ensuring senior leaders at the company (including the CFO, CEO, and Board members) can elaborate on your ESG information.
A leading healthcare company mentioned to us that they are now adding more sustainability information into existing IR tools, like their Q&A database.
6. Be proactive
Finally, don’t wait for investors to ask you about your company’s sustainability policies. Explain how your business’ strategy manages these risks and takes advantage of the opportunities presented by social and environmental issues. This will help you ensure your company gets the credit it deserves, and gives you a competitive advantage over those companies that are not communicating well with their investors about these issues.
Companies interviewed frequently reiterated how, “it is incumbent on the company to tell the story,” as Seb Beloe, Head of Research at WHEB Asset Management, put it. In fact, lack of communication often leads investors (those that are looking for sustainability performance information) to use incomplete data in their decisions. Luzia Hirata, Equity Research Analyst at Santander Asset Management, pointed out, “I need to make an assessment on ESG, but I have to assume that the company is not conducting good practices on the issue if I can’t find the information.”
This blog originally appeared in IR Magazine, as part of EQS’ white paper “The New Communication Frontier: Environmental, Social, and Governance”.