As sustainability factors become more significant influences on corporate strategy, companies are naturally interested in engaging any mainstream investors that may be interested in their sustainability performance. They are given hope in this by the fact that ‘mainstream’ investors who control a substantially greater proportion of assets than specialist SRI funds are showing more interest than ever before in sustainable development issues. However, it is still not always easy for companies to identify this.
The engagement of ‘mainstream’ investors with sustainability issues has been long-anticipated and long-delayed. Even now, it is difficult to gauge how extensively sustainability issues have permeated ‘mainstream’ analyst thinking and portfolio manager’s decision-making. It is impossible to generalise across a spectrum that ranges from investors that show no interest whatsoever in sustainability issues to those these that are actively evaluating how sustainability indicators can be used as a complementary, or even lead, indicator of company performance.
However, progress is being made, the most tangible manifestation of which is the emergence, in recent years, of a strand of SRI known as ‘integrated analysis’. This SRI strategy aims to use sustainability research to contribute to financial analysis by identifying additional sources of investment risk and opportunity. As such it forms a bridge between mainstream SRI analysis and conventional ‘mainstream’ investment.
‘Integrated analysis’ requires SRI analysts to deliver fundamentally different and more financially-sophisticated results to their ‘mainstream’ colleagues and clients. As a result, they are obliged to ask different and more financially-sophisticated questions to companies. Companies will need to respond to this with more financially-focused communications to SRI investors.
To communicate effectively on sustainability issues with ‘mainstream’ investors, companies first need to understand how to communicate with SRI analysts that are developing ‘integrated analysis’ techniques. To do this, they need to know:
- What integrated analysis is
- How it changes the information needs of SRI investors and requires a shift in focus towards:
From this, companies can start to develop new routes of communication to engage ‘mainstream’ investors with sustainability issues.
To date, few companies have responded to this change in investor priorities and have continued to present to SRI investors on their sustainability performance without linking it closely to the drivers of their financial performance.
