Dear sustainable investment value chain,
Many thanks for the business opportunity!
I'm happy to accept this for the short-term …
But, I'm not sure it is right for the long-term for me (or anyone else) to own this opportunity…
Still, if you're offering - I would like to be involved in a different opportunity that's good for us all …
Why do companies and investors make it so hard for each other to discuss sustainability issues?
So, it's the time of year when companies around the world publish their sustainability reports and hold their AGMs. This means that it's the time of year when there should be lots of direct contact between investors, companies and research providers on sustainability and corporate governance issues.
In this reporting cycle, there is plenty to discuss - notably related to companies' strategies for carbon reductions and diversity, equity and inclusion practices and labour standards in shifting supply chains and social inclusion … in a world where political support for these has been muted or evaporated.
Direct contact matters
These issues are all nuanced and complicated and strategic … and certainly benefit from in-depth, contextualising discussions between investors and companies - discussions that go way beyond the simplistic datapoints of "have you got a policy on X?" or "what are your emissions of Y?"
Such discussions become even more important in a world in which companies are becoming more reluctant to declare their positions or report their progress on politically-contentious issues or to blazon progressive commitments across websites.
Of course, companies cannot and many investors do not (in spite of perceptions) function on the short-term cycles that politicians do. Most environmental and social programmes need investment that develops and is sustained through multiple political cycles. Such investment needs to be discussed and understood.
However, it clearly needs to be done privately* at the moment.
Within 'mainstream' investment investor relations, in-depth, direct, private discussion between companies and investors happens regularly … through webinars and conferences and roadshows. Of course, these also happen around sustainability issues but they are somewhat harder to achieve.
How so?
In most practical respects, this communications process is exactly the same as it is for mainstream investors and involves targeting, invitations, scheduling of Zoom calls etc.
In one respect, however, it is harder for companies and investors to discuss sustainability issues: For Organisation A to 'talk' to Organisation B, someone in Org A needs to be able to identify the relevant person in Org B or vice versa … and yet …
Companies are unhelpful
SRI-Connect has reviewed the direct sustainable investor communications practice of 222 companies (as part of a wider project to benchmark best practice in direct sustainable investor communications)**.
Only 25 of the 222 companies surveyed identify (on their website) a specific person within the investor relations team as being responsible for ESG / sustainable investor communications.
Are we honestly surprised that investor letters get sent directly to the Chairman?
Exceptions to this … that display good practice are:
Also … Adidas, Air Canada, HSBC, Lanxess, Lloyds Bank, Mercedes, Merck, OMV, Philips, Repsol, Sanofi, SAP, Shell, Siemens, Vestas, Vodafone & VW.
Through this simple practice, these companies make it easy for an investor interested in sustainability communications to know whom to contact with any questions or requests.
(** Companies, please DM if you would like a free copy of how your company benchmarks here. These are supplied on a sectoral basis to companies only … to help them develop their own practices. We're not in the 'name and shame' business)
Investors are worse
Similarly, we have reviewed the websites of investors to understand the size and shape of their SRI/ESG teams and the division of responsibilities within these. (Which analyst covers the Transport sector? Who is responsible for Biodiversity? Etc).
While many investors profess an interest in 'engagement' and - indeed - write long reports on the subject, they make it remarkably hard for a company that actively wants to engage to identify the relevant people to speak with.
There are a few notable exceptions *** that make the responsibilities and interests of their teams visible on their websites:
- Artemis - Link
- Calvert - Link
- Candriam - Link
- DWS - Link
- Impax - Link
- Mirova - Link
- Storebrand - Link
- Wheb - Link
… and a number more that describe their teams within their ESG / sustainability / stewardship reports … which is helpful … but why bury this useful information in a 60 page .pdf?!
However, the large majority of investors do not share this information in a way that is readily accessible to companies. Perhaps this is why engagement is such a time-consuming exercise?!
(*** Investors, please DM if you would like a free copy of how your company benchmarks here. These are supplied to investment firms directly. Again, we're not in the 'name and shame' business)
So, thanks! … in the short-term
Ultimately, this all works very nicely for SRI-CONNECT.
Our network (which is free for companies, investors and research providers to join via here and use) is designed to help companies, investors and research providers identify and communicate with relevant people across the sustainable investment value chain.
Also, we offer additional services that enable companies to communicate proactively and on their own terms with the relevant sustainable investors and analysts.
Essentially companies can use the network for free to do it themselves or they can pay us to support them.
All very nice …
… but no thanks … not for the long-term
While we are delighted to offer these services and will continue to do so as long as they are needed, we would also love the value chain to move beyond this … to a point where every company knows who the relevant sustainability managers and analysts are at firms and every investor knows who the relevant people are at companies …
… so we can all focus on the interesting questions of sustainability strategy, messaging, analysis and capital allocation.
Connecting A to B is important … but ultimately easy, low-margin, not very interesting work … and I have reached a stage in my career where interesting is becoming more important.
… and please …
… but the strategy and messaging work … and the research and analysis work to ensure that the conversations that happen lead to meaningful behavioural change and reallocation of capital.
Yes, please. I'll definitely have some of that please!
Byline:
Mike Tyrrell is OpenToWork … on anything that improve the quality and efficiency of company <=> investor communications on sustainability … so that he can keep funding www.sri-connect.com as a free research, communications and networking resource for the whole sustainable investment value chain globally.
* … and before anyone jumps with concern on the word 'private', I am not for a second suggesting that such conversations include price sensitive information. This is not allowed (for good reason) in 'mainstream' investment and it is not allowed in sustainable investment either. Conversations are typically private because this enables them to focus efficiently on the specific aspects of the few parties involved. In any case, most companies don't - as recent disclosures show - have a clue what their next quarter's earnings are going to be so aren't in a position to disclose it.
