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Planning your SRI and governance communications for 2016

Sustainable and responsible investing (SRI) and corporate governance (CG) are hot topics in the IR community, as a recent Society webinar showed. Mike Tyrrell reports.

All records were broken on Wednesday 21 October as the IR Society hosted a webinar for over 160 IR managers and consultants on ‘Planning your SRI & CG Communications for 2016’.

It is safe to say that SRI is one of the hottest topics in investor relations right now. Sessions on SRI were also included in the recent conferences of the AERI (Asociación Española para las Relaciones con Inversores) in Madrid and the AIRA (Australasian Investor Relations Association) in Sydney.
The Society’s webinar brought together some experienced practitioners in a Q&A- only format to share practical experiences of communicating sustainability and corporate governance information to investors. It was an excellent call and I can probably do no better in this short article than simply reproduce the salient points made by the highly-experienced panel.

The overriding message from the event was that IROs should treat SRI investors and analysts in the same way as they treat all other investors and analysts. They should use all of the same processes that they do for other investors. They should target, plan, communicate and follow up in exactly the same way.

Just because the message is somewhat (but not entirely) different, there’s no reason why the communications disciplines used need to be any different.

Plan
It’s a simple message, but cannot be emphasised enough.

• “Plan and be consistent in that plan”
Antony Andrews, BP

• “Start addressing ESG issues in regular presentations ... be proactive, take the bull by the horns and reach out to investors”
Seema Suchak, Schroders

Shape your key messages
Don’t be led astray by ‘received wisdom’ on what SRI investors want. It’s your business, your message and your audience – understand what they want to know.
• “Construct the narrative yourself”
Antony Andrews, BP

• “Address your most challenging issues but also where you might outperform”. Ensure that your message is “material and meaningful”. Also “leave out the greenwash”
Seema Suchak, Schroders

Striking the balance: the message, the meetings, and the data
Once you know your story, you have to know how to deliver it.

• “ESG and SRI is both a quantitative and qualitative risk analysis (process) ... meeting with companies is always going to be an important part of the process”
Seema Suchak, Schroders

• “Analysts want to benchmark companies (so they need data) but this must be presented in the context (of the company’s wider business narrative)”
Antony Andrews, BP

• The “quality of ESG research is dependent on the quality of information that is received from companies”

Antti Savilaakso, MSCI ESG Research

• Please “provide the granular information, but include the straightforward data too”
Antti Savilaakso, MSCI ESG Research

Whose line is it anyway?
One of the biggest SRI communication challenges for companies remains co- ordination between business functions.

• “Many companies can be a little uncoordinated between the CSR team and the IR team. Make sure there is full engagement between these two teams”
Matt Edmund, HSBC

• “The emergence of investor relations managers with a knowledge and ability to communicate on sustainability issues has been a very welcome recent development”
Seema Suchak, Schroders

• “Get the board and executive management to speak on these issues” Rob Walker, HSBC

• “Make sure there is oversight (and a record) of what questions are being asked by whom and to whom”

Antony Andrews, BP

Corporate access – help them to help you
IROs are not alone. Increasingly, sell-side analysts, IR consultants and corporate access teams are able to help companies access SRI
investors and support them with the information needed to do this.

• “Use market intelligence, look at SRI targets and SRI-investor expectations and scoring systems”

Matt Edmund, HSBC

• “Utilise any CRM available – (record) who you met recently – when and why. Log the activity and the follow-up and use it in your future plans”
Matt Edmund, HSBC

Governance in 2016
We asked Rob Walker of HSBC what he predicts will be the hot topics for corporate governance analysts in the coming year.
Broadly, he sees an environment in which investors recognise that “good governance is worth a premium”.

In terms of ‘hot topics’, he predicts that board diversity will remain a key issue for investors. There will continue to be a “focus on gender because of quotas” but to focus exclusively on gender would be to “miss an opportunity to look at the changing revenue exposure of companies, and find out how that applies to the board”, its competencies and its succession planning.

Also, Walker noted that “income inequality (has hit radar screens as is emphasised by the) introduction of pay ratios in the US (which) could create reputational risk across the board”.

Ten steps to take control of your SRI message:

To communicate effectively with SRI analysts and investors, companies need to undertake the following steps:

1. Understand SRI – understand the basics of how SRI investors operate.

2. Identify SRI interest levels – work out the general levels of interest in your company.

3. Create a ‘Register of SRI interest’ – work out exactly which analysts and investors cover your company on sustainability and CG issues – this is much easier and cheaper than it sounds.

4. Record recent activity – simple stuff – know what different parts of your business did to communicate with SRI investors and analysts last year – you would be amazed by how few companies can put together a one-page listing of their recent SRI comms.

5. Develop an SR-IR plan – obviously ... and importantly ... publish that plan – if investors know when they are going to hear from you, they are more likely to fall in line with your timetable and less likely to impose their own.

6. Shape the key messages – investors have different priorities to employees and local communities – don’t shovel the same messages at both groups.

7. Publish a sustainability report – note – this is Step 7 in the process – not Step 1.

8. Undertake an SRI roadshow – go and see the important investors – one-on-one meetings for your big investors – group meetings for the small ones – webcasts for the analysts and those from far-flung markets.

9. Respond to selected requests and questionnaires – be selective about what else you respond to.

10. Rest – have a closed period – don’t be pushed around. Once you get an annual process going, it’s entirely reasonable for a company to say to investors: that’s our presentation for the year – now go away – we’ll report to you again next year – of course, if we crash a tanker, blow up a school, develop a cure for malaria or launch a breakthrough in pollution control, we’ll be happy to arrange a focused catch-up ... but otherwise, we’re going to run our business for a bit and we don’t want you bothering us with your questions...

Published: 14 January, 2016