AI in ESG? Nope. Just a bit of decent IR please.
Investors and analysts typically need three things from companies:
Everyone always focuses on the data requirement in isolation. This rather misses the point in three respects:
Mindful of the fact that companies find communicating on sustainability to investors difficult, the SRI-Connect team visited the investor relations pages of the websites of 110 companies (across the globe and across sectors) to explore how many companies were meeting investors needs for INFORMATION and CONTACT as much as their needs for DATA. Specifically, we asked:
Glass half-full? Half-empty? Or 14.5% full?
On one hand, we found some really good practice to be positive about. Some companies are becoming much more proactive in their communications on sustainability to investors.
On the other hand, many companies across the world are missing some really easy tricks in their sustainable investor communications.
Out of 110 companies surveyed:
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Sustainable / ESG data requests are really annoying...
We get it. We really do! Many of the ESG / sustainability requests made by (or on behalf of) investors are really annoying. They appear (and sometimes are) irrelevant, overly-granular, ill-informed, disconnected, unrealistic, untimely, inefficient ... I could go on.
It is entirely understandable that companies find them hard to manage.
... but (most) companies really can't complain
However, until companies start communicating sustainability / ESG information using the same basic principles of transparency and direct communications that they deploy to other aspects of investor communications, it seems inevitable these inefficiencies and frustrations will continue.
A company who complains that ESG ratings misunderstand their business or aren't accurate but have not held an annual briefing for ESG ratings agency analysts would be as ridiculous as a company complaining about a financial 'sell' rating if they hadn't invited the relevant analyst to their latest 'strategy presentation'.
... but it can all be fixed ...!
The encouraging aspect here is how easily (and cheaply) fixable it all is. If companies simply deploy the same practices to sustainable investor communications (target, prioritise, webcast, roadshow, feedback) that they apply other investor relations, they can massively expand their reach into sustainable / ESG investors while significantly reducing the time that it takes.
Free support to get you started
Sector benchmarking reports on the IR practices discussed above and six other metrics on how companies use their IR webpages to support direct investor communications on sustainability are available for free to all listed companies from relevant sectors. Just contact me directly and I'll be delighted to send you a comparison of your practice in this regard vs that of your sector peers.
(NB: We don't plan to publish these benchmarks beyond peer companies in each sector. We're not in the 'name and shame' business or the 'name and fame' business. We're just in the business of improving the efficiency of communications so that we can all start to focus on what matters ... how to allocate capital effectively in a world of sustainability transitions)
Valutus - Director of Quantitative Analytics
8moHey Mike, You should read Daniel Aronson's book "The Value of Values." here is a link to the book: https://a.co/d/6gDJ1u2) I have read it and it provides real insight into the way ESG can create actual bottom line value for companies. Definitely worth a look.
Founder, CEO @ Impact Cubed | Sustainable Investing Advisory
8moThank you Mike for continuing to be a voice of reason in our industry. Years ago we spoke of investors hiding behind data issues to avoid taking action. Keep it coming Mike!
RISE consultancy | 12 years of sustainable investment experience
8moI agree with all your three points in data including, 'Data without context/information is meaningless'. Unfortunately the current obsession on data and reporting will continue to cause inaction and for companies to pay lip service to sustainability. Companies and investor relations can and should take the lead on sustainability, which will ensure investors have more insight on the likelihood of success of companies long term implementation and budget plans for decarbonisation and their material ESG issues.
SRI investor & analyst relations at SRI-CONNECT
8moSome thanks are due here: First, to Luke Blower and Yi Sun for setting us off on this path of exploration through WBCSD – World Business Council for Sustainable Development's Building Bridges programme Then to Andy White and Isobel Runcie for delivering both the brainpower and the legwork to ensure that we were interrogating company practices in the way that was most likely to lead to efficient and sustainable outcomes. Finally to Tim Human for asking the right question at the right time and showing us that the work we are doing privately for individual sectors and companies has wider relevance.