Off-season engagement continues to rise, says ESG adviser

The number of requests that institutional investors receive for meetings outside of proxy season continues to rise, as IR, legal and sustainability teams are encouraged to work together on off-season ESG engagement.

Speaking to IR Magazine and Corporate Secretary at the ESG Integration Forum – US 2019 in December, Daniel Oh said the institutional investors he talked to in December were receiving unprecedented levels of issuer outreach before the holidays. Oh, who recently joined Morrow Sodali as its managing director of corporate governance, US, noted that the demand for off-season engagement is notably different to what it was when he worked on the investment stewardship and corporate governance teams at BlackRock and State Street Global Advisors (SSGA).

‘Having a face-to-face relationship is becoming more important,’ Oh said. ‘In the last few days I’ve talked to some of the largest institutional investors and they were complaining about the number of engagements they have even in December. Some mentioned that this is the first week of December and over the next few days they have 20 engagements. That’s really striking because when I was at BlackRock, December was a quiet month before the holidays.’

In November 2018, Rakhi Kumar, SSGA’s senior managing director and head of ESG investments and asset stewardship, told IR Magazine that demand for off-season meetings was the highest she’d ever seen.

From the issuer perspective, Oh said these engagements are crucial to understand how investors weight ESG issues differently – something he has first-hand experience of, having served as Barrick Gold’s senior vice president of investor engagement and governance between 2016 and 2019.

‘You need to know your shareholders,’ Oh said. ‘Not every shareholder has the same view… I’m working with some companies [to help] prepare their engagements, and they come back and have completely different feedback from investors. That’s completely natural but to some people it’s a little bit surprising because they think investors are on the same page.’

This difference in investor views on ESG underscores the importance of collaboration between IR, legal, HR and sustainability, Oh said. ‘It’s so crucial to have one clear message… I cannot emphasize more how the collaboration is so crucial to have good relationships with the institutional investors,’ he said.

Oh added that investors are also grappling with ESG integration, with stewardship teams trying to make sure that their message resonates with the portfolio managers and analysts. If an IR team talks to the portfolio manager at a large institution and the governance team talks to the stewardship team at the same institution, it’s important that the message is consistent and clear.

When attendees at the ESG Integration Forum – US 2019 were surveyed about what their number one priority was for developing a deeper understanding of ESG issues, the top response was to set up a working group between IR, governance and sustainability.

Click here to view the full video interview.