As ESG considerations continue to swell, institutional investors globally are increasingly building coalitions and engaging with their portfolio companies to improve transparency and enact change on a broad range of ESG and sustainability-related issues.
ESG communications specialists (typically working within investor relations, corporate communications or sustainability teams) should act now to stay on top of the rapidly changing developments in this area and more effectively control their companies’ ESG messaging.
In recent years, both the number of collaborative investor-led initiatives and engagement topics on ESG have grown significantly in tandem with the tremendous growth in ESG investing. Of the 20 most impactful investor coalitions, each representing more than $1 trillion in collective assets, nearly half (nine) have been formed since 2017, and 19 of the 20 have been launched since 2011.
Coalition size has also ballooned. Several coalitions including Climate Action 100+ (CA100+) and the Workforce Disclosure Initiative (WDI) now count hundreds of investors (including some of the world’s largest) among their signatories.
Based on Leaders Arena research, CA100+ signatories manage a combined $5.1 trillion in equity assets, owning on average 12.7 percent of shares in global listed companies. And the WDI has signatories managing a combined $2.4 trillion in equity assets, and owning on average 5.9 percent of shares in global listed companies. Companies cannot afford to ignore these new ESG demands.
What proactive steps can ESG communications specialists take now to be more effective?
Many companies find it challenging to keep up with the diverse and evolving approaches to ESG integration within their investor base, particularly if the company operates in an industry where ESG issues have been identified as more material and relevant, such as oil & gas, manufacturing, financials, utilities and materials.
But there are 10 proactive steps teams can take to be prepared to respond to incoming ESG-related requests and reach out to investors in order to control their ESG messaging.
- Maintain a company-specific radar to track relevant investor initiatives
- Monitor investor signatories within your company’s shareholder base
- Prioritize efforts. Examine issues being raised by the investor coalition in the context of how material and relevant they are to the company’s core business
- Consider an initial engagement with investors that have made contact
- Analyze how far you are from fulfilling the investor’s request(s) and the time and internal resources that would be needed
- Build your knowledge base. Identify the surveys, reporting initiatives and data that is driving ESG decision-making by key investors
- Benchmark practices and disclosures against industry peers and leading practices more generally
- With the core investor audience in mind, consider whether any reporting and disclosure enhancements are required
- Create a robust ESG engagement plan that is proactive rather than reactive and ensures the company gets credit for all of the good things it is doing on ESG
- Determine how incoming requests for ESG-related information will be handled before investors come calling.
The above steps require considerable time and internal resources. ESG is a marathon, not a sprint but, by taking these steps, ESG communications specialists can stay on top of the rapidly shifting developments in ESG and give your company a competitive advantage in investor communications.
Heather Keough and Chris Plath are senior ESG analysts and Miguel Santisteve is the founder at Leaders Arena
