Better the pain you know? ... in ESG communications

I participated yesterday in a WBCSD-hosted discussion on 'Achieving Best-in-Class Sustainability in Capital Market Days and Investor Roadshows'.

I introduced myself somewhat pessimistically as someone that had been working on the topic of investor - company communications on sustainability for 15 years but who still hadn't fixed the problem.

(For context, Tim Berners Lee published his first website on 20 Dec 1990. In June 2005, Google was valued at USD 50 billion, Amazon was profitable and Skype had been invented. So, it took 15 years to develop the internet and 15 years for companies and sustainable investors to fail to achieve something that requires no technological development at all. Hmmm...)

Somewhat optimistically, however, I suggested that in the ensuring 1.5 hours, the group of people gathered in Montreux and online (thx, internet) might do better and might 'fix it'.

... and we nearly did ;-)

How?

Here, credit must go to Eliza Mahdavy of EDF, Jennifer Mottles of PMI and Andreas Kusche of Mercedes-Benz (my fellow panellists) who demonstrated a level of knowledge and confidence about their dealings with sustainable investors that I come across all too rarely.

Whereas many companies wring their hands in despair at their dealings with ESG ratings agencies and investors' requests for data that does not actually relate to the sustainable business challenge that they face, these three people brought a 'can-do' attitude to the situation that saw:

• Andreas describe how Mercedes-Benz Group was hosting an ESG-focussed Capital Markets presentation (next week sometime if you're an autos or sustainability analyst and are interested)
• Jennifer highlight how PMI has developed its own suite of materiality indicators drawn from the transition journey facing PMI in particular ... rather than a generic set developed from top-down by an industry body or research firm
• Eliza describe how EDF responded to the tsunami of questionnaires, data requests and engagement approaches by the radical approach of organising direct meetings with their largest investors to explain the company's business context and sustainability strategy and to ask the investors which research providers they believed adds value

So, what contribution did you make Mike? I can't quite believe you stayed quiet.

In retrospect, not much. Of course, I talked. It's usually hard to stop me. I made a few points - which I have listed here for anyone that it is interested (Some thoughts ... yeah ... whatever ) ... but I'm not the main story here ... because all I did was supply information and perspectives on investors.

But these developments cannot be about what investors want and will drive.

The process has to be about companies, what they want and will drive.

(Investors are stretched way beyond capacity dealing with client interest and regulatory demands. They simply don't have bandwidth at present. Also, they have spent the last 15 years asking for stuff (granular, comparable data) that has absolutely no relevance to the investment strategies that they deploy. They need to be educated not pandered to*).

These three companies (and other here: Sustainable IR - Case Studies ) demonstrate that it is entirely possible to be proactive with investors and analysts, to communicate directly and to develop informed and informative relationships. There is no reason for the two sides of the investment process to stand at a distance throwing questionnaires and data at each other or, worse still, throwing threats of regulation about ESG ratings.

So, why does the problem persist?

I feel fully confident that the next time I speak to a company about sustainable investor communications, they will bemoan all of the familiar problems about inaccurate data and 'black box' ratings and lack of understanding of their business and bla ... bla ... bla.

But it is clear - from my recent interaction with EDF, PMI & Mercedes Benz (and actually a number of other companies over the past year) that there is a much better way to go about sustainable investor communications. (Don't sweat the reporting, the disclosure and the ratings. Do following 'mainstream' IR practice and go direct to investors).

So, why - when there is a cure - are companies still feeling the pain?

There can only be three explanations:

• Either - they do not know that there is a more efficient, more effective way to communicate on sustainability with investors - hopefully anyone who attended the WBCSD session, consulted www.sustainable-ir.com or has read this far in the blogpost will know that it can be different
• Or - the sustainability team within a company knows but can't persuade their IR colleagues to get involved (give me your shareholder register and 15 mins on the phone with them and we can fix that)
• Or ... and this is the difficult one ... the sustainability team knows there is a better way ... but a better way is new ... and new makes us nervous ... and we're quite good at doing these questionnaires now ... and nobody got sacked for filling in the boxes ... maybe we'll just fill in the boxes again ...

Dear companies,

It really is up to you.

If you want investors to understand more clearly your sustainability exposures, the ways that you manage these and the impact that these factors will have on your business and share price, you need to follow the role model companies that are out there and be proactive about your sustainable investor communications.

If you want to spend the next five years filling in spreadsheets for data-gathering interns that have no relevance to your real business and occasionally reading haranguing blogposts from me, that is also your choice.

Enjoy!

Mike