Some thoughts ... yeah ... whatever

Yesterday, I was on a panel.

I said some things.

The things I said are not the point.

The point is here: Better the pain you know? ... in ESG communications.

But I needed somewhere to reference the things that I said about company <=> investor communications on sustainability without making the other blogpost too long - especially as there are a few things below that I didn't say but would have done if we hadn't run out of time in a very engaging session.

So, here they are - largely responses to the question: What should companies consider when communicating on sustainability to investors?

[1] Use www.sustainable-ir.com

It is a grant-funded, free-to-air resource designed to answer any question a company may have on this topic.

[2] Investors are not homogenous - so the sustainability information that they need will not be homogenous

• Active investors - will need few, material, contextualised pieces of information about specific companies and sectors that provide a clear line of sight between sustainability factors and the key value drivers of a company
• Passive investors - will need few, simple datapoints that are consistent across an investment universe against which they can run passive funds (e.g. low carbon funds)
• Quants investors ... are the only ones that can possibly need granular, multi-factor ESG datasets for investment purposes ... but there are very few genuine quants investors in sustainable investment. So, why are we collecting all of this data? I don't honestly know.

(Then there are investors (of any of the types above) pursuing an 'engagement strategy'. Where these investors are genuinely engaged, they will want the same as active investors. Where they are trying to take shortcuts they might ask for the same as passive or quants investors).

[3] Investors often don't know what they are doing in this space

Companies often fall into the trap of assuming that investors know what they are doing in ESG/SRI. Many of them simply don't. They are working it out as they go along. I've been doing this for 20 years and I am still very much working it out as I go along.

But nobody should be ashamed of that. The essence of being an analyst (investment or otherwise) is not about knowing stuff; it's about being comfortable with the fact that you don't know lots of stuff and enjoying the process of finding out.

In this ESG/SRI space, we don't know lots of stuff ... but we're learning (www.sita-training.com). So, work with us.

Companies should therefore challenge investor requests (especially when those don't align with the sustainability priorities that they perceive for their own business) thus: Please explain to me how this piece of information will help you make an investment decision within the context of the investment strategy that you run.

[4] Start with the investors not with the ESG research providers

Every discussion about ESG starts with a moan about ratings.

Ratings serve a purpose. They have strengths and weaknesses. Some investors use them a lot. Some investors use them a bit. Some investors don't use them. Move on!

(In passing, move on is what the EC and other regulators should do on this topic ... but they won't and we'll all get sucked into this wholly ill-conceived and mis-directed piece of thinking ... and one that is more likely to do harm than benefit to the EU / US's wider sustainability ambitions. Ho hum!).

The important question is: What do investors need? Research providers are the suppliers to not the masters of asset managers. Find out what your current investors and potential future investors want and which data, ratings and research providers they use before spending a minute of your time with those providers.

[5] What do investors want in capital markets days / roadshows?

Four things:

• Context: What is driving your business??Where are you driving it??Independent of sustainability factors.
• Materiality: Can I get a clear line of sight between sustainability exposures that your business has and the key value drivers of the business?
• Engagement: I want to ask my questions, learn about your business in a way that makes sense to me and develop a relationship with you that I can use in future
• Gloss: I need something shiny to show my clients to show them that when they pay me to do sustainable investment, this is having an impact on companies.

… and they need you to do the logistics around any meeting and to be concise.?While I would like to be able to spend three days a year with every company I invest in, that is not realistic. Three hours is probably all of the time, I am going to be able to spend with each company. The more work you (as a company do), the more time I can spend (as an investor) understanding your business.

[6] What would you like to see more of / less of?

More of:

• Direct communications
• Companies taking the initiative around susty communications with investors
• Companies seeing susty communications as an education process for investors rather than demand fulfillment

Less of:

• More sectoral collaboration - on the company side
• Obsession with comparability of data between companies (It never is - let's stop looking for it)

[7] How can an individual company get started?

• [a] Team: Align IR & CSR/Susty team's objectives
• [b] Audience: Know your investors and their interests in sustainability (not just
• [c] Process: Once a year. Roadshow incl. 1-2 x small group meetings with investors, 4-6 x 1-on-1 meetings, 1 x webinar for research providers (poss. two if you want to separate the ESG ratings agencies from the sell-side brokers)
• [d] Content: As above: Content, Materiality, Your interest, Gloss

[8] Anything else?

Yes - the most important thing of all. Be confident.