By Ian Rhoades, Senior Associate
Nearly 900 investor relations practitioners and service providers descended on Boston in June for the 2022 edition of the NIRI (National Investor Relations Institute) Annual Conference, which returned in person for the first time since 2019. ESG was a dominant theme of the three-day event, which included sessions on environmental, social and governance frameworks, a forecast on what ESG will look like in 2025, and navigating the ESG bond market.
ESG Drives Long-Term Growth, and Profits. With the major mutual fund families continuing to expand their lineup of sustainability-focused products, ESG has become an essential ingredient of every investor relations program. Speakers at the NIRI conference noted that strong corporate governance principles will lead to a more effective overall ESG strategy. A solid governance foundation gives management the credibility to persuade investors that the company can achieve its environmental and social objectives.
Investors also stressed the importance of authenticity in a company’s ESG approach. Authenticity is reflected in ESG strategies that both reduce risk as well as map directly to meaningful growth objectives. Best-in-class ESG implementation includes conducting a materiality assessment, whereby a company surveys its key stakeholders—investors, employees, customers, suppliers—to ascertain the specific ESG issues of primary importance to those audiences. Doing so sends the message that the company’s ESG strategy is genuine and inclusive.
Two Way Street — IR as a Crucial Conduit. Think of the IRO as a messaging maestro conducting the flow of communications in two directions: from the company to the investment community, and from the investment community to management and the board of directors. This requires not only a detailed understanding of the story, and the ability to translate complex information into a narrative that is clear and persuasive. It also requires an intellectually curious ear. When speaking with investors, IROs must listen closely, picking up signals about competitive trends, company-specific issues, or looming activist threats that may harm credibility. That information should be conveyed regularly to the board and management team.
Best-in-class board communication should involve a short presentation paired with Q&A and conversation around the most pressing topics. Hearing what’s going through investors’ minds provides actionable insight and leads to better decision making and enhanced corporate governance.
Activism in 2022. Activists launched 73 new campaigns in the first three months of 2022, making Q1 the busiest quarter for activism ever, according to a recent webinar on the topic hosted by IR Magazine. IR pros, investors and analysts at the NIRI Conference shared their recommendations on keeping your company out of the activists’ crosshairs.
If an activist takes a stake in your company, establish a dialogue with them. Most will want to speak with you and share their concerns. That dialogue can be very productive if management keeps an open mind as to whether the activist’s concerns (and potential solutions) are valid. It also is critical to have a productive, ongoing dialogue with your current investors so that you can understand what their concerns may be. It is better to address any perception gaps with investors on an ongoing basis, before finding out that a large shareholder has voted with an activist during a proxy fight. Consider undertaking a perception audit to find out what your shareholders are thinking about your management team, strategy and prospects now.
NIRI’s first in-person event in three years certainly did not disappoint, and we’re excited to see everyone again in Chicago next year!
Sharon Merrill provides best-in-class investor relations advice, including strategic counsel and implementation of ESG programs. Click here for an overview of our investor relations service offerings or fill out the form below for a complimentary consultation.