Simon Propper offers his top tips for engaging investors with a social conscience
Q. I want to beef up my engagement with investors interested in socially responsible investment (SRI). Should I hold special meetings for them or cover the issue in general investor meetings?
A. Most IR professionals would probably confess over a quiet drink that the whole SRI area is more trouble than it’s worth. They feel besieged by demands from investment organizations for disclosure of obscure minutiae of company operations, with barely a banker’s lunch budget to spend.
So should you allocate time to this special-interest group of investors? And if so, what is the best strategy for engaging with them? The place to start is an appraisal of your own business. How important are environmental and social issues to its success? Are the risks or opportunities significant? How strong is your company’s approach to managing them?
If the answers to the above are ‘not very’, ‘no’ and ‘about average’, it’s safe to suggest you shouldn’t spend much more time on this. If the risks or opportunities are significant, however, your investors and potential investors will want to know about them. The range of options for engaging and informing investors is outlined below in order of priority.
Annual report: integrate corporate responsibility (CR) issues into your annual report. Include only significant subjects, and be factual and quantitative. Discuss risk, opportunity and alignment with business strategy. Check that your register of risks properly reflects CR (BP’s annual report made no mention of working with contractors prior to the gulf explosion). Avoid green tokenism featuring philanthropic work.
Sustainability/CR report: you still need a separate report for the detailed SRI researchers. Don’t listen to the ‘one report’ advocates – they’ll need a wheelbarrow to carry it around.
Questionnaires from ratings agencies and other investor organizations: complete these on the basis of the weight of their influence. The Dow Jones Sustainability Index, FTSE4Good and the Carbon Disclosure Project are the usual must-completes. Limited resources may mean you ignore the minnows.
General investor meetings: integration is the key. Can your CEO and CFO articulate which CR issues are significant, and why? It’s particularly impressive when done well, as for example by Unilever’s Paul Polman.
One-to-one meetings: really serious SRI investors will request meetings to deepen their knowledge. Most send the SRI analyst, not the fund manager, but it’s worth devoting time to these if only to help analysts identify the real issues and eliminate the trivia.
SRI group meetings: these can be an efficient forum and show a level of self-confidence and commitment by the company. The preparation time needed is relatively high and you will probably have to field several company experts to speak on different issues.
There’s no single answer to the question posed above but more and more investors are trying to understand how CR can affect your business, so it makes good sense to help them.
Simon Propper is MD of sustainability strategy and communications consultancy Context.