Top tips on ESG engagement from Aviva Investors
What is your role at Aviva Investors?
I spend my days talking to firms we invest in on the full spectrum of ESG topics, from antibiotic resistance to zero-hour contracts. I complement this with public policy advocacy at a UK, EU, OECD and UN level on a spectrum of issues from sustainable development goals to green bonds. I’m also involved in business development.
What tips would you give firms when it comes to ESG communications?
The biggest oversight we see is the mistake of thinking reporting equals investor relations. Reporting and disclosure is a foundation activity. IR teams from mature, multinational corporations must be able to talk a degree of ESG. We see great benefits when the IR team is well connected to the company secretary, not just around proxy voting and AGM season, although it’s not always a given. Investors communicate on ESG matters with both the board and management and may use multiple channels into the business to make their views clear. If IR and the corporate secretary aren’t talking, IR is missing a vital piece of the institutional investor picture. Increasingly, governance engagement and research is on ESG, not just governance and remuneration. IR must connect the dots to ensure it has the whole picture of the market.
What do you look for in an annual report?
The following are some of what we look for and, while most of the points seem obvious, it’s amazing how few companies manage to achieve them:
- First and foremost, reporting on the basis of the Financial Stability Board’s Taskforce for Climate Related Finance Disclosure guidelines
- Identify the ESG issues you feel are material to the company. Less is more. Justify your choices and relate them to the health of the business as a whole
- Integrate your reporting of ESG issues into the main narrative text in the annual report and accounts. A simple example might be a power company reporting its emissions intensity alongside Ebitda
- Create relevant KPIs to track your key impacts and, once you have acceptable baseline data, establish targets that are stretching but achievable
- Integrate these targets into the executive annual bonus scheme, at least at a meaningful percentage (in other words, not less than 10 percent)
- Report on your progress against targets as time goes by. Design KPIs so that they are stuck with for five years, minimum
- No platitudinous policy statements, woolly feel-good narrative or otherwise self-congratulatory assertions that can’t be backed up by evidence.
What do you believe makes a successful investor event?
A successful investor event brings the company’s story to life for the investor. IR should own all investor engagement, including ESG.
IR can and should use the corporate responsibility department as experts to help shape meetings and also talk to brokers and advisers who help other companies shape these types of meetings – lots of companies are doing them. The meeting content and speakers must have a clear link to current business strategy and performance and shouldn’t feel like a sustainability or governance bubble.
Site visits are becoming increasingly popular. I’ve visited sites as diverse as a palm oil plantation and a carpet factory and always come away with a richer understanding of the company and the risks and opportunities it faces.
This article appeared in the Fall 2017 issue of IR Magazine