Institutional investors would like to see more qualitative, forward-looking and visually compelling disclosures from public companies, according to new research from Edelman.
Trust is the number one driver of investment decisions, but over half (58 percent) of institutional investors surveyed feel that current disclosure requirements are not doing enough to maintain their trust.
Eight out of 10 (79 percent) respondents would like to see more qualitative, forward-looking disclosures when evaluating an investment. And in fact, investors are more forgiving of companies that occasionally miss quarterly guidance than those that don’t provide any forward-looking information at all.
According to a 2016 NIRI survey, 29 percent of US companies provide quarterly guidance, while 67 percent provide annual guidance.
Half of Edelman’s survey respondents say that the way most companies share information for IR purposes is outdated, while 65 percent would like to see more visual ways of sharing information.
‘Companies must promote themselves inside-out to win trust while upgrading the fundamentals of their communications to the Street,’ says Lex Suvanto, global managing director of Edelman Financial Communications.
The need to get communication right is underscored by nine out of 10 (87 percent) of investors saying they would support a reputable activist investor if they believe change is necessary at a portfolio company.
Eighty percent of respondents also feel that companies are not prepared to handle shareholder activist campaigns. Steve Wolosky, partner at Olshan Frome Wolosky, told IR Magazine earlier this year that issuers should be looking at the new digital communications tools that activists are using to build a robust defense.
‘Investors view themselves as agents of change and will take action if companies fail to do so on their own,’ Suvanto adds.
Investor decision-making factors
This year Edelman expanded its annual Trust Barometer research to include a survey of institutional investors, gaining responses from 101 investors in 14 countries. The respondents collectively manage over $1 tn in assets.
While trust is the top driver of investment decisions, a company’s ethical standards and current valuation versus peers are also influential.
Some of the biggest drivers of trust in a company, according to Edelman’s research, include equal voting rights for shareholders, infrequent board and management turnover, customer service satisfaction results, and a healthy relationship between employees and management.
Edelman’s research also shows that investors are concerned about macroeconomic trends affecting business performance. Seventy-nine percent of investors believe that a country’s current political climate impacts which companies their firm invests in, yet nearly half of respondents feel that most companies are not fully acknowledging emerging political risks to their business.