The role and responsibilities of the IRO have changed significantly over the last three decades, with much of that transformation coming since the credit crisis. What was once a pure communications role within publicly listed firms has quickly changed into a proactive and strategic role where you need to have deeper knowledge of your company’s financial planning and analyses.
At the Netherlands Association for Investor Relations (Nevir), we bring together IROs from Dutch publicly listed companies to exchange knowledge and experience, and to learn more about topics that are gaining importance for our role. The ever-growing speed of technological advancement has been a key driver of recent changes in investor relations. Today, IROs are able to communicate directly with a larger investment community through the use of technology.
- The use of social media – While IROs have been reluctant to adopt social media, almost 80 percent of institutional investors regularly use it, according to an oft-cited – albeit slightly dated – 2015 study from Greenwich Associates. The debate now is less whether to engage in social media and more when, how and where.
- The use of big data – It seems the biggest evolution in the IR landscape is ahead of us. Data analytics enable IROs to get a better understanding of what investors are looking for and investor communications can be better tailored to target your audience more successfully.
- A stronger focus on ESG – Although it started with screening out ‘sin stocks’ such as tobacco and gambling firms, over the years ESG considerations for investors have become mainstream. The Global Sustainable Investment Alliance estimates that ESG investing represents a third of assets under management globally. What does this mean for us as IROs? There is an increasing focus on disclosing non-financial data in financial reports and during meetings and calls. Indices such as Dow Jones and MSCI are also increasingly reporting on ESG ratings, requiring us to work more actively with them in order to show up on ESG screens.
- The increasing importance of messaging and roadshows – Mifid II will likely result in cuts in research budgets and the number of equity analysts. A generally accepted prediction ahead of the Mifid II implementation date was that research spending would likely fall by about 20 percent to 30 percent on average. Though it remains to be seen how that has panned out in reality, anecdotally, IROs are already being expected to do more to market their company themselves. This will increase the IR responsibility in focusing more on messaging, targeting and organizing roadshows.
- More barbarians moving toward the gate – Messaging becomes even more important when you think about the increased activist investor base. According to a study from Lazard, the total value of new activist positions doubled from $31 bn in 2016 to $62 bn in 2017. This shows our job in managing a vocal activist investor base has become more important than ever.
- Passive investor meets active IR – Passive investing has grown rapidly in recent years, now accounting for about 20 percent of global equity markets, according to a 2018 BIS study. For IROs this means being familiar with the wide variety of indices that include our stocks, and the screening methodologies for those indices.
The rate of change in the industry is increasing. This means IROs continuously need to adapt to new challenges and situations. It’s therefore important to continue learning to stay ahead of the game.