How to integrate ESG issues into the investment thesis

Oct 31, 2019
Backstage video at the IR Magazine Global Forum 2019

How should IR teams respond to the growing demands for more ESG disclosure? The starting point should be the information they are already producing, according to Brian Rafferty, CEO of Taylor Rafferty. 

Speaking at the IR Magazine Global Forum 2019 in Paris, Rafferty said IR teams should go through their existing operations, reporting and regulatory disclosures to find information that fits within the ESG area of focus. 

‘I would go back to how they present their business, the construct, which should always be upside potential, downside protection,’ he said. ‘If that’s not well organized, organize it. Look for the areas that fall within the current ESG definition, and integrate the most important elements into that structure.’  

The most compelling and easiest areas to include usually are related to risk mitigation, he explained: ‘Those are where, if there are any easy wins, there are easy wins to be had.’

While the demand for ESG information is cranking up, this subject matter shouldn’t be considered anything new for companies, added Rafferty. 

‘Sustainability reporting is 20 years old,’ he pointed out. ‘Governance, the G in ESG, has been an issue since public companies became public companies. And the E and S have to do with license to operate, so businesses have been managing these components of their successful operations for my entire career. It’s now that there is a very loud, urgent demand for a more structured approach to it.’

When asked what the changes mean for IR professionals, Rafferty said they could be a burden or an opportunity – depending on how they are approached.  

‘It can either mean more work, in an environment where there is already too much work, or it can mean taking the lead internally in synthesizing information that has gone to a level of urgency politically, [with] capital markets, everywhere, and finding out how that can help the company advance its investment thesis and advance its investment prospects,’ he said.

‘That is not an easy task with the amount of noise, the number of forms that are coming in to fill out, trying to figure out where you fit on different ratings services, but ultimately that is the best and only way forward.’

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