Companies should be completely transparent when it comes to their messaging and communication of ESG strategies, according to IR professionals at the latest IR Magazine Think Tank – West Coast.
During the event, held in Palo Alto, California on March 22, IR experts re-emphasized the importance of clear communication and never being in a position where ‘you want to say you’re doing something that you’re not’.
‘There have been some rather large names that have settled with the SEC over greenwashing claims,’ said a member at the event. ‘What they were saying was, We look at every single company in the portfolio and we run it through our proprietary database and decide whether it should be in the portfolio from an ESG perspective. It turns out when the SEC examiner showed up, they weren’t: they had missed a few.’
Looking at regulation and government-mandated requests of companies, ‘you have to be really careful about what you say and be able to back it up,’ warned a speaker at the think tank.
‘I think marketers in a company also tend to want to overstate, which is just the nature of marketers, but you have to be really careful that you can prove the facts when somebody comes calling.’
Red flags in ESG
For companies with institutional investors, if they would like to meet with the lead director of the firm, ‘the answer is always yes,’ a panelist stated.
‘You really need to say yes: it creates a lot of skepticism in the stewardship world if directors are not permitted to talk to shareholders. Not every shareholder, obviously, but you’re going to screen for that. Larger shareholders are more important; you need to make your directors available for those conversations.’
Companies should always take a proactive stance when it comes to messaging and ESG reporting to stay ahead of the curve, another panelist said.
‘If look you look to Europe, which had a head start, it is still working on its taxonomy,’ she said. ‘Famously, the French were always arguing that nuclear was clean energy, so that held up the taxonomy for a while.
'When Russia invaded Ukraine, natural gas became ‘clean’, too, as long as you did certain things in terms of scrubbing or whatever. It just shows you that the purity [of reference] isn’t quite there, generally.’
Anti-ESG is very real, proclaimed a member at the event: ‘Some of it is misplaced and some of it is just a reaction. There are groups that are so anti-fossil-fuel, they don’t even want to accept the fact there needs to be a transition.
'The anti-fossil-fuel people and anti-ESG movement are also concerned about corporations involving themselves in social issues.
‘Asia never really got involved, it has never really embraced that. It depends on what industry you’re in, what state you’re in, who your shareholders are, whether you have a public pension plan and how it affects careers for employees and CEOs.’
IR Magazine returns to Palo Alto, California for its next Think Tank – West Coast on September 26. Requests for invitations to attend are now open.