IR Papers: Investors want more ESG info
Environment, social and governance
Investors have a growing appetite for non-financial environmental, social and governance (ESG) data, and Harvard researchers have discovered precisely what sort they most crave.
Using recent Bloomberg data to chart ‘hits’ on a range of non- financial metrics, researchers uncovered widespread market interest in transparency around ESG policies and performance. Their findings also pinpoint interest variations across markets, asset classes and company types, and offer IROs a chance to benchmark their communications program and tailor a more sophisticated strategy.
■ At the market level, investors are more interested in the ‘E’ and ‘G’ than the ‘S’ of ESG information. The report’s authors suggest that, relative to social data, environmental implications are easier to quantify in valuation models. The vast stream of research relating governance to company value ensures keen interest in this area.
■ The sell side is almost purely focused on greenhouse gas emissions. By contrast, the buy side wants a much broader range of ESG data.
■ With the exception of governance data, fixed-income investors aren’t much interested in non- financial information.
■ Metrics of interest to the US market differ significantly from global results. For example, US investors are relatively less interested in climate change than those based in Europe.
Study co-author George Serafeim, assistant professor of business administration at Harvard Business School, predicts continued ‘exponential’ growth in market interest in non-financial information. ‘With more data available, investors are making cross-company comparisons,’ he says. ‘Opaqueness around these issues and your ESG performance can make a big difference when it comes to access to capital.’
Major firms are reluctant to use social media for genuine, two-way communication, according to a recent study by researchers at the University of Leipzig. The analysis of the top 30 listed companies in the US, the UK, Germany, France and Japan also reveals significant differences in online IR use.
‘Social media are mostly used for traditional information delivery and not for interacting online with shareholders,’ says Kristin Koehler, a PhD candidate and the study’s project leader. ‘Blogs, chats and other tools offering the possibility of feedback are largely ignored.’
The study further finds IROs gingerly approaching external social media platforms like Twitter and Facebook. ‘Social media are about networking, contacting investors and interacting with them wherever they are,’ says Koehler. ‘IR is not doing this.’
US firms, led by the likes of Cisco, GE and Alcoa, are evolving fastest to IR 2.0, while German companies SAP, Bayer, Daimler and BASF all make the study’s top 10 ‘2.0’ ranking.
The researchers find Japanese firms least likely to put the ‘social’ in social media. ‘Investors in Japan use social media but companies don’t,’ says Koehler. ‘Companies everywhere should look at where their shareholders are meeting. Until they do, and devise a plan to respond, they won’t be exploiting the full potential of social media.’