Earlier this month, IR Magazine chatted to Darrell Heaps, CEO of Q4, about his predictions for the biggest technology trends of 2020, including data protection laws, a move toward more actionable insights and progression toward ESG reporting standardization.
Heaps points to the changes occurring on the sell side as a result of Mifid II as the biggest cause of upheaval and change in the IR profession, noting that ‘technology is there to serve business needs, and the decline of the sell side is the biggest capital markets trend.’
The number of equity analysts fell by 8 percent in 2019, according to a recent report from Bloomberg, and it’s predicted that research budgets at asset managers could fall by a further 20 percent to 30 percent this year.
For the companies that have lost significant sell-side coverage, Heaps says the approach to IR ‘goes from inbound to outbound marketing. The phone doesn’t ring as much and IR teams have to be more proactive.’
He says this will place a greater focus on issuers’ investor targeting efforts and on the effectiveness of their website as a useful resource for prospective investors.
‘If you think about it from a sales and marketing perspective, companies have to be much better at marketing themselves’ in an environment where they’re facing decreased analyst coverage, Heaps says. ‘The value of their website, the quality of their communications and how they deliver those communications online is more important than ever. They have to be able to provide rich data to investors – the kind of data the sell side would have provided in the past.’
He explains that in the near future issuers can expect a greater degree of connectivity between the technology solutions they use, so their targeting software syncs with their website analytics to track potential and existing investors’ online footprints in a similar manner to how sales and marketing teams map customers’ behavior.
It’s easy to waste a lot of time looking at website analytics, for example, Heaps adds, but knowing how many visitors came to your website isn’t actionable or particularly useful. Focusing on what they’re doing, where they’re navigating to and what they’re downloading is more informative, he says.
‘It’s about being able to identify and track investors more effectively – understanding who is on your site or webcast and what they are doing,’ he continues. ‘The more information you have on your customers, the more you should know when to target them. In sales and marketing, there’s a time when a person is a perfect target. For instance, there’s a time when you’re interested in buying a car and other times when you’re not.’
Q4 has taken steps to strengthen its website and data insights offering through its recently announced partnership with S&P Global Market Intelligence. As part of the arrangement, Q4 will take on S&P’s web-hosting business as well as integrating S&P proprietary data into Q4’s platform.
ESG reporting standards
If the Mifid II-prompted contraction of the sell side is the largest ongoing trend influencing IR teams in 2020, ESG is certainly the second-largest – whether it’s proxy voting, ESG reporting or managing third-party data providers.
One of the challenges investors face, Heaps says, ‘is the lack of standardization across ESG ratings and how companies are measured on their ESG performance.’ This was a talking point at the recent IR Magazine and Corporate Secretary ESG Integration Forum, where some issuers expressed concerns about how to own their ESG story while third-party data providers sell information about their performance to investors.
‘We’re in this world of chaos when it comes to ESG information,’ Heaps says. ‘ESG is an undeniable trend and it will continue to grow, so the market needs to agree on some form of standardization.’
Data protection and privacy
Finally, Heaps points to two recent data protection laws either side of the Atlantic that could potentially influence IR teams.
The EU’s Global Data Protection Regulation (GDPR) came into effect on May 25, 2018 and governs the acquisition, processing and storage of the personal data of current and prior EU residents. The California Consumer Privacy Act (CCPA) came into effect on January 1, 2020 and looks at how companies will process the data of individuals living in California. Both regulations aim to protect the rights of individual members of the public.
For IR teams, this means having open conversations with their service providers about how they are processing data, and the conditions under which a CRM system is maintained. ‘When looking at targeting, databases and CRMs, they are now being managed through a privacy lens,’ Heaps says. He confirms that Q4 has been getting questions about its GDPR compliance in Europe since the law came into effect, and adds that those questions are now being asked in California as a result of the CCPA.