Do investors care about sustainability?

They say they do, but companies are not good at giving them what they need – or so I found out during a conference we held this week at my consultancy, Corporate Citizenship. 

Yesterday was a first for us at Corporate Citizenship.  We’ve been working with companies for over 20 years now, and for the first time we brought together in one room representatives of the investor community for a face-to-face dialogue with those in companies charged with explaining how they approach sustainability.  And a powerful discussion it was too, all part of our continuing Long Term Value Project.

‘IR meets CR’, we called it.  Speakers came from Schroders, MSCI, Aberdeen Standard Investments, Royal Bank of Scotland, Total, Stora Enso and more.  You can get a tweet-by-tweet account of how it went here. Some 150 people participated, kindly hosted at Chartered Accountants Hall in London by the ICAEW and run in partnership with the Investor Relations Society. It was especially pleasing for me to be back at the ICAEW: when I was training to get my accountancy qualification, these topics were not on the syllabus at all.

Our proposition was that there’s a disconnect between corporate responsibility

 professionals and their colleagues in IR about what information should be provided to investors about how sustainability can drive long-term financial value.  That’s despite more and more companies reporting on their environmental, social and governance (ESG) performance and more and more investors paying increasing attention to ESG issues – or say they say, witness Larry Fink’s latest broadside to CEOs calling on them “to demonstrate the leadership and clarity that will drive not only their own investment returns, but also the prosperity and security of their fellow citizens.” He should know, as the leader of BlackRock with $6.3 trillion in assets under its management.

What did we learn?

First, that companies are their own worst enemies.  In our survey, 70% say they know what ESG issues matter to investors, but fewer than one in five (17%) put that information on their own investor relation portals.

Second, they need to get better at direct engagement with asset managers, and perhaps spend less time completing questionnaires from rating agencies.  This was hotly debated, and took us into a discussion about whether the information provided is truly ‘investment grade’ anyway.

Third, that we all – whether companies or asset owners, managers and raters – should focus more on corporate purpose and the strategic drivers of long term value, rather than yet more KPIs. True integrated reporting is one way to address that.

My job was to facilitate, so for once I didn’t do much talking about my own views. If I had, I’d have stressed the importance of asset owners being more assertive and telling the managers what they want. In many cases, the ultimate owners are you and me in our pension funds – but we rarely get any say about investment decisions made on our behalf.

In any event, participants went away with a lot to think about, and a strong set of actions to take from all the learning and sharing of experience.

Meanwhile our own work at Corporate Citizenship on long term value now moves on to look at workplace pensions, asking whether companies are practising what they preach and how they can leverage that asset to greater effect for sustainable value creation.  We’re collaborating with Sustineri in this workstream and you can help by taking part in a short survey here about your company’s pension scheme.

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