Part 3: Corporate Perspectives and ESG Communication Practices
Corporate Perspectives and ESG Communication Practices: Including how companies are communicating their ESG journey
In part three of our ESG miniseries and building on our communication last week that focused on the investor landscape, today we are diving into corporate views and practices and our proprietary research comprising responses from 67 public companies globally (and counting), across market caps and sectors.
The Vote Is In and It’s Nearly Unanimous – ESG is Considered an Important Factor to Long-term Success for Companies
In our recent survey of 67 corporates globally across market caps and sectors, launched May 21, 97% of IROs note ESG has become a greater priority at their organization over the last 12 months or was already a high priority, up from just 70% in 2019, while none assert it is not a priority.
- “Interest went from 0 to 60 overnight!”
- “Created a dedicated team, with a board-member champion, and joined AMGTA as a founding member.”
- “It has received greater attention at the higher level.”
- “Have given more attention as certain investors have become more engaging with companies.”
- “We’ve broadened our ESG-related targets to include more social-related.”
- “Was important already but taking on an even greater priority.”
- “Much more time spent on ESG at senior levels in the company.”
- “We also added green financing to our policy priorities.”
- “More interest and demands from investors and customers.”
Even more, 95% of IROs believe their management team places at least Some importance on ESG as a factor in the company’s long-term success. Importantly, 63% assert it is Very Important or Critical, up from 36% in 2019. Though large-caps are placing higher levels of importance, small- and mid-caps continue to place greater emphasis on ESG, as many are customers, suppliers, partners, and distributors for the large-caps that are investing in significant resources and defining long-term goals. To that end, 50% of small-caps note ESG is Very Important or Critical, up from 23% in 2019, while 55% of mid-caps are doing the same, up from 24% in 2019.
IROs Still Most Commonly Being Tasked with Leading ESG Efforts
IR or Better Known as “The Wearer of All Hats”; IROs Still Most Commonly Being Tasked with Leading ESG Efforts, though an Increasing Percentage Are Appointing Heads of Sustainability (A Best Practice and a Sign to Investors that You Mean Business!)
The role of the IRO has evolved tremendously over the last decade and ESG has only made it more dynamic. While nearly 30% of companies surveyed report having a Head of Sustainability or similar, more than 40% of companies still place responsibility on IR for ESG reporting, though this is down from 54% in 2019. Not surprisingly, large-caps see the highest percentage of companies having Sustainability leads, while mid-caps are delegating to IR and/or Legal, and small-caps predominantly IR.
Decisive Actions Are Being Taken – As ESG Has Become Table Stakes, Issuers Are Becoming More Creative in Messaging their ESG Story
With three-quarters of companies having identified material ESG factors impacting their company and nearly two-thirds conducting ongoing ESG communication with investors, cutting-edge companies are identifying new ways to differentiate themselves. Representing a significant opportunity, nearly 20% actively target ESG investors and a similar percentage have presented at ESG-focused sell side conferences. Corbin has partnered with clients to target ESG investors based on our proprietary research identifying firms that consistently rate ESG as important to their investment thesis.
While no companies report always receiving questions on ESG from investors, more than 60% note they are discussing ESG Sometimes or Often. This was a marked change from 2019, where one of the most oft-reported reasons for not placing importance on ESG was that “investors were not asking about ESG.” Even more, 90% note they are receiving more questions from investors in meetings over the last year.
When it comes to the most common topics raised in one-in-one meetings, IROs identify the following (open-ended):
A Greater Percentage of Issuers Are Leveraging ESG Data, Research, and Ratings Providers than Investors
Last week, we outlined that 54% of investors utilize MSCI, 43% Sustainalytics and 23% ISS, while 23% report none and, more importantly, 60% assert they are able to invest in a company even with a poor ESG score from ratings providers.
For issuers, more than 70% turn to ISS and just under 70% for MSCI and Sustainalytics, while 32% utilize RobecoSAM, compared to just 3% of investors.
Regarding ESG standards and framework developers, in line with 2019, SASB remains the clear leader with which issuers are aligning, followed by GRI, CDP, TCFD and UN SDGs.
With regard to the most critical ESG surveys, MSCI, Sustainalytics, CDP and ISS are considered the four most critical surveys to fill out.
ESG Committees and Leadership are Taking Shape
Finally, while most surveyed companies have appointed Board Committee Oversight of ESG, 30% of issuers have not yet done so, while less than 10% have developed a standalone Board committee dedicated to Sustainability / ESG.
In Closing
In our final installment next week, we’ll outline best practices and recommended strategies for effectively communicating your ESG journey, including key communication channels leveraged by issuers and investors, company ESG targets/goals and investor views on ESG disclosure examples from leaders in sustainability.