Part 3: Activating a Compelling Sustainability Narrative in the Dynamic ESG Landscape
Setting the Stage
Since 2010, we have been tracking buy-side views on and investment behaviors driven by ESG, and our research has identified investors increasingly factoring it into their overall process and decisions. While the current environment remains dynamic as companies navigate a more challenging growth landscape and prioritize expense management and profitability, we continue to find that ESG remains an influential investment factor. Indeed, our latest research shows over 90% of investors continue to place at least some importance on ESG when making investment decisions, the highest level ever recorded. Moreover, 54% of corporate issuers note executives consider ESG very important to their company’s long-term success, up from 45% in 2021 and more than doubling since 2019.
“We Don’t Get Any ESG Questions from Investors”
Before partnering with Corbin Advisors, many companies viewed ESG matters as a formality — align with SASB and other prevailing framework providers and disclose enough to ensure you are neither a leader nor a laggard in ESG ratings. That experience has often led management teams to believe ESG is best handled by legal and marketing teams with little input from leaders responsible for the financial performance and condition of the company.
However, this perspective has significantly shifted in recent years. As sustainability becomes an increasingly important concern for stakeholders — from investors and regulators to customers and employees — companies have begun to view ESG not as a compliance exercise but, rather, as a strategic effort that can drive competitive advantage and long-term value creation.
In fact, as our 2023 Global ESG Survey has shown, over half of surveyed asset managers, 54%, note their firm has experienced increases in managed assets mandated for ESG / sustainability investment, and 65% of corporates report receiving more questions in the last 12 months about ESG from investors. Furthermore, and as we lay out in the analysis below, nearly all self-reported issuer ESG activities registered an uptick versus our 2021 Study.
Nonetheless, amid a surge in corporate “greenwashing,” investors are becoming increasingly discerning about how to process and digest this data. This even prompted SEC intervention, with the regulatory agency establishing the Climate and ESG Task Force in March 2021 to “proactively identify ESG-related misconduct” by identifying any material gaps or misstatements in issuers’ disclosures.
Based on our proprietary buy-side research and experience collaborating with companies over many years to architect and activate effective ESG strategies, we believe deeply and have said often that sustainability is about progress, not perfection; that it is a journey grounded in continuous improvement; and that a company’s approach and narrative must be authentic, not check-the-box or “slideware” — a term used by investors to describe glossy, overly produced, and substantively limited in content and context communication materials.
More and more, companies are realizing that it’s not sufficient to merely increase their ESG activities; they must also ensure these efforts are genuine, verifiable, and well communicated. This is where the challenge of authentically activating around a compelling sustainability narrative enters center stage, underscoring the need for companies to not just engage in ESG activities, but to do so in a way that resonates most with investors and other key stakeholders.
Investor and Corporate Views
As a reminder, to evaluate the emerging perspectives from both institutional investors and corporate issuers, we surveyed 155 buy-side professionals and 103 IR and C-suite executives globally from March 14 – May 17, 2023, across more than 30 focus areas relating to ESG. In aggregate, buy-side participants represent equity assets under management of ~$10.3T.
As Corporate Issuer ESG Activities Proliferate, Key Investor Focus Areas Emerge
Management occupies ringside seats to risks and opportunities, both current and emerging, confronting their companies. While a fund manager may possess a broad understanding of ESG risks at an industry or regional level, the specific risks and opportunities that significantly affect a particular company need to be communicated by the company itself.
This insight that management can provide is invaluable, allowing investors to make more informed decisions and better understand the unique landscape in which the company operates. It also allows for a more tailored approach to managing both ESG risks and capitalizing on ESG opportunities — something we outlined last week as being of equal importance by the vast majority of investors. Moreover, the articulation of these risks and opportunities not only aids investors, but also ensures the company itself maintains an active and accurate understanding of its own position. Regularly evaluating and communicating these factors prompts issuers to stay agile, proactively mitigating risks and seizing opportunities as they arise.
Our research shows that more companies are putting these measures into place. Of the following ESG activities, nearly half registered double-digit increases vs. our 2021 Study. At least two-thirds of corporate issuers have identified material ESG factors, published an CSR/ESG/Sustainability Report, conducted ongoing ESG dialogue with investors, and/or put systems in place for collecting ESG information.
When double clicking into the most common communication platforms, our research demonstrates ESG has become firmly integrated throughout most company materials. Again, nearly all communication channels registered an increase versus our 2021 Study, led by 16-point increases in both the Investor Presentation and the Annual Report. The Corporate Website, CSR/ESG/Sustainability Report, and Investor Presentation are the most common channels, respectively, with the latter surpassing investor meetings for the #3 spot relative to our 2021 Study. Notably, only 2% of issuers have not proactively addressed ESG within their communication materials.
In terms of investor sources of information, while the CSR/ESG/Sustainability Report is cited as the leading source of information used to evaluate a company’s ESG progress and efforts, just 20% report always reading it, lagging both the Annual Report and the Proxy, which see 54% and 48% of investors, respectively, consistently digesting these publications.
Investor commentary implies that these multi-stakeholder reports either lack actionable investment information or that key information is often buried in narratives that do not clearly integrate into the business strategy.
“I don’t often have time to read through sustainability reports in too much detail. If the company is able to concisely summarize highlights in the investor presentation, that’s very helpful. I need to assess relatively quickly.”
“I do read the ESG/CSR report from time to time, but it’s mostly skimming to make sure I’m not missing anything important there.”
“I’m not a huge fan of ESG systems as it stands or of the number of the sustainability reports because there’s more pictures than text, which is not helpful. Sustainability reporting is really important. I know a lot of investors will look at MSCI ESG ratings and hence won’t necessarily dig that deep into the company. I think that’s wrong.”
“We use any number that is published from companies. The first thing we care about is the level of disclosure and the quantifiable effect of their disclosure. The way we evaluate risk is based on operational statistics, emissions, water usage, and energy and electricity diversity statistics.”
“In addition to prioritizing ESG more within our investment process, there is also a component of company engagement that we expect which involves speaking with the companies and discussing their sustainability reports and ESG efforts. It is helpful to have a one-on-one framework to be able to do that.”
Notably, they rank the general Investor Presentation and Earnings Call as the #2 and #3 sources of ESG information, demonstrating the value of a more focused ESG summary for investors. Furthermore, more than double the number of investors place emphasis on Dedicated ESG Presentations and Dedicated ESG Webcasts as a leading resource versus corporates, a communications strategy we have been executing since identifying the disconnect several years ago.
Recommended Strategies and Best Practice Examples
So, how are companies effectively activating their sustainability narrative and all the work that goes into producing the CSR/ESG/Sustainability Report? How can issuers “cut through the noise” and provide effective, clear, and impactful information in ways that resonate most with investors, through both traditional and novel channels?
While CSR/ESG/Sustainability Reports provide a wealth of quantifiable information on a company’s ESG practices and are certainly a great place to start, these reports can be complex and overwhelming for investors if they’re not presented in a user-friendly manner. Investors are “drinking from the firehose” with limited time to wade through reams of information that may or may not be important to the investment thesis. Therefore, a critical step is to ensure these reports are accessible to a broad audience and reiterated seamlessly throughout materials yet are quickly digestible.
Traditional Channels
The Investor Presentation
As mentioned, while our research shows the use of nearly all venues for ESG disclosures by corporates registered an uptick, about three-quarters of the companies are now incorporating ESG into investor presentations, up from 58% in 2021. Furthermore, according to our broader research, the Investor Presentation is cited by 88% of investors as one of the highest-impact corporate-issued communication platforms when researching a company as an investment opportunity and staying apprised of developments.
As such, including an ESG section within the Investor Presentation — which should be one-click accessible on the IR landing page — has become a recognized best practice for companies seeking to communicate their sustainability efforts and impacts. When woven into the company’s broader narrative, ESG elements within the Investor Presentation can help create a more complete, well-rounded picture of the business and investment thesis.
The Earnings Call
While Earnings Calls are ranked as the 9th most important channel for communicating on ESG efforts by corporate issuers, they are rated much higher by investors, coming in at #3. This discrepancy reinforces the importance of these calls in communicating both the company’s financial and strategic performance, inclusive of ESG execution, to investors.
Including ESG-dedicated slides in the Earnings Presentation brought to life by illuminating prepared remarks is a best practice and underscores the company’s commitment. We recommend including a case study that demonstrates how the company is executing against its ESG strategy and, importantly, how it is creating value for shareholders.
Importantly, a company should communicate its story, not static information. The content provided should demonstrate progress and clearly, authentically, and fluidly detail where a company is on its journey. Communicating achievements and setting new milestones is important in evaluating traction and impact.
Selected Best-In-Class Examples
- First Advantage (FA, $2.0B, Industrials) Q1’23 Earnings Presentation [PDF]
- Regency Centers (REG, $10.3B, REIT) Investor Presentation, June 2023 [PDF]
- Werner Enterprises (WERN, $2.8B, Industrials) Investor Presentation, June 2023 [PDF]
Novel Channels
ESG Factsheet / Scorecard
Once the hard work of developing the CSR/ESG/Sustainability Report is completed, it’s imperative to distill this information into an investor-friendly, simple, and easy-to-digest page of information.
An ESG Factsheet / Scorecard is a concise, data-driven document that presents a company’s performance on key ESG metrics. It typically includes information on a range of indicators, from carbon emissions and energy usage to worker safety records and Board diversity. According to our research, nearly one-quarter of investors report an ESG Factsheet / Scorecard is of use when evaluating a company’s ESG efforts and progress.
Key benefits of an ESG Factsheet / Scorecard include:
- Transparency: Provides a clear and concise, to-the-point summary of a company’s ESG performance, outlining essential information that can inform investment decisions in a quick and efficient manner.
- Performance Tracking: Allows for consistent tracking of progress over time and regular updates can show how a company’s ESG performance is evolving.
- Strategic Alignment: Ensures that a company’s ESG efforts align with its overall business strategy and objectives, linking ESG goals back to key pillars and initiatives.
ESG Factsheets / Scorecards are increasingly included within the CSR/ESG/Sustainability Reports and/or published as a standalone piece on the corporate website.
Selected Best-In-Class Examples
- T-Mobile US (TMUS, $159.5B, Communications) 2022 CR Report Factsheet [PDF]
- Visa (V, $479.6B, Financials) 2022 ESG Report [PDF]
- Veritiv (VRTV, $1.6B, Industrials) 2023 CSR Report [PDF]
ESG-Dedicated Presentation and Webcast
Leveraging two critical findings from our ongoing buy-side research over 15+ years — the first that the majority of investors report the Investor Presentation is a leading source of company-issued information and the second that a majority of investors say they do not always read the CSR/ESG/Sustainability Report — led us to innovate the concept of an ESG-Dedicated Presentation and ESG-Dedicated Webcast several years ago. And, in every case, it has served as a catalyst for investment as per 13F filings following the webcast.
Notably, just 6% of surveyed corporate issuers, the majority Corbin clients, report conducting an ESG-Dedicated Webcast. Furthermore, in a separate analysis, only 3% of the S&P 500 have hosted such a call in the last two years. In light of this, we see a significant opportunity for companies to bring to life the CSR/ESG/Sustainability Report — a significant undertaking for most — by subsequently synthesizing pertinent information into the preferred investor communication channel, a presentation, and hosting a webcast, which allows executives to narrate their story in an authentic, educational, and transparent manner.
The webcast is typically 45- to 60-minutes in length, includes C-suite executives, such as the CEO, CFO, CSO, and GC, as well as other relevant Sustainability / ESG leaders, and includes both prepared remarks and Q&A – either moderated with pre-determined questions or open to participants, similar to an earnings call.
Selected Best-in-Class Examples
ESG-Dedicated Presentation
- Ingersoll Rand (IR, $25.4B, Industrials) 2022 Sustainability Investor Day [PDF]
- SNC-Lavalin Group (SNC.TO, $5.9B, Industrials) 2023 ESG Presentation [PDF]
ESG-Dedicated Webcast
- Albemarle (ALB, $27.0, Basic Materials) 2021 Sustainability Report Conference Call
- Amdocs Limited (DOX, $11.2B, Technology) ESG Webinar
LinkedIn Posts
According to our latest research, 65% of issuers report using social media, largely LinkedIn, to communicate on ESG. This is a particularly useful channel for sharing real-time, important highlights and updates in shorthand and on a widely-used digestible forum frequented by employees, customers, suppliers, investors, and local communities and groups. This platform also provides a great channel for ESG-related videos, which are far more likely to be shared versus text alone across these constituencies.
Selected Best-In-Class Examples
- Salesforce (CRM, $212.4B, Technology) LinkedIn Profile
- Amdocs Limited ($11.2B, Technology) LinkedIn Profile
- T-Mobile US (TMUS, $159.5B, Communications) LinkedIn Profile
In Closing
In our practice, we often encounter companies that have adopted a “set it and forget it” mindset when it comes to their ESG communications. This approach typically involves aligning with the relevant standards, releasing a report, and referring investors back to the document on the subsequent earnings call.
While certainly an important first step, our research demonstrates that activating your ESG strategy extends well beyond publishing your company’s CSR/ESG/Sustainability Report. As investors are bombarded with information from every angle, corporates have been tasked with distilling this information down into consistent, authentic messaging and incorporating this framework and narrative throughout a variety of stakeholder communication channels — both traditional and novel.
The final piece of our four-part ESG series will uncover how companies are cultivating and accelerating their in-house ESG practices, including oversight, budgets, communicated targets, and more.
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Corbin Advisors is a strategic consultancy accelerating value realization globally. We engage deeply with our clients to assess, architect, activate, and accelerate value realization, delivering research-based insights and execution excellence through a cultivated and caring team of experts with deep sector and situational experience, a best practice approach, and an outperformance mindset.
Our growing repository of proprietary, research-based insights on the rapidly developing ESG landscape has fueled our thought leadership on this important topic. We began building our ESG knowledge base in 2010, surveying institutional investors globally on the topic, so we can provide our clients with expert experience today.
