HOW WILL THE PANDEMIC SHAPE BEST PRACTICE INVESTOR RELATIONS?

HOW WILL THE PANDEMIC SHAPE BEST PRACTICE INVESTOR RELATIONS?

ESG is here to stay. Investing is still about the fundamentals. And, consider making your results announcement on a Monday; those were key pieces of advice for IR professionals at this year’s annual Australasian Investor Relations Association (AIRA) Conference.

COVID-19 created economic uncertainty and extraordinary volatility in financial markets. At the same time, there was a rapid spike in investor demand for information, creating a challenge for investor relations (IR) professionals as they balanced communication with multiple stakeholders. But how will the pandemic change best practice IR in 2021?

1. Environmental, Social, Governance (ESG) investing is here to stay

There has been a three-fold investment in ESG funds over the last year.  Members of the investment community who spoke at the AIRA Conference were unanimous in their views that Environmental, Social, Governance (ESG) investing is here to stay.

Previously, the ‘E’ in ESG (‘Environment’), had been the key focus but the pandemic highlighted a greater focus on the ‘S’ in ESG (‘Social’) with investors taking a keen interest in how companies were treating their staff, dealing with customer hardship and addressing vulnerable people in their supply chains.

Board and executive remuneration and behaviour was also a focus as was the awarding of executive bonuses when companies received JobKeeper funds. Fund managers had mixed views on whether it was appropriate to award executive bonuses if JobKeeper funds received had been modest.

COVID-19 has accelerated a shift in understanding of ESG – both from a company and investor point of view. Effective articulation of ESG strategies by members of the executive team shows a company understands its operational risks and, as one participant mentioned: “An annual report is a statement of what the company does, while a sustainability report is a statement of who the company is.”

Key takeaways on ESG:

    1. Ensure the Chair and CEO are well informed. When a senior executive defers questions or cannot articulate ESG specifics to investors, it degrades the value of a company’s sustainability strategy.
    2. Customise your ESG disclosures. While benchmarks are useful, a company should customise its ESG disclosures, leading with the issue of greatest impact. For example, environmental impact may be key for a mining company or use of plastic for Woolworths, while customer treatment may be more appropriate for a telco.
    3. Sustainability reporting is important for all companies. As ESG inflows increase, all companies – even small companies – must report on sustainability to maximise potential capital inflows. While ESG surveys can be time consuming, pick the ones of most value to participate in. Sustainability roadshows are becoming an increasingly popular way to demonstrate a company’s commitment to ESG to fund managers.

2. Investing remains about the fundamentals

While the pandemic has no doubt created a lot of change, investors are still focused on the fundamentals. Transparency and honesty are key and while investors appreciate that companies do not always have all of the information, they want management to be as open as possible as the risks and opportunities.

Key takeaways:

    1. There is no need to overly control the message. Investors will understand if initiatives cost a little more but won’t be if they believe management is trying to divert attention from an issue.
    2. Bigger is not always better when it comes to capital raisings. Retail shareholders bore the brunt of dilution as a result of super-sized capital raisings this year. Raising too much capital will not be viewed favourably.
    3. Innovation and technology are key. The pandemic has accelerated long-term theme and investors are looking to understand where innovation sits within a business and how you are leveraging technology to lower your cost of doing business or increase revenue.

3. Practical tips for investor engagement

While global trends, ESG and fundamental investing were key discussion points, there were also some practical tips on how to more effectively engage with investors.

    1. Report earlier in the month to capture more investor attention
    2. Consider reporting on a Monday and scheduling investor briefings outside the typical 10am – 11am time slot.
    3. Restrict roadshow meetings to a number the CEO is comfortable with
    4. Encourage use of cameras on calls but understand take-up of video is relatively low across the Asia region
    5. If hosting a webcast, ensure each executive presents from individual laptops – if they all present from a room with one camera, it is difficult to see each speaker
    6. Reduce the length of investor meetings to 30-45 minutes
    7. Incorporate more breaks into virtual roadshows – Zoom is tiring!
    8. Different parts of the reporting calendar favour virtual or physical meetings – you don’t have to stick to one!
    9. Proactively ask individuals for questions if you aren’t getting any
    10. Only hold investor days if you have something to focus on

The 2020 AIRA conference was held under Chatham House Rule, which does not allow for attribution of quotes / comments to individuals.

If you are looking for best practice investor relations support, Cannings’ dedicated team of Investor Relations professional are trusted by small and large ASX listed companies to build enduring value for companies, shareholders and stakeholders. To speak with one of our IR consultants, get in touch at IR@canningscomms.com.au