Hear about the latest in the ESG movement.
Off-season engagement continues to rise, says ESG adviser
Communication, engagement and collaboration are central to an effective investor-facing ESG program, says Morrow Sodali’s Daniel Oh
The number of requests that institutional investors receive for meetings outside of proxy season continues to rise, as IR, legal and sustainability teams are encouraged to work together on off-season ESG engagement.
Speaking to IR Magazine and Corporate Secretary at the ESG Integration Forum – US 2019 in December, Daniel Oh said the institutional investors he talked to in December were receiving unprecedented levels of issuer outreach before the holidays. Oh, who recently joined Morrow Sodali as its managing director of corporate governance, US, noted that the demand for off-season engagement is notably different to what it was when he worked on the investment stewardship and corporate governance teams at BlackRock and State Street Global Advisors (SSGA).
‘Having a face-to-face relationship is becoming more important,’ Oh said. ‘In the last few days I’ve talked to some of the largest institutional investors and they were complaining about the number of engagements they have even in December. Some mentioned that this is the first week of December and over the next few days they have 20 engagements. That’s really striking because when I was at BlackRock, December was a quiet month before the holidays.’
In November 2018, Rakhi Kumar, SSGA’s senior managing director and head of ESG investments and asset stewardship, told IR Magazine that demand for off-season meetings was the highest she’d ever seen.
From the issuer perspective, Oh said these engagements are crucial to understand how investors weight ESG issues differently – something he has first-hand experience of, having served as Barrick Gold’s senior vice president of investor engagement and governance between 2016 and 2019.
‘You need to know your shareholders,’ Oh said. ‘Not every shareholder has the same view… I’m working with some companies [to help] prepare their engagements, and they come back and have completely different feedback from investors. That’s completely natural but to some people it’s a little bit surprising because they think investors are on the same page.’
This difference in investor views on ESG underscores the importance of collaboration between IR, legal, HR and sustainability, Oh said. ‘It’s so crucial to have one clear message… I cannot emphasize more how the collaboration is so crucial to have good relationships with the institutional investors,’ he said.
Oh added that investors are also grappling with ESG integration, with stewardship teams trying to make sure that their message resonates with the portfolio managers and analysts. If an IR team talks to the portfolio manager at a large institution and the governance team talks to the stewardship team at the same institution, it’s important that the message is consistent and clear.
When attendees at the ESG Integration Forum – US 2019 were surveyed about what their number one priority was for developing a deeper understanding of ESG issues, the top response was to set up a working group between IR, governance and sustainability.
Click here to view the full video interview.
From trend to action: Issuers focus on takeaways from ESG Integration Forum
Audience members surveyed about biggest priorities when they return to the office
The theme of this year’s ESG Integration Forum focused on moving beyond a discussion about ESG trends and toward positive action companies can take to own their ESG story.
The ESG Integration Forum brings together readers of IR Magazine and Corporate Secretary to discuss how they can further collaborate on effective ESG strategies. This year, it was notable that a large number of sustainability professionals were also in attendance.
Attendees were surveyed about their ESG priorities at the end of the day, and cross-functional collaboration was clearly on the minds of many audience members, as we’ll see in the answer to the three survey questions below.
The first question audience members were asked was what their top priority is, as it relates to developing a deeper understanding of ESG.
One of the reasons the ESG Integration Forum exists is that the IR Magazine and Corporate Secretary editorial teams have observed that in many cases, the IR and governance professionals at the same company would speak to different people at the same investor and draw very different conclusions. It’s notable, therefore, that attendees walked away with an enhanced mandate for collaboration.
This is something Michael Wherley, director of investor relations at FMC, noted. ‘We have pretty limited resources – we’re a $10 bn market cap, but I’m a one-and-a-half-person IR team and the ESG team has three people,’ he explained. ‘We think about where to put our emphasis and how to get the data right.’
The next audience question concerned how issuers should collaborate on ESG reporting and engagement. The results were as follows:
During the table workshop session, several attendees described how useful it had been for them to look at what information their investors are publishing. One small-cap investor relations professional commented that it’s particularly helpful, given that his firm may not have the resources to invest significantly in its own ESG reporting initiatives from scratch.
This was backed up by Ian Roe, director of sustainability at MerchantCantos, who chaired a table discussion about getting started on the ESG journey. He said the takeaway from the discussion was, once again, the need for cross-functional collaboration – especially for small caps.
The final polling question put to the audience was about how issuers can think about owning their ESG message and use it to inform their shareholder engagements around ESG. The results were:
Speakers from Blackrock, Boston Trust Walden, Cornerstone Capital and the Canada Pension Plan Investment Board each explained that their firm publishes its thoughts on ESG on the company website. A clear takeaway from the event was that attendees would like to develop their understanding of their investors’ own ESG priorities. For passive investors, that’s likely to focus on long-term value creation and proxy voting; for active investors it may also focus on how ESG can influence buy, sell and hold decisions.
Regarding the responses that called for a focus on adding ESG elements to investor-facing presentations, Hope Mehlman, executive vice president and chief governance officer at Regions Financial, explained earlier in the day that she had added two ESG slides to the IR slide deck, ensuring that all investors would see how important the topic is to management.
