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In recent years, there has been a growing trend among investors to incorporate environmental, social, and governance (ESG) factors into their investment decisions. As a result, it has become increasingly important for listed companies to incorporate ESG into their investor relations approach. In this post, we will explore why ESG is important for listed companies and how it can be integrated into their investor relations program.
Four reasons why ESG important for listed companies:
- Attracting investors: Companies that can comprehensively talk on their ESG factors signal to investors that they have good risk management frameworks in place. We also find that investors and fund managers are increasingly expecting information on ESG performance in order to assess a company’s overall performance and viability.
- Risk management: Undertaking due diligence on their ESG factors can help companies to identify potential risks and opportunities that may impact their operations, reputation, and financial performance. By integrating ESG factors into their business strategy, companies can mitigate risks and take advantage of opportunities that arise.
- Brand reputation: Companies that prioritise ESG factors can build a positive brand reputation, which can be a key differentiator in a competitive market. A strong brand reputation can help attract customers, employees, and investors, and can lead to long-term success.
- Regulatory compliance: Companies that do prioritise ESG factors are more likely to be in compliance with environmental and social regulations, which can help reduce the risk of legal and reputational issues.
How can companies incorporate ESG into their investor relations approach?
- Understanding impact: Firstly, we recommend you understand which factors are important relative to your own specific company and sector – or your “impact”. To do this, we recommend reviewing your business mapped to a global ESG framework (we can help with this.)
You come away from this with an understanding of where you sit from a baseline perspective to measure current impact, and also objectives around next steps for your company. Impact measurement and objective setting can usually be achieved through a combination of a few meetings and some desktop work.
- ESG reporting: Increasingly, investors are expecting to read about your approach to ESG via either your periodic reporting or through separate, break out ESG activities. We can help you with a level of reporting that is fit for purpose – it would cover your commitments and progress on environmental, social, and governance issues. This reporting can be shared with investors and other stakeholders to demonstrate the company’s commitment to sustainability.
- Investor engagement: A huge area of opportunity – companies can engage with investors on ESG issues by participating in ESG-specific roadshows; investor conferences and meetings. There are also opportunities to incorporate messaging relating to your approach in areas such as responses to investor inquiries, and by sharing your relevant ESG data and insights via corporate channels.
- Board oversight: Companies can assign responsibility for ESG oversight to a specific board committee or board member, which can help ensure that ESG factors are considered in all aspects of the company’s operations and decision-making. We are also able to provide a team member who can support the Board in decision making on this topic.
- Employee engagement: Companies can involve employees in their ESG initiatives, which can help build a culture of sustainability and encourage employees to identify and address ESG risks and opportunities. There are many simple ways to achieve this and we can work with you to think through how to plan, execute and measure effectiveness.
In summary, incorporating ESG into a company’s investor relations approach is becoming increasingly important for listed companies. By prioritising ESG factors, companies can attract socially responsible investors, manage risks, build a positive brand reputation, and ensure regulatory compliance.
In our view, companies that prioritise ESG are more likely to succeed in the long term by building a sustainable and responsible business that benefits all stakeholders.
Reach out to us today to chat about how to get started on building out the ESG strategy for your company.