Targeting tips for your ESG roadshow audience
‘A few years ago, we were patting ourselves on the back because we were putting out a sustainability report and had one slide in our quarterly earnings deck on sustainability. That’s all changed,’ says Michael Bennett, vice president of IR at Schnitzer Steel. He notes that while Schnitzer was doing more in terms of ESG outreach than other metals and mining companies, it was not until he began benchmarking against thematic peers that he fully recognized the need to boost the firm's ESG engagement.
‘We were seeing a lot of the same investor names, and there was so much missed potential out there,’ he explains. ‘We knew we had to open up [our ESG discussions] to a new audience, but it can be challenging to know who to speak to at funds and who to invite to the roadshow.’
As IROs get their arms around the arguments for reaching out to new and different ESG investors, the investor audience is undergoing seismic changes of its own. Investment funds now have a more sophisticated build-out of ESG roles and responsibilities so identifying the right individuals to communicate with may require more effort than in the past. Here are some targeting tips.
Know the lingo ESG investors are no longer a monolithic group but fall into several different categories.
There are ESG investors with exclusionary strategies, which screen for certain sectors or practices. There are thematic investors, which invest in specific solutions to ESG problems (examples include renewable energy and circular economy funds).
There are impact investors, which invest in companies that are achieving positive and measurable social and environmental results. And there are ESG integration investors, which weave ESG issues into all aspects of their investment analysis. Consider which type of ESG investor would find your story most appealing.
Research signatories When assessing a fund’s commitment to ESG, look to those that are putting their names to particular platforms. A good place to start may be signatories to programs such as the Net Zero Asset Managers initiative, an international group with 273 signatories and $61.3 tn in assets under management.
Understand the regulatory landscape Numbers differ for how many sustainable mutual funds and ESG-focused ETFs are out there. In Europe, for instance, regulators recently imposed stricter rules about which funds could be labeled ‘sustainable’.
As a result, in early 2022 Morningstar removed the sustainable label from more than 1,200 European funds, with the expectation that the numbers will drop even further still. That said, funds leaving the ESG universe are being rapidly replaced by waves of newcomers to the space.
In the US, there are similar regulatory efforts afoot. In May, the SEC proposed rule changes that would prevent investment funds from making unsupported claims about their ESG credentials. The new ‘Fund Names’ proposals would bar investment managers from using the descriptor ‘ESG’ unless certain specific environmental, social and governance criteria are met.
Polish your message Distilling a company’s ESG message for a group meeting or one-on-one is no easy feat. Fortunately, honing complicated messages into memorable stories is a skill IROs possess.
One way to hone your message is to benchmark against roadshow presentations of peers and leaders in the space. Knowing investor expectations and crafting a responsive presentation are additional ways to make sure your story hits home.
We knew we had to open up [our ESG discussions] to a new audience, but it can be challenging to know who to speak to at funds or invite to the roadshow
