Make value creation, measurable data and CEO buy-in some of your ESG cornerstones
Wherever a company is on its journey to fully implementing ESG talking points into its regular earnings updates, here are a few key aspects that are important to consider.
Prime your audience If beginning this process as a nascent company – or refining your approach if familiar or mature – it can be worth sowing the seeds of your ESG content before fully launching it. Have the aim of building comfort and confidence with your investor base and senior management by weaving this content into existing disclosures.
And when it comes to the earnings call itself, consider embedding ESG-specific questions with your sell-side analysts to help propel your Q&A. If relevant, it may also be valuable to expand the scope of investors that are engaged in earnings-related discussions.
For example, electric car maker Tesla has opened up its Q&A platform to allow retail investors to submit questions, broadening the conversation each quarter.
Move from broad to specific When it comes to earnings, a good starting point for nascent companies is to set out the firm's broad approach to sustainability and ESG, and why these issues are key to value creation and/or cost-avoidance.
Familiar and mature companies should continue to identify key talking points that contain specific, measurable data to make sure it can be instantly understood by their audience. Linking talking points to existing frameworks, KPIs or data points that have been tracked for some years can help to give context.
We’ve tried to touch on ESG directly or indirectly on each of our calls as we try to make sure it stays relevant to the investor community
Keep it regular All four quarterly updates offer the opportunity to tackle your company’s ESG performance in a different way. For nascent companies, the focus should be on providing regular updates on key financial measures driven by ESG performance rather than non-financial data.
For familiar companies, it can be good to identify one quarter as an opportunity to hold a deep dive into ESG performance before providing updates throughout the rest of the year. Remember: your CEO’s comments are a good place to offer extra detail or context regarding corporate purpose or as a consideration of wider stakeholders.
Identify risk Risks relating to each of the E, S and G pillars are crucial to your disclosures, but familiar and mature companies may consider including a run-down of the value at risk of not acting on a particular sustainability theme. Illustrating this with specific examples can be particularly effective. For instance, exploring the potential costs of not considering employee safety, particularly within a Covid-19 context, could be illuminating.
Reach out and expand Whether starting out as a nascent firm or developing your approach as a familiar or even mature company, identifying these talking points is a great opportunity to promote cross-functional collaborations within your organization. Corporate sustainability teams are an obvious port of call, but developing thematic KPIs and metrics alongside a host of other internal teams can be a powerful illustration of progress with granular detail.
‘In general, we like to cover interesting, non-routine topics on most of our earnings calls,’ says Brian Dingerdissen, Essential’s vice president and chief of staff for investor relations and communications. ‘In the last couple of years, we’ve tried to touch on ESG directly or indirectly on each of our calls as we try to make sure it stays relevant to the investor community.
‘We’ve found that some investors have a heavy focus on ESG and some do not, but we get a decent number of questions on it. We’ve spent a ton of time telling our ESG story with a formal microsite and our dedicated reporting, so we want to make sure we make our larger investor audience aware. We have a really good story to tell, I think, as a long-term company founded on solving environmental issues as a water utility and protecting the environment, and now bringing that expertise to a gas utility.
‘We don’t tend to get on the earnings call and say, This is our ESG update. Typically, we more hit on topics related to ESG issues. I could argue that anything could be related to ESG, though: we talk about the work our foundation does, our employee volunteer groups, the capital we’re investing to reduce emissions, the reliability of our water and wastewater plants, climate change and the impact of storms. And then – maybe most importantly – we talk about the value of the services we provide as a utilities firm. We also spend a lot of time on our diversity efforts, whether it’s with suppliers or employees, and we tie our leadership team’s compensation to many of these aspects.
‘We know not everyone’s going to read the ESG microsite or the proxy or the annual report, so we want to keep these topics fresh in people’s minds. It takes people hearing or reading things multiple times for them to truly absorb it. We also want to make sure investors are not relying exclusively on third-party ratings, which we have found can lag our performance. We want to make sure we are telling that story directly.’
