With a client count of more than 2,650 customers, including 58 percent of the S&P 100, and a 6 percent global penetration rate based on corporate issuers, spanning from our web services, virtual events and analytics to corporate access and investor conferences, Q4 is in a unique position to assess the pulse of corporate clients when it comes to a focus on ESG.
What is not unique about what we see is that the focus on ESG-related activities within the investor relations (IR) space is moving at lightning speed. This speed and exposure has also contributed to an increase in board-related ESG requests and requirements from the IR team, including a need to better understand the stances that the largest shareholders may take at the AGM while also providing a rigorous process that stands up to the increased scrutiny being placed on ESG data, partially driven by increased efforts to combat greenwashing.
Our clients range from leaders in ESG disclosures to those that are only just beginning the (daunting) task of starting their program. One of the most frequent comments we have received from those ‘beginning their journey’ is that they do not know where to start. The lack of regulatory requirements – coupled with increasing requests from ratings entities, surveys and the buy side – makes the task of getting started even more formidable for them.
From those further along the journey, the focus shifts toward improving their disclosures, tracking the impact of their IR program and assessing how their data and narrative are being received by the street/market participants.
Regardless of where a company’s IR program is along the ESG path, there are a number of recurring themes we have learned from our clients that we see as always important whether building, maintaining or improving an approach to ESG.
1. Keep your program company-centric This does not mean ignoring the impact your company has on the wider world but rather focusing your program on data and actions that are relevant and material to your company and industry. Build your program so you can leverage your ESG data to respond to requests (surveys from the buy side, ratings, and so on) rather than building your ESG data as a result of actioning all requests.
2. Decide which framework and/or standard to follow In addition to adhering to any current or future regulations, we recommend a focus on SASB (or future iterations under the International Sustainability Standards Board) and TCFD.
Whether you ultimately decide on voluntarily disclosing all guidance or requirements based on the framework and/or standard you choose to follow, leveraging a framework and/or standard will assist in keeping your focus on what is material.
3. Leverage what your company already has Remember that many of the topics and metrics contained within the standard(s) you follow may already exist within your company (such as for finance, supply chain, HR, legal, and so on). This also applies to the process you build for the collection and storage of your data.
4. Think data quality With or without requirements for assurance, to make your disclosures useful to investors, you want to have a process in place that supports the relevance, consistency and reliability of the data you collect. The focus should be on material topics and, to ensure your program efforts are more than just checking the box, you should treat the data as an opportunity for improved business operations.
5. Disclosures Whether issuing a comprehensive sustainability report, an ESG-focused website or a ‘simple’ single ESG web page as you start, treat ESG-related disclosures in a similar way to financial disclosures. At minimum, this means avoiding simply posting whatever you have for the sake of saying you are ‘doing ESG’. Put thought behind what you ultimately disclose, even if not contained within regulatory disclosures.
As ESG continues further down the path of standard and framework consolidation and government-issued regulations continue to increase, the focus from the board level will continue to increase as the overarching world of investor-focused ESG becomes better defined. If IR teams are not already receiving requests or being asked ESG-related questions by the board, they should expect them soon – and be prepared to respond.