Introduction

Investors, governance and investor relations professionals reveal how they approach ESG engagement matters

Introduction

Engagement around ESG issues has become increasingly important for both investors and companies. Discussions are taking place more frequently on increasingly lengthy lists of topics and with a growing list of teams and individuals from different functions involved.The importance of engagement is highlighted by record numbers of environmental and social shareholder proposals gaining approval. In the US this past year there have been record levels of support for proposals in areas such as board diversity, political contributions and plastic pollution, and a growing number of proposals focused on workforce diversity and climate change.The emergence of shareholder activism around ESG issues further underlines the need for clear and effective engagement between issuers and investors. One key to a successful engagement program entails different constituencies – including colleagues at the same company – having an awareness of each other’s perceptions and approaches to ESG matters.In this special report we present data based on a survey conducted among investors, in-house governance professionals such as general counsel and corporate secretaries and investor relations (IR) professionals. They share insights on ESG and stewardship reporting, the ESG issues currently on their agendas, how they perceive the ESG knowledgeability of others and the involvement of boards and other functions in engagement, among other things.

Key findings among investors

Eighty-one percent of investor respondents say the investment stewardship team at their firm has increased in size over the last five years.

Overall, 84 percent of investor respondents say that over the last three years ESG risks or opportunities have been given more focus at their firm when making investment decisions.

Over the past year, the topics that have most frequently led investors to engage with issuers are environmental concerns, board composition and effectiveness, the impact of the Covid-19 pandemic, supply-chain management/issues and executive remuneration.

Investors rate governance teams most highly for their knowledge about executive remuneration, followed by board composition and effectiveness and employee diversity data.

Most investors (53 percent) say their firm has its own proprietary ESG methodology.

Key findings among governance professionals

Governance respondents say the IR officer/IR team is most frequently involved in ESG engagement with investors, followed by their company's governance team, ESG/sustainability teams, the CEO/chief financial officer, board members and HR.

Just over half say they engage with third-party experts who provide advice or guidance to board members on ESG matters.

Overall, 59 percent agree or strongly agree that their company’s board members have a high level of involvement with overseeing ESG.

Governance respondents rate their IRO/IR team colleagues’ ESG knowledge most highly in terms of Covid-19’s impact, community relations and corporate culture.

Key findings among IR professionals

Less than a third of IR respondents say they plan to add an ESG specialist to their team in the next five years.

Almost half (47 percent) agree or strongly agree that the vast majority of their company is aware of ESG issues and how they fit into its long-term strategy.

IR respondents say their colleagues on governance teams are most knowledgeable on ESG issues when it comes to board composition and effectiveness, executive remuneration and corporate culture.

Just 28 percent of IR respondents say they think investors often or always read their ESG report before engaging with the company. That contrasts with 53 percent of governance professionals who say they believe investors have always or very often read the ESG report.