Getting involved
IR respondents were asked – as were governance professionals – to rate how often different groups are involved in ESG engagement with investors on a scale from one (never) to five (always). They say they are most frequently involved, with an average score of 4.2 out of five, followed by ESG/sustainability teams (3.6), the CEO or CFO (3.1), governance team (2.8 – less frequent than the 3.6 rating governance teams give themselves), board members (2.5) and HR (2.2).
The larger the company, the more frequently IR respondents say they are involved in ESG engagement, with the average score increasing from 3.8 among those at small-cap companies to 4.6 among those at mega-caps.
Despite the growing focus on ESG, less than a third of IR respondents say they plan to add an ESG specialist to their team in the next five years – although it should be noted that almost as many say they don’t know.
The number saying they plan to add an ESG team member rises in line with company size: just 17 percent of those at small-cap companies say they plan to do so, compared with 33 percent at both mid-cap and large-cap companies and 50 percent at mega-cap companies.
ESG is increasingly seen as an important oversight area for boards, and many investors like directors to be involved when they discuss those issues with companies. Almost two thirds (64 percent) of IR respondents say their board engages with investors on ESG matters. That figure is 94 percent among mega-cap company respondents and 54 percent among those at small caps.
IR teams are more likely than governance teams to have confidence about buy-in on ESG. Almost half (47 percent) of IR respondents 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. This compares with 39 percent among governance professionals, where the same percentage say they disagree or strongly disagree.
The level of confidence varies by cap size. More than half (54 percent) of IROs at large-cap companies agree or strongly agree on buy-in, compared with 53 percent of those at small-cap companies, 46 percent of those at mega-cap companies and 38 percent of those at mid-cap companies.
Confidence in the board is higher: 68 percent of IR respondents agree or strongly agree that their company’s board members have a high level of involvement with overseeing ESG, compared with 59 percent among governance respondents.
Asked what they do or what their team does to ensure senior leadership is up to date on ESG issues, IR professionals’ comments include:
Just 21 percent of IR professionals say their management or board has discussed offering shareholders a say-on-climate arrangement. This is similar to the responses from governance professionals, 18 percent of whom say the issue has been discussed. Another similarity between the groups is that almost a third of IR respondents say they don’t know whether their board or management team has had such discussions.
Across the ESG agenda, 77 percent of IR respondents say investors have asked about the impact of Covid-19 over the last year. The next most frequently raised topic is board composition and effectiveness (mentioned by 74 percent of respondents), followed by environmental issues and executive remuneration (both 72 percent), employee diversity data (61 percent) and corporate culture (54 percent).
By comparison, the topics governance respondents most frequently say have been raised this year are, in order, environmental issues, the impact of Covid-19, employee diversity data, board composition and effectiveness and executive remuneration.
As with investor and governance respondents, when asked when in the calendar year their company is most likely to discuss certain ESG issues with investors, IR respondents most frequently say ‘generally across the year’. Like governance professionals, IR respondents report a more even spread of engagement across the calendar year than do investors.
For example, 21 percent of IRO respondents say board composition and effectiveness is discussed generally across the year while 31 percent say discussions are more likely to take place between April and June and a further 18 percent say they have been more likely between January and March.
IR professionals were asked to rate the knowledgeability of different elements of the engagement process on specific ESG topics using a scale of one to five, with one being ‘not at all knowledgeable’ and five being ‘extremely knowledgeable’.
On average, they rate their CEO/CFO most highly on the impact of Covid-19 and corporate culture (both 4.6), executive remuneration and board composition and effectiveness (both 4.5) and cyber-security and data privacy (4.2). Overall, they rate them less highly on environmental issues (3.8) and gender pay gaps (3.6).
IR respondents say their colleagues on governance teams are most knowledgeable on ESG issues when it comes to board composition and effectiveness (4.3), executive remuneration (4.2), corporate culture (4.0) and political lobbying and spending (3.9). On average, they rate them less well on knowledge of community relations (3.1) and gender pay gaps (3.0).
On average, IROs say the board members at their company have the strongest ESG knowledge around executive remuneration and board composition and effectiveness (both 4.3), the impact of Covid-19 (4.1), corporate culture (4.0) and cyber-security and data privacy (3.8). They rate them less highly on environmental issues (3.4) and gender pay gaps (3.3).
When it comes to ESG, IR respondents say their knowledge is best on corporate culture (4.4), the impact of Covid-19 (4.3), board composition and effectiveness (4.1) and executive remuneration (4.0). They say they fare less well in terms of gender pay gaps (3.3) and labor practices (3.2).
On average, IR respondents say their colleagues on ESG/sustainability teams are most knowledgeable when it comes to environmental issues (4.5), health and safety and corporate culture (both 4.1) and community relations and employee diversity data (both 4.0). They rate them less highly on executive remuneration (3.5) and gender pay gaps (3.4).
Respondents say the HR team/chief HR officer are most knowledgeable about talent management (4.7), staff retention, hiring and training (4.6), labor practices and corporate culture (both 4.5) and racial equality (4.4), but less knowledgeable about environmental issues (2.5) and political lobbying and spending (2.3).
In terms of ESG reporting, 51 percent of IR respondents say investors ask them to use a specific framework or frameworks, while 44 percent say they do not. Larger firms are more likely to be asked to use a particular framework: less than a third of IROs at small-cap companies report such requests, with 43 percent of those at mid-cap companies, 67 percent of those at large caps and 77 percent of those at mega-caps reporting such requests.
Seventy percent of IROs say their company reports to a specific ESG framework or frameworks. Overall, 59 percent of IR respondents say SASB is the framework most requested or reported to, followed by 54 percent who point to GRI and TCFD, 42 percent who mention CDP and 16 percent who name the Science Based Targets initiative.
SASB and TCFD are each mentioned by 92 percent of respondents at mega-cap companies. GRI is mentioned by 64 percent of IROs at small-caps, more than any other framework.
Seventy-three percent of IR respondents overall say their company publishes an ESG report. The numbers that publish an ESG report rise broadly in line with company size, from 52 percent of small caps and 68 percent of mid-caps to 77 percent of large caps and 94 percent of mega-cap companies.
Just 28 percent of IR respondents think investors often or always read their ESG report before engaging with the company. That contrasts with 53 percent of governance professionals who believe investors have always or very often read the ESG report.
