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‘Siloed sustainability tells us something about a company’: Highlights from the IR Magazine Forum – Canada 2022
Macro-driven markets, virtual engagement and ‘peak ESG’ feature in conversations
When IR professionals gathered in May for the IR Magazine Forum – Canada 2022, there was plenty to discuss.
The Canadian market, like others around the world, had been hit by investor concerns over inflation, slowing global growth, central bank tightening and the war in Ukraine. But the country’s materials sector had also picked up interest given the sharp rise in commodity prices.
The first session tackled the various macro factors driving markets in 2022. ‘It’s really tough times in terms of how you are going to finance your growth,’ said one speaker. ‘A lot of investors want full transparency and clarity on the balance sheet and your longevity as an organization.’
Next, the conversation turned to how to communicate your company story to a variety of stakeholders. The session investigated how IR teams should approach messaging to investors with different styles and methodologies.
‘Investors will have different time horizons, but we have just one so I think it’s important not to change your underlying story,’ said one panelist. ‘I’m somewhat constrained by who we are. But you are keyed into what they want to know. And they want to know about fundamentals.’
Speakers noted that cash generation had become far more important in the current market. ‘That had not really been a major part of our narrative before – it was about growth,’ the audience heard. ‘The conversation has very much steered toward pulling yourself up by your bootstraps and the kind of cash you are able to deliver.
Hybrid IR and ESG
Following a morning coffee break, delegates returned to their seats to hear about investor targeting and engagement in a world where IR teams need to mix physical and virtual outreach.
Seven in 10 portfolio managers say they won’t make an investment without seeing the whites of the eyes of management, noted one speaker: ‘Assuming that stat still holds, certainly there’s significant importance to in-person meetings.’
‘One of the benefits [of virtual] is that you can reach out and touch a lot of investors in a single day,’ said another panelist. ‘We did a fixed-income offering, and we had the ability to talk to 50 people in a day so it was really helpful from a marketing perspective.’
The panelist pointed out, however, that physical meetings are better for forging a bond with the investment community: ‘There’s a lot to be said for building a relationship that way and, in particular, building a level of trust with larger investors.’
There was time for one more session before lunch, with attendees hearing about the evolving ESG landscape and what it means for sustainability reporting. ‘It’s a field that’s moving constantly,’ the audience was told. ‘Maybe in the last 12 to 18 months, we had something of peak ESG, where I think if you were in an extractive or emitting industry you got a lot of questions from your investors about your ability to sustain your business. I think things have become more rational. In the ESG space, you can invest in a wider selection of companies today than you could have done 18 months ago.’
Roundtables, investor days and investor Q&A
After the lunch break, delegates took part in a session called the exchange, where IR professionals have the opportunity to move between roundtable discussions covering different topics.
The roundtables covered four areas:
– How to engage management teams around ESG
– How to communicate your business sustainability story
– Working with the sell side in the current market environment
– The evolving skill requirements for IROs in 2022.
Following an afternoon break, there was time for two final sessions. The first looked at creating impactful investor and analyst days – a key area given that so many companies want to reset their narrative following the pandemic.
The final session, as is customary at IR Magazine Forums, was a Q&A with the buy side and sell side. Attendees were encouraged to submit their most pressing questions to a panel of investment professionals. One question focused on how investors and analysts source ESG information about companies. ‘I think we would probably avoid the [corporate] sustainability page initially, just because that’s where sometimes everybody throws all their sustainability information,’ said one panelist.
‘A truly sustainable company is going to tell its story in a different way from one that isn’t. Siloed sustainability tells us something about a company, and it’s not necessarily the best thing.’
A site for more eyes: How can IR professionals use their websites to engage effectively with retail investors?
We ask IROs for their reaction to our latest research
Retail investor communication has always been a challenge for IR. IROs have traditionally paid greater attention to institutional investors, which are fewer in number and wield considerably more clout. Retail investors are more disparate, and individual relationships yield lower rewards.
The IR Magazine Global Investor Relations Practice Report 2021 shows just over a quarter of shares are held by individuals. But this can include shares held by a company’s individual founding family members – reporting by IR Magazine in 2020 put the number of non-family retail shareholders at just 14 percent. Recent reports have the proportion of the stock market held by individual shareholders ranging between 19 percent and 26 percent.
On the other hand, institutional investor ownership is consistent. In the last two years, reports by IR Magazine show six in 10 shares globally are held by investment institutions. Among North American companies, this rises to 69 percent. This inevitably leads to IROs focusing on their relationship with the institutional investment community. While institutional engagement is conducted through meetings, events and the cultivation of interpersonal relationships, retail investor engagement largely relies on wider communication media. Websites in particular are a key means for IR to address the retail community and get the company story out.
IR Magazine‘s latest report on IR Websites, shows that 62 percent of IR professionals find IR web pages to be an effective tool in communicating with retail investors, compared with 13 percent who find them ineffective.
General reasons given for their effectiveness in retail communication focus on the ease of reporting on a website, with the ability to provide large amounts of information in a clear and concise way.
Access all areas
German multinational chemical company BASF, winner of the best IR website trophy at this year’s IR Magazine Awards – Europe, has more than 800,000 individual shareholders. Dr Stefanie Wettberg, senior vice president of IR at BASF, explains that ‘around 40 percent of our share capital is held by private investors. The best way to inform this large group is via our IR website. It is the easiest and fastest way to make all relevant information broadly accessible.’
Having such a large retail investor base highlights the need for readily accessible information on IR web pages. ‘We offer comprehensive information and a wide range of services, from Excel downloads, online reports and factbooks to newsletters via email and much more,’ Wettberg says. ‘We also include links to other sections of basf.com with further information – for example, on our sustainability activities. This topic is of particular interest to our retail investors.’
This is an extract of an article that was published in the Fall 2022 issue of IR Magazine. Click here to read the full article.
Business of blockchain: Managing IR in the miner leagues
Sue Ennis of Hut 8 tells Linda Montgomery how she is breaking new ground in IR in a fast-moving new sector
Hut 8 is a Canada-based, TSX/Nasdaq-listed mining company. But it doesn’t mine gold or minerals – it mines Bitcoin and was the first mining company to qualify for a listing on a major exchange in October 2019, under exemptive relief for innovative companies through the TSX Sandbox.
Finding an auditor or even a banking relationship was a major challenge for crypto-asset and blockchain companies back then. Being a pioneer in a very new sector with scant institutional research or traction was one of the many initial IR issues faced, along with investor outreach and education, and developing a deep and diverse set of shareholders. Sue Ennis joined the company as vice president of corporate development near the end of 2020; she has seen a lot happen in 18 months. Her CEO, Jaime Leverton, joined around the same time and together they form a female IR leadership duo in a highly male-dominated industry.
Earlier this year, Hut 8 added cloud and datacenter services to its offerings, aiming to help gaming and metaverse companies build a future Web3 world. Bitcoin price volatility powered Hut 8’s market cap to north of C$3 bn ($2.34 bn) in late 2021, but by early July 2022 – in the ‘Crypto Winter’ – it was down to C$370 mn. The pandemic then saw retail investors grow from 20 percent to 35 percent of all trading, according to one estimate, and Hut 8 was a beneficiary of this trend.
‘WallStreetBets and GameStop flipped IR on its head,’ Ennis says. ‘It was the power of retail investor volumes that helped us reach the S&P/TSX Composite Index of top companies, the first blockchain company to do so.’
How small can be supersized
Along with retail investors, the internet and social media communities are critical to Hut 8’s IR strategy, according to Ennis. ‘The internet is the new decentralized hedge fund,’ she says. With a lack of bank and traditional analyst coverage, buy-side and sell-side investors go to the internet and various community forums for information. Retail makes up about 65 percent of Hut 8’s investor base, and Ennis points out that you can’t ignore small retail investors because many have supersized influence when you consider how freely and quickly information is shared online.
She recalls being new in the job and trying to learn about her investors. ‘I searched Hut 8 on YouTube and noticed a lot of mentions and activity,’ she says. ‘So I left comments in the channels introducing myself, and soon many community organizers started getting in touch with me.’
YouTube communities talking about Hut 8 are typically started by regular people as a side gig, like Paul Barron, Talkin’ Investing or Zac Hartley, with communities of between a few hundred and 300,000 followers. Today Ennis does regular interviews, Ask Me Anythings and post-earnings calls with multiple social media communities, including on Twitter Spaces and Facebook. ‘Recently we did a YouTube community interview that got about 75,000 views,’ she recalls. ‘Soon afterwards, our inboxes were full of inquiries and questions. It was a huge hit!’
According to Ennis, these community members are seeking more than just information; it is a cult of people built around their support for Hut 8 and often other blockchain or new economy companies, with a very strong emotional connection. ‘With more people living their lives online and virtually now, they get to know each other, follow each other’s accomplishments, and even do business with each other,’ she explains. Hut 8’s StockTwits community has 63,000 followers and, according to Ennis, a huge percentage of them are online every day chatting about the company. ‘As an IRO, you must know where your end-customers are and speak to them directly to get the highest ROI,’ she says.
One of her biggest challenges is ESG: ‘There remains an extraordinary amount of misinformation in the media about the environmental impact of Bitcoin mining so education and lobbying are major priorities for us.'
Hut 8 has chosen ESG metrics relevant to it aligned with SASB and GRI. In 2021, the company set specific targets for reducing its environmental footprint and achieving carbon neutrality by 2025, and outlined a full set of social, governance and other goals in its first sustainability report. Ennis is up for more change, too. ‘These aren’t just crypto-savvy 18-year-olds in their mom’s basement – we also have value investors,’ she says, adding that many people don't realize how fast this adaptation is happening: you can now buy Bitcoin in your retirement account through traditional institutions like Fidelity.
Linda Montgomery is a Toronto-based fintech and digital assets marketing executive and an IR professional. This article originally appeared in the Fall 2022 issue of IR Magazine.
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