How IROs interact with investors and E&S data providers
There are differing reports about the amount of engagement that takes place between E&S data providers and issuers. At recent IR Magazine events, some issuers have suggested they can maintain a regular dialogue with E&S data providers, while others say it’s difficult to know who to contact or how to get a response.
Nearly four in 10 global IR professionals report limited interactions with E&S data providers. More than half of North America respondents don’t engage, nor do a third of respondents in Europe and a fifth of respondents in Asia.
One in five global IR professionals engaging with E&S data providers have questions about the providers’ methodology. Regionally, just under a third of respondents in Asia, 20 percent of respondents in Europe and 19 percent of respondents in North America have questions about data providers' methodology.
We asked IR professionals to indicate the most important environmental and social issues their company currently reports on. Just over a quarter of global IR professionals say their company references greenhouse gas (GHG) emissions in its environmental reporting. North American firms are almost twice as likely as European companies to report on GHG emissions (35 percent compared with 18 percent).
One in five companies globally covers carbon reporting/emissions in their reporting. Just under a quarter of IR professionals in Asia say their company references carbon reporting/emissions, while nearly one in five respondents in Europe say the same. Carbon reporting and emissions are least-cited by respondents in North America (15 percent).
The third-most cited issue is reporting on energy consumption, mentioned by 17 percent of respondents globally. In North America and Asia, one in five respondents cite energy consumption, compared with just 11 percent of respondents in Europe.
For social reporting, both CSR and employee diversity are cited as most important by 20 percent of global IR professionals. But while this holds largely true across the regions for CSR, ranging from 16 percent in Europe to 18 percent in North America and 20 percent in Asia, the perceived importance of employee diversity diverges more broadly, from just 4 percent in Asia to 13 percent in Europe and 30 percent in North America.
The third-most cited issue for social reporting is HR/employment issues/labor practices, mentioned by 17 percent of global respondents. These issues are of greater concern in North America, where they are cited by 21 percent of respondents, than in Asia (16 percent) or Europe (11 percent).
In this section, we asked IR professionals for their comments on the accuracy of the methodologies employed by E&S data providers. Globally, just under one in five IR practitioners believe no E&S data provider produces accurate environmental data, while just above one in five believe no provider produces accurate social data. This belief is most acute at small-cap companies, where 34 percent cannot identify a reliable provider of social data, compared with 19 percent of mid-caps, 13 percent of large caps and just 12 percent of mega-caps.
The top five data providers – MSCI ESG Ratings, Sustainalytics ESG Ratings and Research, Dow Jones Sustainability Index, ISS Corporate Solutions and RobecoSAM – are all thought by IR professionals to be well established, transparent about their methodology and ratings, have comprehensive data and engage with companies. The same top five providers are cited by IR professionals for both environmental and social research, although the percentages differ slightly.
IR professionals in Europe rate Sustainalytics ESG Ratings and Research as the most accurate provider of E&S data, while respondents in North America and Asia cite a preference for MSCI ESG Ratings.
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Just under half (47 percent) of global IR respondents indicate they have not completed a questionnaire from an E&S data provider in the last 12 months. This proportion differs regionally, with North America most closely mirroring the global norm at 46 percent and Europe being slightly above at 51 percent. Asia is the outlier with just over a third (36 percent) of respondents not having completed a single E&S questionnaire in the past year.
Mega-cap and large-cap company IR respondents typically complete more E&S questionnaires in a 12-month period than their counterparts at small and mid-caps, with an average of 6.2 for mega-caps, 4.7 for large caps, 2.8 for mid-caps and 2.4 for small-cap companies.
Nearly four in 10 IR professionals have not had a single conversation on environmental or social issues with investors in the last 12 months. The average number of conversations that were held on these topics differs regionally, with IR professionals in Europe holding more than twice as many environmental conversations as their North American counterparts. Respondents in Asia held the highest average number of conversations on this topic, at 35.
In Europe and Asia, nearly four in 10 IR professionals say investors want to discuss E&S issues more regularly, and nearly a quarter of IR professionals in North America say the same.
IR professionals in Asia also held the most social conversations with investors in the past 12 months: at an average of 24, this is almost three times the number held by IR professionals in North America and more than twice the global average of 10.
Investors’ thinking on E&S issues isn’t always joined up, however. Almost a quarter of IR professionals in Europe say investors’ E&S discussions don’t focus on the details. This is higher than the almost one in 10 global IR professionals who say the same, and considerably higher than IR professionals in Asia, none of whom get this impression from these conversations.
Globally, nearly four in 10 IR professionals try to respond to every investor query related to environmental or social issues. This is more prevalent in Asia (44 percent of IR professionals) than in North America (30 percent), with Europe falling somewhere between the two (40 percent).
Just under a quarter of IROs prioritize investors’ queries by assets under management or top shareholders and in North America and Europe the percentages are similar (28 percent and 25 percent, respectively). This is far less important for IROs in Asia, however, where just 6 percent prioritize investors’ queries in this way.
Responding to investors’ queries typically involves multiple stakeholders: sustainability teams, ESG teams, CEOs, CFOs, general counsel and CSR teams. But the overriding responsibility for answering investors’ queries on E&S matters lies squarely with the IR team, with almost 70 percent of IR teams globally handling these queries.
Although governance-related issues are those that come up most commonly with investors, just under a quarter of IR professionals globally say the most common focus of their conversations with investors is greenhouse gases/emissions/water usage. While less important in North America, where only 17 percent of conversations focus on these topics, in Europe this rises to a considerably higher 34 percent of IR professionals’ conversations with investors.
Globally, the next-most important issues are employee-related at 16 percent of conversations, though this varies from a low of 5 percent for mega-cap IR professionals to a high of 24 percent at small caps. Similarly, while 14 percent of global IROs’ conversations with investors focus on general climate change queries, this ranges from 9 percent in Asia to 19 percent in North America. Mega-cap IR professionals see the least focus on employee-related matters, at just 5 percent of their conversations with investors.
When asked about the main focus of their company reporting, 44 percent of global IR professionals say it is governance. There is little regional difference, ranging from 39 percent of IR respondents in Asia ranking it most important to 48 percent of IR respondents in North America dong the same.
Where environmental reporting is the main focus, there is little difference between the IR respondents: 30 percent globally rate environmental reporting as their main focus, varying from 29 percent in North America to 32 percent in Asia, and from 29 percent at small caps to 34 percent at mega-caps. Just over a quarter globally rate social reporting as most important.
