As global assets integrating Environmental, Social and Governance (ESG) considerations continue to swell, institutional investors are increasingly building coalitions and engaging with their portfolio companies to improve transparency and enact change on a broad range of ESG. The explosion in the number of investor collaborations is linked to growing investor interest in ESG, which is increasingly underpinned by numerous studies showing that good ESG performance can potentially enhance risk-adjusted returns. Investors increasingly wanting to link their values to their investment decisions has also helped drive interest in ESG.
Many companies find it challenging to keep up with the diverse and evolving approaches to ESG integration within their investor base, especially if the company operates in an industry where ESG issues have been identified as more material and relevant, such as oil & gas, manufacturing, financials, utilities, and materials.
There are proactive steps these teams can take to be prepared in responding to incoming ESG-related requests:
1.) Maintain a company-specific radar to track relevant investor initiatives including your investor signatories, ongoing research, and regulation overall and in your company’s sector.
2.) Monitor investor signatories to your company’s shareholder base and track how ESG initiatives are impacting their presence in your company and sector.
3.) Prioritize efforts. Examine issues being raised by the investor coalition to see how relevant they are to the company’s core business.
4.) Consider an initial engagement with investors that have made contact.
5.) Analyze how far off you are from fulfilling the investor’s request(s) and the time and internal resources that would be needed.
6.) Build your knowledge base. Identify the surveys, reporting initiatives and data that is driving ESG decision-making by key investors.
7.) Benchmark practices and disclosures against industry peers and leading practices.
8.) With the core investor audience in mind, consider whether any reporting and disclosure enhancements are required and in which formats, such as a smaller, more focused report versus the company’s CSR report.
9.) Create a robust ESG engagement plan that is proactive rather than reactive and ensures the company gets credit for all of the good things it is doing on ESG.
10.) Determine how incoming requests for ESG-related information will be handled before investors come calling.
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