What is 'corporate access' and why does it exist?

The Financial Conduct Authority defines corporate access as: “a service of arranging or bringing about contact between an investment manager and an issuer or potential issuer [a company].”

So, providers of 'corporate access' connect institutional investors with the management teams of the companies that these investors have or may want to invest in.

As part of this, corporate access teams often help companies:

• Identify and target different institutional investors, highlighting their individual investment approach and style
• Uncover new pools of capital for those companies and
• Gather feedback from investors after meetings have taken place

As each fund and each fund manager has an individual approach to investments, this targeting is an important part of the reason that companies seek corporate access support.

It's also relevant that some investors place more weight on access to management than others which highlights the most challenging yet fundamental role of any access service: the continual mapping and monitoring of the changing interests and priorities of institutional investors.

Let's clear up the jargon first.  What terms are sustainability managers going to encounter that they won't immediately understand?

Typically, any discussion of 'corporate access' will expect an understanding of the following:

First of all, the thing itself is called 'corporate access' - because it was originally supplied as a service to investors.  However, it is really a two-way service that companies might find easier to think of as 'investor access'.  Investors want access to companies and companies want access to investors.  It's the same thing.

'Sell-side brokers' are intermediaries such as Investment Banks who offer services between the issuers of securities and institutional investors. Corporate access is one of these services.

A 'non-deal' roadshow is a series of meetings with investors hosted by the management team of a company usually around the time of financial results.  (A 'deal' roadshow, by contrast, is undertaken when a company is seeking to issue capital or seek shareholder approval for M&A or some other 'deal').

How does 'corporate access' work? What different options are available to companies?

Corporate access services are historically provided by 'sell side' brokers and encompass numerous different services including:

• 'non-deal roadshows' and conferences
• 'fire-side chats' and
• video conference calls

All of these provide institutional investors with opportunities to meet company management teams.

Sometimes investors themselves take the lead and ask 'corporate access' providers to create a bespoke programme of meetings with companies outside of the reporting cycle.  These will often include site visits and are typically described as ‘reverse roadshows’.

Typically, the corporate access service provider will also handle the logistics for a company.

“… 15 percent of companies record having undertaken an ESG-focused roadshow in the past year, with 5 percent having held an in-person event and 13 percent a virtual one (3 percent of which have undertaken both)… the likelihood of taking part in an ESG-focused roadshow increases with company size.” 

Who supplies 'corporate access' services and what are the advantages of using the different types of providers?

Today there are more options open to corporate investor relations teams.

'Sell side' brokers still arrange most corporate access.  However, companies are increasingly able to use independent service providers to support their investment engagement strategy and some companies undertake the exercise themselves.

Also, in some circumstances, 'access' is arranged by investors reaching out - either directly to companies or through third party service providers.

There are advantages and disadvantages to the different approaches:

• The advantages of using sell side brokers are that their research team will likely cover the stock of the company seeking investor access. This gives them access to the investors and also the ability to support this access with in-depth analysis and ratings. Additionally, brokers may offer other banking services to a corporate who might require them.
• The disadvantages are that, in areas such as ESG, they do not always have dedicated stock specific research or sales teams who can adequately advise the company whom to meet and why. Also banks may be tempted to prioritise access to their most important investment clients - rather than to the investors that are most important to the company being featured. Indeed under the MiFiD II regulation banks no longer have every investor as a client.
• The advantages of using independent service providers are that, as their name suggests, they are independent. This means they are not governed by the equity research model nor any investment banking relationships and do not segment investors. Independents often bring specific expertise which might be sector specific, regional or, for example, a capability and experience in ESG.
• The disadvantages are that specialist advice and service provision does not come for free.
• The advantage of taking the practice in-house is that enables a company to build a stronger relationship with its shareholders and understanding approach and investment style is key.
• The disadvantages are that it is expensive for each company to build its own expertise across the global investor base and companies may not pick up the same market colour and knowledge as specialists who spend their whole time working on this.

Ultimately, of course, companies do not have to choose one option over another.  Most companies blend different aspects of all of them.

How is 'corporate' access paid for?

Corporate Access can be paid for in two ways.

• Where a company embarks on its own outreach programme and uses independent service providers, the cost of this execution is borne by the company.
• Where sell-side brokers lead, access is paid for by investors. In Europe, this is governed under a regulatory framework set by MiFiD II and pricing can be set by both parties.

How does 'corporate access' work in ESG / SRI?

IR Magazine's Global Roadshow report for 2020 contains a specific section on ESG roadshow activity, providing interesting global data on current ESG activity and potential:

“… 15 percent of companies record having undertaken an ESG-focused roadshow in the past year, with 5 percent having held an in-person event and 13 percent a virtual one (3 percent of which have undertaken both)… the likelihood of taking part in an ESG-focused roadshow increases with company size.”

They continue: “Although there are few companies with recent experience of ESG roadshows, there is a significant increase in interest in them for the future, with 40 percent of companies planning to undertake an ESG-focused roadshow in the next 12 months. The recent increase in attention to virtual events has likely facilitated this, with a clear majority planning to hold their ESG roadshows virtually.” (https://content.irmagazine.com/story/ir-magazine-global-roadshow-report-2020/page/7/1)

It is becoming clear:

• that sustainability is an ever-accelerating as an investment driver for institutional investors.
• that ESG/SRI rating of a company is an ever more crucial element for investors to consider if they can and will invest in a company.
• That the the way company manages its ESG agenda and communicates this to the market is key to its ongoing success.
• That the landscape for ESG led investing is changing and equity research analysts are beginning to integrate the ESG factors into their financial modelling;
• That there are independent research houses covering these companies and offering their view on ESG - that add to the ratings that companies are given by a series of agencies which institutional investors track and use as benchmarks for their decision making.

ESG investing is now core to investment decision-making.  Yet still the investment community do not have access to the level nor quality of information they require to analyse ESG data; critical for them to make the most informed investment decisions. 'Corporate access' provides the opportunity for companies to set out their stall and lead the engagement.

What are the advantages of standalone sustainability corporate access to investors?

The main advantages are that a separate interaction focused on the sustainability factors alone gives the institutional investor a deeper dive into how integrated a company's ESG factors are into each of its business areas and operations.

What are the advantages of sustainability corporate access to companies?

Primarily, a company reaches out to investors to explain its business and the opportunities to them with the objective of retaining existing investors and attracting new investors.  The same is true of sustainability corporate access.  As the world moves to a more sustainable path, more companies will want to see their stock held within sustainability-focused funds.

Direct meetings enable companies to present their sustainability performance, address questions and misconceptions as they arise and ensure they are correctly understood. It also gives them a first-hand understanding of investor’s ESG priorities and needs. 

What impact has COVID-19 had on corporate access?  Will the changes last?

Of course, the COVID-19 pandemic has accelerated a change in the way that corporate access is delivered with many events now delivered virtually. This has brought both benefits and challenges.

I expect that once the pandemic restrictions pass, investors will prefer a return to physical meetings.  However, virtual meetings offer efficiencies and a breadth of access that will not be ignored going forward.

 While expectations are that physical meetings will continue post pandemic, the accelerated use of virtual conference calls has played into the hands of the more ESG focused investors who historically have not expected companies to travel for meetings.

This is an advantage as a roadshow can involve numerous members of a company meeting several people at each institution globally. It also reduces the carbon footprint all round.

Any final thoughts?

Yes.  One final point to consider is that ESG is a very broad topic and often involves lots of different people within a company.

'Mainstream' investor engagement typically takes place after the announcement of a company's financial results.  It is led by the CEO, the CFO & the Head of Investor Relations. All members of this team are able to discuss the company's strategy, numbers, and some of the broader ESG themes.

However, some of the highest quality ESG events delivered over recent years have engaged other company representatives such as a senior Non-Executive Director to communicate a governance perspective or a Head of Cyber Security from a risk perspective.

In this respect ESG/SRI roadshows can be different from “mainstream” roadshows. In other respects, they should be exactly the same.  They need to be carefully planned, well executed, targeted and with clear messages.

“Taking ESG communication to the next level is an ever-growing trend and one I am looking forward to being part of.”

Cathy Norbury and Lucy Richardson of InterAxS Global interviewed Matt Edmund (previously of Citi & HSBC).  Together interviewer and interviewee combine 50 years of experience in 'mainstream' and 'ESG/SRI' corporate access.