After a decade of steady evolution, 2021 has seen a revolution in sustainability communication between companies and investors.  We chart the progress in recent years in this working paper: [All Change in Sustainable Investor Relations].

Catalysts for change

A combination of:

• widespread awareness of climate change and biodiversity decline
• regulatory focus (especially as asset managers race to classify funds that they market in the EU under the Sustainable Finance Disclosure Regulation)
• significant growth in investor demand for sustainable investment
• increased importance of active ownership and engagement and
• COVID-19

… has catalysed the sustainability interest of 'mainstream' investors' interest in companies' sustainability exposures and management practices.

Two notable changes

This has had two notable knock-on effects:

• Because 'mainstream' investors and analysts are now asking questions about sustainability, investor relations officers have taken control of the process (shifting responsibility from CSR / sustainability managers)
• 'Mainstream' investor interest is shifting the conversation towards the impact that sustainability factors have on KEY VALUE DRIVERS for companies

Barriers to effective integration

Unfortunately, five factors keep much sustainable investment activity bound to a somewhat unhelpful focus on data minutiae:

• Continued growth of passive investment and confusion over what sustainability information passive investors really need
• Regulatory interest - as regulators incline towards universal, top-down approaches that do not reflect the reality of capital flows and influence. (Regulators currently appears to exacerbate biases in the market rather than reduce them).
• Confusion over the different research and data needs of different investor strategies
• The 'influence through data demand' engagement strategy practiced by a number of investors
• The application of artificial intelligence to sustainable investment research

Only pro-active IR communications can keep the narrative on a sustainable track

While there is much pressure from the investor side of the dynamic to focus (unhelpfully) on comparable data, IROs can do a lot to counterbalance this by pro-actively shaping messages around their sustainability exposures and management practices and discussing directly with investors how these can maximise opportunities and minimise risks to the key value drivers of their business.

Actions for IROs

• Consult sustainable-ir.com for best practice in sustainable investor communications
• Join an SR-IR Breakfast Club - for peer learning
• Request a 'Register of SRI Interest' to identify the key contacts at relevant investors
• Participate in the Sustainable Investor Access programme

Actions for investors

• Be clear and honest about the communications (content and format) that you really need from companies to make investment decisions
• Be clear with companies about the research (providers) that you do and don't use in sustainable investment decision-making
• Avoid supporting initiatives and industry calls for data unless you are actually going to use that data yourself in investment decision-making

All change …

… but only proactive IROs can ensure that it is change for the better!