Many companies regard their CSR / sustainability report as the sole point of focus for their sustainability communications with capital markets. They devote considerable amounts of effort to the publication of a single, multi-stakeholder document. While there is merit in producing a single place of reference, many companies do not focus enough on the specific needs of investor audiences (materiality), timeliness or the distribution of the report and the information within it.
Other companies regard questionnaire completion for ESG agencies as a high priority channel of communications to investors. When focused on expected objectives, this has merit. When, however, companies try to answer all questions simply because they are asked, this can be very inefficient.
Steps to take
Before embarking on any written communications, companies should consider the specific needs of their investors (see Factors to Consider below) and then choose the written communications vehicle that best meets those needs.
Having done this, companies may decide to:
- Produce a CSR / Sustainability report and/or
- Issue a Sustainability Results Statement (a shorter digest of critical messages and data issued at the time, ideally, of the company's financial results) and/or
- Publish databooks or use other formats for ensuring that the most investor-relevant information reaches investors promptly
Factors to consider
What information do SRI analysts require in company reporting?
- Ethical/negative screening analysts will look for clear, concise information on companies’ exposure to ‘unethical’ business activity
- Best-in-class analysts will look for comprehensive information across all aspects of companies’ sustainability performance and their interaction with all stakeholder groups
- Engagement analysts will look for information on how companies are managing their practice in contentious areas
- Integrating analysts are likely to review the report in conjunction with a company’s annual report, most recent results statement and latest strategy presentation to identify areas of sustainability activity that have a bearing on stock value
So, for effective communications, companies should not only differentiate between SRI investors and other stakeholders, but they should also differentiate between the different motivations of SRI analysts.
Other factors to consider include what report formats investors prefer, whether investors require reports to be verified, what reporting standards should be considered and whether the report should be a separate sustainability report or a single integrated annual report. (On balance, however, investors tend to be format-agnostic. Provided they receive the relevant information, they don't tend to care how).