Q (How) are sustainability and corporate governance issues integrated within asset management firms?

Sustainability issues are factored into investment decisions in three different ways:

  • Not at all … because some asset managers, of course, have made little progress in this respect
  • Systematically … as asset managers apply sustainability factors to valuation or portfolio construction via rules-based processes that operate before, after or alongside fundamental investment decision-making
  • Fundamentally … in which sustainability analysts work together with their 'mainstream' investment analyst colleagues to make holistic investment decisions that fully integrate sustainability and financial factors using fully integrated processes
Q How can companies, most easily, track developments in sustainable investment and ESG?

The growth of sustainable investment has led to a plethora of information providers (particularly conferences and news publications).

Those with the longest track record in the industry are:

  • www.responsible-investor.com - which is a subscription-based news publication and events organiser that updates subscribers on the latest news and market developments in sustainable investment practice and regulation
  • www.sri-connect.com - which is a free-to-join online research marketplace and communications channel that enables companies to track market trends and investor interest in sectors and sustainability issues and research themes. (It also enables companies to contact analysts and investors directly)
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Some of the newer providers are highlighted in the resources section of this platform.

Q How can I find the largest shareholders in my company?

The IR team at most companies will maintain a running record of their largest investors - sometimes supplied by their bankers. Such information can also be provided by financial data providers such as Bloomberg, FactSet or Refinitiv.

Q How can I tell which of my firm's largest investors are interested in sustainability?

It depends how precise you want to be. If you want a rough-and-ready idea, you can use SRI-CONNECT's free-to-access Directory. Typically, if an asset manager has an SRI analyst registered against its profile, then that asset manager is interested in sustainability.

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For a more precise answer - including the identification of individual sustainability funds on your sharehlder register, you will need to engage the specialist investor identification services available from a number of firms listed in this site's Directory

Q How can small cap companies communicate efficiently on sustainability issues without incurring huge costs?

Small cap companies face particular issues in finding the budget to engage on sustainability at the level implied necessary by investors are research providers.  This blogspot proposes a low cost service that may be of interest.

Q How do SRI analysts and investors receive their information?

Asset managers typically receive their information from three sources:

  • from companies' published reports;
  • from information gathered by ESG ratings agencies;
  • from their own contact with companies.

In respect of the second, ESG agencies gather their information from company reporting, from media monitoring, from specialist data providers and from other sources such as government agencies.

Q How interested are credit ratings agencies in ESG?

Their interest is increasing rapidly. In 2016, the UN PRI noticed a lack of interest in sustainability by credit ratings agencies and took the initiative to engage with them. The CRAs responded rapidly and materially such that in 2019, the PRI hailed the progress made by the three major ratings agencies as a 'race to the top' … and the race continues apace…

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… as the ratings agencies have developed scoring systems on ESG factors, have develop green bond accreditation services, have acquired ESG ratings businesses and expanded their footprint in this market segment in many other ways. Companies that issue significant amounts of debt and are exposed to material sustainability issues would do well to understand the processes by which each of the major ratings agencies assesses the sustainability outlook for their sector and stock.

Q How much time should companies spend on ESG/SRI investor relations?

Companies that are already actively involved in sustainability communications to investors can realistically (we believe) be looking to spend about half as much time on ESG/SRI investor relations as they currently do - provided that they take control and improve the efficiency of their process significantly. Overall, companies…

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… should be looking to limit their sustainable investment communications (each year) to:

  • the time it takes to produce a comprehensive report on their sustainability exposures and management strategies
  • a week to communicate directly on these impacts with the investors that hold their shares and the analysts that cover them
  • ad hoc events over the course of the year if they want to engage investors in specific issues or if positive developments or controversies occur

(Note: companies with sustainability exposures that impact their financial performance with frequency or at a significant level should aim to do communicate more than this)

Q How should communications with SRI investors differ from ‘mainstream’ investor communications?

In format, not at all. Companies should adopt the same combination of published reporting and direct communications. In frequency, there is rarely a need (excepting in the cases of major controversies) for companies to communicate to sustainable investors more than once a year. In content, sustainable investors tend to be more interested in the long-term strategic direction of the company and less interested in the noise of quarterly numbers.

Q How should presentations to SRI analysts and investors be structured?

ESG/SRI investors and analysts want to focus on the sustainability issues that are likely to have most impact on companies' financial performance. To support this, they need to understand the company's core strategy. Accordingly, we recommend the following structure:

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  • 5 minutes on the company's core strategy
  • 5 minutes on the company's overall approach to sustainability
  • 5 minutes each on the three sustainability themes of most financial relevance to the company
  • 35 minutes for questions – (for live group meetings) | 20 minutes for questions (for 1-on-1 video meetings)

For more information see Take control of SRI communications 

Q How should we focus our messages for sustainable investors?

Sustainable investors and analysts are primarily interested in the sustainability issues that have most potential to impact the financial performance … and hence stock price of companies.

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Sometimes such issues will be found in companies' products and their positioning; sometimes they will be found in companies' production processes / execution activities; sometimes they will be found in wider societal and market trends. Companies should focus on these aspects above other aspects - which may have sustainability relevance by may be less financially-material.

Q How should we prioritise our communications with investors on sustainability?

As with all investor communications, companies should prioritise the asset managers that hold their shares and then those that might buy these shares.  After this, companies should prioritise the research providers that influence those asset managers.

Q How should webcast / video / telecoms technology be used in SRI communications?


Sustainable investors & analysts like to meet companies directly but they also like to avoid CO2 emissions. Even before COVID-19, sustainable 'corporate access' used webcasting and videoconferencing technology extensively. It should be a cornerstone of any company's sustainable investor outreach.

Q How to prioritise which ESG questionnaires to answer?

To help companies prioritise the risks and opportunities of responding or not responding to questionnaires, ESG Global Advisors recommends that a company addresses the following questions:

  • What are the ESG interests of top current or potential investors? Does the questionnaire relate to an information source that that is used by these investors, or an engagement activity that they support?
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  • Does the questionnaire relate to an ESG factor identified as financially material for the company? Could answering the questionnaire help the company to communicate more effectively on this ESG factor?
  • How much effort is required to answer the questionnaire, and what are the risks of not doing so? Is it likely to impact access to capital, damage the company’s reputation, or result in engagement follow-up that is even more time-consuming?
  • A company providing strong investor-focused ESG reporting based on a thorough ESG materiality assessment is better-placed to be selective in responding to ESG questionnaires.

    Q Is ‘divestment’ a concern? Which companies should be concerned?

    Yes - it has become a concern in some sectors over the last two years.  Whereas previously, 'negative / exclusionary screening' that was applied to individual funds was too small to have any impact on a company's cost of capital.  However, 'policy-based' divestment  has seen a number of sizeable investors withdraw all investment in certain companies or sectors - typically those most exposed to climate change.

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    Where such action by sizeable investors leads to 'copycat' action by others, this can create a self-reinforcing trend that will affect companies' access to capital.
    At present, such 'policy-based' divestment is largely confined to those companies with direct exposure to the most carbon-intensive parts of the energy value chain (thermal coal, oil sands etc). However, it is easy to see how these initial steps might extend to other companies in the energy value chain and also to companies exposed to issues that have investment relevance and also resonate with (retail) end investors. Tropical deforestation might be one such issue.

    Q Is there a difference between 'SRI' and 'ESG'?

    Not really - although some investors pretend that there is.  From a companies' point of view, investors expressing an interest in 'SRI' or 'ESG' are typically all interested in the environmental, social, economic and ethical / moral exposures, practices and performance of companies as well as their market positioning, strategic choices and financial performance.

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    They are also interested in the corporate governance practices that ensure that these exposures and practices are appropriately governed and reported to shareholders.

    Q Should companies combine sustainability communications with corporate governance communications? Or should they be treated separately?

    It depends. Some investors believe that 'environmental', 'social' and 'corporate governance' issues are best considered as an integrated whole. Others believe 'sustainability' issues are structurally-different from 'corporate governance' issues and should therefore be considered separately.

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    As no rules can usefully be applied here, companies need to establish the individual preferences of their largest investors and communicate with them accordingly.

    Q Should companies publish standalone sustainability reports or integrated annual reports?

    Investors don't care. Provided the information is available to them and is verified and audited where appropriate, investors rarely care what format it appears in.

    Q What does 'ESG' stand for / mean?

    ESG stands for Environmental, Social and Governance and covers the following issues of interest to investors:

    • Environmental issues such as: climate change, biodiversity loss, local air quality, resource consumption etc.
    • Social issues such as: human rights, employee welfare, local community relations etc
    • Corporate governance issues such as board and ownership structure, investor communications and remuneration
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    Some would argue that the term 'ESG' excludes two aspects of sustainable investment:

    • The 'ecoomic' dimension of sustainabiilty - that incorporates factors such as national economic stability, local economic growth etc.
    • The 'ethical' dimension - that incorporates issues of moral concern to some investors such as abortion rights, animal testing, lending at interest etc.
    Q What does SDG stand for? Do investors care about the SDGs?

    The UN SDGs are the UN Sustainable Development Goals. The 2030 Agenda for Sustainable Development provides "a shared blueprint for peace and prosperity for people and the planet, now and into the future". At its heart are the 17 Sustainable Development Goals (SDGs). Investor interest in the SDGs …

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    … has grown significantly in recent years as they provide a useful overarching framework against which investors can demonstrate 'real world impact'. They are also useful guiding parameters for the development of thematic investment funds.
    That said, many of the UN SDGs relate to issues that lie outside the influence of listed companies or investors in them.
    It is worth companies' highlighing any contributions that they make to the UN SDGs to those investors that show a specific interest in them.

    Q What is ‘engagement’? Should companies welcome or fear it?

    Engagement comprises a spectrum of activities ranging from 'constructive engagement' approaches - whereby a single investor shows deep interest in the exposures and practices of a company they are invested and collaboratively suggests ways for further improvements in their sustainability programme through to 'shareholder activism' approaches - whereby investors take oppositional motions to company AGMs proposing actions not previously planned by management.

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    'Constructive engagement' is typically undertaken in private while shareholder activism typically ends up happening in public with 'media' being an active part of the strategy.  Whether companies should welcome or fear 'engagement' will depend from case to case on the approach being taken by the investors and the nature of the action that they are requesting / demanding.

    Q What is the EU taxonomy for sustainable activities? How does it relate to investment?

    The EU taxonomy is a technical screening criteria for economic activities that can make a substantial contribution to climate change mitigation or adaptation, while avoiding significant harm to  four other environmental objectives. Asset managers operating within Europe are being required to report on the exposure of their portfolios to issues identified in the taxonomy.

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    The four other environmental objectives are:

    • sustainable use and protection of water and marine resources,
    • transition to a circular economy,
    • pollution prevention control, and
    • protection and restoration of biodiversity and ecosystems.
    Q What is the IRO's role in the sustainable investor relations process?

    Ideally, IR managers should manage the whole investor communications process - from investor and analyst targeting through message development, data publication, investor engagement and feedback gathering. Importantly, their role should be to MANAGE THE PROCESS.

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    This does not mean that they need to be subject matter specialists, to gather all of the data, to answer all of the questionnaires etc. As with other areas of investor relations activity, the specialism of the IRO lies in managing the relationship. They should engage specialists within the company (in this case CSR/sustainability specialists) to deliver the detailed information as required.






    Q What is the role of the CSR / Sustainability manager in the sustainable investor relations process?

    Ideally, CSR / sustainability managers should support their IRO colleagues with information and subject matter expertise while IROs should manage the process of investor communications. However, too often, CSR / sustainability managers do not receive the support that they need from IROs and end up managing all sustainability communications to investors.

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    While it is far better (more efficient for all / lower risk to the company) for the investor relations team to take the lead, we understand that this is often not the case.  For this reason, we have written guides to help both IROs and CSR managers to understand better each other's roles:

    Q What is the UN PRI? What is its function in the industry?

    The Principles for Responsible Investment has become the de facto industry body for asset managers and institutional investors ('asset owners') who are interested in responsible investment worldwide.  The organisation promotes industry development, monitors trends in the industry, evaluates asset manager progress and lobbies governments on legislation and regulation on sustainable development of interest to investors.

    The organisation also promotes and co-ordinates 'engagement' activity by investors with companies - in which respect the company is a lead partner on Climate Action 100+

    Q What objectives should companies set for sustainable investor communications?

    Companies should set broad but simple objectives covering their communications with their largest investors and influential research providers. These need to be easily tracked and refreshed on an annual basis. Typically, these will include measures of:

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    • Inputs - the resources (employee time) that companies expect to spend on sustainable investor communications
    • Outputs - the deliverables from that time (# of analysts met, events hosted, reports produced etc)
    • Outcomes - the expectations that companies have of this activity - for example, an uplift across six major research providers or improved perception amongst their top 20 investors


    • Most companies do not yet articulate clear objectives for their SRI/ESG communications - this is unhelpful as it makes progress difficult and measurement impossible
    • Some set simplistic objectives based on single focal points (e.g. inclusion within a specific single SRI/ESG index) - this is potentially worse as it focuses companies on one single set of metrics which are highly unlikely to be representative of the wider market's interest.
    Q What sustainability trends are investors currently focused on? (2020)

    The same issues as the rest of the world is focused on: COVID-19, climate change, equality (gender and race), biodiversity, plastics and economic recovery.



    Q Which are the best ESG/SRI conferences to attend?

    Two types of SRI/ESG conferences may be of interest to companies:

    • Industry conferences - where companies can learn more about developments in sustainable investment
    • Broker-organised conferences - where companies can meet with investors and present their sustainability practices
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    SRI-CONNECT publishes a Global SRI & CG Diary that lists these conferences - mainly the industry conferences).

    The following brokers are known to organise regular (annual) broad-based ESG/SRI conferences:

    Others arrange conferences on more specialist themes and on an ad hoc basis.

    Q Which ESG agencies should we prioritise?

    The ESG ratings agencies that are most highly-rated by asset managers are listed in the (annually-updated) IRRI Survey 

    Q Which markets are most active in SRI / ESG?

    Until recently, Northern European markets led the world in respect of their level of sustainable investment engagement with growing interest in Canada, some parts of the USA, Australia, southern Europe and Japan.

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    This 'rule of thumb' is breaking down, however, such that it is now more accurate to reflect on rapid and sustained interest across the world. Details of interest levels and strategies deployed in different markets can be found in the bi-annual Global Sustainable Investment Review and in the PRI Annual Report

    Between 2016 to 2018, the fastest growing region for responsible investment has been Japan, followed by Australia/New Zealand and Canada. These were also the three fastest growing regions in the previous two-year period. The largest three regions— based on the value of their sustainable investing assets—were Europe, the United States and Japan.

    Q Which reporting frameworks do investors want companies to use?

    There is no consistency … and significant misinformation on this point. Most investors ask for more granular and comparable sustainability information from companies. So, companies are keen to provide this. However, companies …

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    … often fail to identify why investors are asking for the information and whether / how they will actually use this.
    Frameworks can be divided into:
    * Single-user frameworks - such as those specified by individual research providers - such as Sustainalytics or ISS-ESG
    * Multi-user frameworks - such as those developed by data specialists who aim to channel data towards others - such as CDP, Bloomberg or Factst
    * Open-source frameworks - such as those intended to be used by multiple users - such as GRI or SASB
    Over time, it seems likely that companies will migrate from focusing on 'single-user' frameworks towards 'multi-user' frameworks and 'open-source frameworks'.
    In respect of the latter, there are signs that the framework being developed by SASB is gaining traction - largely as it is being adopted by some of the larger passive investors.
    Importantly, however, companies should always remember that individual active investors are likely to be most interested in information that is not captured by frameworks - as this is where investment advantage is likely to lie.

    Q Which research providers publish ESG / sustainable investment research on my company?

    Seven different categories of research providers now publish ESG / sustainable investment research on companies.  Companies, however, tend to focus on one only.

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    Conveniently, the seven categories can be remembered alphabetically as follows:

    • ESG Agencies
    • Sell-side Brokers
    • Credit rating agencies
    • Data providers
    • Engagement service providers
    • For impact and Grant-funded research providers
    • Other research providers
    Q Which sell-side brokers publish sustainability research on companies?

    About half of European brokers are actively publishing sustainability research as part of their investment research output. Some of these also have global or Asian coverage. Some of these have global reach and, therefore, publish on North American, Asian or Australasian markets.

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    We advise companies with material sustainability exposures to consult the lists below to identify brokers that cover their company with 'mainstream' financial research and ensure that they are aware of any plans that these firms have to publish sustainability research on their company, sector or on issues that affect them:

    Q Who should take responsibility for sustainability communications to investors?

    Successful sustainable investor communications involve the investor relations team and the sustainbility / CSR team. The IR team should manage the process and the CSR team should produce the content.

    Q Why are asset managers interested in sustainability?

    For four reasons: Primarily, because their clients (both institutional and retail investors) demand it of them; secondarily because regulators are demanding it (and requiring reporting from asset managers.

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    Asset managers are also interested because, for active funds, there can be investment performance advantage in taking sustainability factors into account. Finally, asset managers are sometimes major companies in their own right and therefore have CSR obligation to "do the right thing".

    Q Why are we never asked about sustainability issues on 'mainstream' roadshows?

    This is a 'chicken and egg' problem.  Companies typically don't make themselves available to address these issues on roadshows so the analysts and portfolio managers that are interested don't attend the meetings … so the companies conclude that the whole firm isn't interested.

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    The way to break the cycle is to check - ahead of any roadshow - whether the asset managers that you are meeting have sustainability analysts / PMs and - if so - to actively request that they receive an invitation to the meeting.

    Q Why can't all ESG/SRI research and data providers use the same data?

    The ESG/SRI research industry is relatively young (compared to investment research) and the inputs, techniques and outputs that it uses, deploys and produces are still evolving and there is still competition between different providers on all three points. More significantly, companies have not yet imposed their own disciplines on the process.

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    Companies could support a transition towards consistency by:
    * Publishing any information that they give to one provider to the market as a whole (… and arguably they should do this any way)
    * Selecting and reporting data based on the quality of match with their business activities - rather than based on what the analyst asks for (… and refusing to respond in other formats)
    * Challenging the false assumption that data comparability between companies is either possible or desirable (see Nothing compares to you )

    Q Why can't we just talk to the ESG ratings analyst that covers us - like we do with sell-side brokers?

    IROs who are used to communicating directly with sell-side analysts are often surprised that SRI analysts (from ESG ratings agencies) do not appear to respond to similar approaches. In reality, some SRI/ESG analysts from research providers really welcome direct dialogue with companies while others fend it off.

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    One reason given for analysts' reluctance to engage directly with companies is that it would compromise their independence. We do not think this argument is credible. There are plenty of ways of ensuring independence that also allow for direct contact.
    We suspect that 'the cost of contact' is a more significant reason - whereby it is cheaper for research firms to send questionnaires and use bots to scrape websites automatically into templates than it is to commit analysts to in-depth engagement.
    Perhaps most significantly, ESG analysts do not ask for direct conversations with companies because these are never offered - hence, in a vicious circle, they are never asked for.
    In our opinion, companies should always reach out and seek direct dialogue with the companies that cover them as this typically leads to a much better understanding of the company by the analyst.

    Q Will investors deprioritise sustainability / ESG issues during an economic downturn?

    It seems highly unlikely. Sustainable investment grew steadily through the dot-com bubble of the late 90s; it grew consistently through the financial crisis of 2007 - 2008 and it appears to be continuing to grow through the COVID-19 crisis.

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    While there are arguments that economic downturns focus minds on financial fiduciary duty rather than other aspects of ESG. However, the environmental causes and social consequences of COVID-19 (combined with ongoing understanding of the climate crisis) makes it unlikely that the pace of sustainable investment / ESG is likely to slow any time soon.

    Q With whom from a company do SRI/ESG analysts or investors prefer to communicate?

    Analysts and investors like to communicate with different people at different stages: with CSR / sustainability managers for broad information on sustainability programmes; with technical specialists for specific aspects of practice; with members of executive management for issues of significant financial materiality; with non-executive directors for corporate governance related matters.  The key thing is finding the right communicator for the right message.