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‘ESG is the chief driver of meaningful shifts in IR strategy heading into 2022,’ states Foli Pontillo, global head of investor engagement and perception at Nasdaq, as she talks about some of the key findings from the firm’s third annual Global IR Pulse Survey.
This focus on ESG in IR might not be surprising on the face of it – we’ve all witnessed the shift that has taken place in the past couple of years as ESG issues have been thrust into the spotlight. But the numbers are still notable: almost 40 percent of IR professionals have an ESG-focused remit, with 18 percent of this segment serving in a lead ESG role, according to the research.
And this is something Pontillo says is seen across the board. ‘We were really intrigued to see how much of a stake IR has in ESG regardless of market cap, sector or region,’ she says. There are multiple drivers behind this ESG push, she explains, with IR professionals noting external pressures from investors, partners, suppliers and regulators, as well as internal pressures from employees.
Because of the rapid growth in the importance of ESG, this year Nasdaq garnered IR perspectives on ESG challenges. ‘At the top of that list is reporting and disclosure: knowing what to report, when to report, how to report and then, of course, formulating a credible and compelling ESG narrative,’ says Pontillo. Further, one fifth of IR professionals point to internal education and buy-in as well as proving the ROI on ESG efforts as another issue, per the research.
Key challenges facing IR
Looking back, Nasdaq’s survey finds that the most difficult decisions IROs made over the past 12 months centered on messaging around macro and/or regulatory headwinds, adjusting financial and strategic guidance, managing hybrid vs virtual engagement, and balancing their ESG priorities and roadmap with traditional IR efforts.
The greatest challenge IROs say they are grappling with – and one that Pontillo explains has occupied the top slot over the past three years – is attracting capital from generalist investors. ‘Generalists are viewed as an attractive segment of the marketplace to build long-standing relationships,’ she says. ‘Another key challenge is messaging around guidance and forecasts.’ This is something Nasdaq saw last year as well.
‘The Covid-19 pandemic led to difficulties in forecasting, and executives had to balance messaging around the near-term impact – positive or negative – with the longer-term outlook, strategic communications and effectively managing market expectations,’ Pontillo adds.
IR pressures
IROs, it seems, are not only taking on more in the ESG sphere but are also fielding more internal questions from the C-suite and the board. ‘Our survey also sheds light on IR professionals functioning in an advisory capacity to their CEO, CFO and board,’ explains Pontillo.
When it comes to the CEO, Mia Cvetkovik, senior analyst on Nasdaq’s global perception team, says the relationship with IR is focused on ‘narrative development, quarterly results messaging and themes across the shareholder base. Even being able to foresee market reactions to company developments.’
Then, with the CFO, Cvetkovik says ‘IR partners on guidance messaging, disclosures, ongoing engagement with investors and understanding market expectations.’
The research also points to increased inquiries from the board on stock price performance and volatility compared with prior years, as well as asks related to investor sentiment and ESG.
Virtual vs hybrid engagement
As IR deals with an increase in internal demands for time and support, investment professionals are also focused on the changing dynamics of the investor engagement, says Pontillo. The research finds that 33 percent of IR professionals are slated to host a hybrid, broad-scale event such as an analyst day in 2022, while half (50 percent) say they plan to host in-person site visits over the coming year. Pontillo notes, however, that the survey ran just prior to Omicron becoming an increasingly dominant variant.
‘As we move through new stages of the pandemic, many IR professionals remain on the fence in terms of what they do [around in-person or virtual events] – at least in the near term,’ she says.
Consider macro context, sharpen messaging and advance the ESG journey
Given all that’s going on in the world of IR, what advice do Pontillo and Cvetkovik have? ‘The IR professional must maintain a constant pulse on macro dynamics and external factors more than ever; the expectation from the investment community is that messaging should incorporate perspectives on these aspects,’ they say.
Cvetkovik also stresses the need to be concise and consistent in messaging. ‘Investment professionals are inundated with information, so it is up to IR to streamline the equity story and the way company developments are communicated to the market; such discipline is more likely to be rewarded,’ she says. It will also likely go some way to tackle that key challenge of attracting generalists.
What about on the ESG front? ‘The message for those IR professionals where ESG is still taking a back seat – maybe because there aren’t immediate pressures from regulatory bodies, internal parties or external stakeholders – is that they need to fully appreciate how various ESG factors not only impact their business performance, risk profile and prospects, but also increasingly influence buy-side appetites,’ concludes Pontillo.
