Sergey Takhiev, head of IR at Russian steel company NLMK Group, describes the extent to which ESG is being discussed with investors
Are IROs dealing adequately with ESG interest from investors?
From the outset, NLMK’s IR team has been responsible for preparing Global Reporting Initiative reports, and this certainly helps to satisfy the needs of our investors for information on ESG issues. When we conducted perception studies during the last decade, we included questions on the company’s performance in CSR and governance, as well as how investors view our performance and what they wish to see from us long term.
Has your ESG approach been influenced by investors?
We learned through one-on-one meetings that one of our long-term institutional shareholders had altered its methodology to accommodate ESG performance, so ESG became an ongoing part of the IR agenda.
What do you see as the greatest challenge for an IR professional in dealing with ESG?
ESG is a broad subject, and lacks a clear common language and vocabulary. Some stakeholders have an interest in a particular aspect of the company’s performance but request figures that have been produced for a different fundamental purpose, which ultimately means it doubles the effort required to respond to their needs.
How has ESG investor interest grown in the recent past?
It has doubled over the last three years, from a fairly low starting level.
How do you ensure a commitment to ESG is not just lip service and that you are, in fact, doing something valid and real?
We provide case studies, updates on the ongoing – albeit gradual – progress we are making on the key metrics, and internal and external feedback on the company’s reputation and performance in the relevant rankings, as well as how our employees perceive this.
What’s your ESG reporting approach?
Our aim is to provide a wide-ranging but concise set of figures that enable investors and ratings agencies to track our performance easily. We strive to disclose more metrics in parallel with the evolving interest in ESG. We would temper this by noting that some external requests require too much private information to satisfy.
Who has primary responsibility for your ESG communications?
The CEO has primary responsibility, as he is accountable for progress toward our key strategic targets, which include ESG issues. In terms of the everyday communications with ESG investors, our IR team is the primary point of contact.
There is still a great deal of scepticism within the investment community about ESG. Why do you think that is?
Scepticism is likely the result of a lack of trust. Trust is built upon consistency, and I believe the approach taken to financial disclosure would be appropriate to ESG reporting. A set of universal guidelines for companies and audit requirements for ESG reporting would deliver this.
In which areas are you seeing the greatest ESG investor interest?
Continental Europe leads the way in terms of ESG interest, with particular interest in environmental and social issues, while UK and US investors have a greater focus on corporate governance.
What are the greatest barriers to meeting the needs of ESG investors?
Management support is paramount. We are quite lucky that our company has traditionally taken CSR and governance issues very seriously, which has proved to be a great help. We have an excellent track record on both CSR and governance, which from an IR standpoint makes it far simpler to cater for ESG interest.
This article appeared in the Fall 2017 issue of IR Magazine
