Corporate and investor panelists discuss the impact of the pandemic on the future of IR.

The market instability created by the global COVID-19 pandemic has resulted in an about-face from many investor relations teams. Is this pandemic presenting a catalyst to reshape engagement and the broader investorcorporate dialogue for the better? Or is it resetting the clock”, as organizations refocus on metrics for financial health while the long term looks increasingly unpredictable? 

On 24 September, FCLTGlobal hosted the Forum on Engagement, a conversation led by a panel of six investment and investor relations experts, to consider these questions and discuss the implications of shifting engagement practices for long-term value creation.   

Moderated by FCLTGlobal Head of Research Ariel Babcock, the panelists covered key subjects including the rise of multi-stakeholder capitalism, a heightened focus onespecially the social topics of environmental, social, and governance (ESG) related issues as a result of the global health crisis and spotlighting of pervasive inequality, and the increased demand for corporate transparency amid a turbulent year for business. 

On the latter, the corporate panelists agreed that more access and less opacity in investor communications will not only improve investor-corporate relationships but can significantly increase trust between investors and companies in the long term.  

“We want to communicate not just the tailwinds that were helping us in particular, but also the headwinds, and help the analyst community understand what the puts and takes were,” said one panelist.  

“If we’re going to fix the issues the world faces in terms of the transition that’s occurring post-pandemic, I think we need more [outspokenness] around these issues,” said another.  

The investor panelists agreed, confirming that visibility and transparency play a large role as they shape their views of companies, especially in the midst of periods of volatility. As one investor observed, 

“Volatility pulls people into survival mode, but this crisis could be the source of a significant shift in the investment landscape. Shifting consumer preferences and behaviors are likely to impact the future of real estate, changes in the retail environment, and accelerate shifts in the energy landscape. These are long-term trends that require long-term perspective to capture.” 

“As investors, we have an obligation to understand the nature of our investments and not confuse short term guidance with certainty. Things like the coronavirus shines a real light on that. In extraordinary times, no one has visibility. What I found, with the companies that withdrew guidance, it was really just a helpful tool to free companies up to talk about what the truth was,” said another of the investors on the panel. 

The rise and role of stakeholder capitalism was a focal point of the conversation, as it has been for much of 2020. More awareness of a company’s full array of stakeholders, in addition to shareholders, will force new decisions from companies as they consider their strategy well into the new decade. The panel agreed that this will carry over to a new model of investor communications that result in the wake of the pandemic.  

“We all have different words for it, but multi-stakeholder thinking – appreciating that shareholders are just one group of stakeholders that businesses have to deal with and have to make sure they’re looking after – if that sticks and carries on, that would be great,” said one panelist. 

Another panelist explained that, “the other thing that we have had more of during COVID is we just had letters from investors actually supporting the kind of the multi-stakeholder view, you know, making sure you do pay dividends, making sure that you do look after communities. Uh, quite a few letters actually through to the CEO is saying that they appreciate that. And that’s definitely a change. We rarely get that kind of letter from an investor.” 

“Trust in your CEO’s may be dropping, but it’s still high. It’s a lot higher than the trust in government. And there’s a huge opportunity and a critical need for the corporate sector to get on this and take the lead and say, ‘Hey, we’re doing this [multi-stakeholder capitalism]. We’re actually trying to drive good outcomes.’ And to the extent that the corporate sector doesn’t do it, I think we’re going to see more regulation and more enforcement,” one panelist emphasized. 

The onset of COVID-19 has undoubtedly changed companies’ immediate priorities. And while short-term demands have shifted quickly, it is also extremely important for companies to maintain their work on climate and other ESG-related issues, and to report on progress in a clear manner. 

On finding wider consensus around non-financial reporting: 

“We’ve found that both a challenge and an opportunity is that there is no standardization in how companies think about or report on ESG. Contrast that with accounting, where everybody has to follow GAAP or FASB, there’s not that much leeway in terms of your earnings. But you do have a lot of leeway in terms of ESG, and we have really found that companies that embrace that and own a strategic vision on ESG makes the whole process of assessing them [from an investment perspective] much easier.” 

“What I would like to see is metrics around how [a company’s] revenues are positively affecting communities, positively affecting supply chains, positively affecting the environment, and [see leaders that are] not being shy about tying the financial with the positive outcomes.” 

“Both investors and companies want to understand the materiality of data, and how that relates to long-term sustainability. There’s an opportunity to really have something like SASB become the de-facto reporting standard for companies, and I think that would really help in terms of understanding and looking at the materiality of some of these trends.” 

On balancing the near-term issues of the coronavirus and longer-term ESG-related issues: 

“We still want companies to think about the long-term impacts of ESG, and that will now include COVID-19, and will probably include it for a few years. We want companies to think about how COVID-19 is impacting [their] business, the supply chain, stakeholders, but we still want companies to think about the longer-term ESG issues as well.” 

“The pandemic really supercharged this sort of S part of that [ESG] dialogue and thought process within the company, the pivot was happening but COVID has really just reinforced that [need to pivot]. And actually the health crisis really brought clarity into the company around how we lay that strategy out.” 

Developing these key areas further will be crucial as companies and investors navigate the new landscape of their businesses in 2020 and beyond, and as FCLTGlobal furthers its mission to rewire global capital markets toward the long term.  

Thank you to  the panelists  for leading an informative  discussion, to the participants who were able to join us, and to all those who have contributed to our work on this important subject. To learn more about the  topics discussed here, view our  library of  resources  on fcltglobal.org  or follow  us  on social media @FCLTGlobal.  

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