… for investors, companies and the research providers that support them ...
... if we all just keep calm, keep aligned to mainstream practice and keep learning!
There are many reasons to be negative about the outlook for sustainable investment & ESG as the industry is destructively battered in different ways by both the American right and the European left.
However, for those investors and companies that can keep their 'eye on the prize' and focus on the act of making better investment decisions and being better owners of companies through high-quality, well-directed and efficient information-sharing, there are rewards to be gained.
What's happening on the ground
Rather than puff further, let me share (in five bullets) some facts about a meeting that I participated in yesterday and let you draw your own conclusions.
- Finnish stainless steel company, Outokumpu, presented its sustainability strategy to 24 sustainable investors and analysts comprising an even balance of asset managers and investment research providers and an even balance of 'sustainability specialists' and 'mainstream’ investors and analysts.
- The company's Head of Investor Relations and VP Sustainability presented the company's approach to sustainability. Importantly, they described both the market context* in which they operate and their recent performance and their future plans.
- Investors and analysts then pressed the companies for answers to questions on topics of material sustainability and investment relevance: carbon pricing, CBAM, scrap availability, investment and return requirements for net zero targets and biodiversity.
- In giving answers, the company was able to describe what could be done within its own scope of authority, what depended on partnerships or markets and what depended on regulation.
- The whole call took an hour and - I believe - everyone went away having learned about the industry and each other's needs and priorities. As a result, investors are better able to make investment or stewardship decisions about the company and the company is better able to find more sustainable investor capital - from other investors interested in energy transition and circularity.
… and most importantly, it reminded me about how & why being an integrating sustainable investment analyst is the absolute best job in the world … and one that I will definitely go back to one day (… once I have fixed all of the communications inefficiencies in the value chain!)
(* This 'context' bit is so so so important and - if done well (as yesterday) prevents almost all of the problems that companies face when dealing with ESG. Yep. The problems companies face very very rarely arise from the data itself; they almost always arise from analysts' understanding of how to contextualise that data).
Equally important - in the context of where sustainable investment / ESG currently finds itself politically, here is what didn't happen:
- Investors and analysts didn't - in any way - micromanage, interfere with or nanny the company on anything. They left the company to infer (from the questions that they asked) what they consider to be important for investment decision-making … much like in 'mainstream investment' in fact
- There was no collaboration or collusion by investors ahead of the event … just as there isn't in 'mainstream investment'
- The topics didn't stray into meaningless detail about irrelevant issues - it stayed focused on the material issues … just as 'mainstream investor' meetings do
One improvement
The one thing that I would love to see - ahead of these meetings - is research published by sustainable investment research providers that help their investor clients understand the relevant issues and the key unknowns / variables.
This would - IMHO - improve further the quality of the meeting (for everyone) and be a significant value-add by research providers.
One question
Every company that I have ever worked with on meetings like this find them to be highly-constructive, highly-efficient, wholly-uncontroversial ways of helping investors understand their approach to sustainability ...
Importantly - for the current times - they don't require intricate reporting or collaboration or acronyms or ... as it turns out ... anything other than a Zoom account and an hour to spare.
So, here's my question for you: Why doesn't every company do it? Every year?
