Take control of SRI/ESG investor communications

It is in no-one’s interest that sustainability becomes a marginalised communication between CSR managers and SRI analysts.  It is in everyone’s interest that sustainability issues are discussed directly between senior management of companies and ‘mainstream’ analysts and portfolio managers.  However, introducing these unfamiliar issues into the heart of the dialogue between investors and companies needs to be done carefully.

With reference to the diagram, we illustrate three ways in which this could be done:

Route 1

Route 1 involves the introduction of sustainability issues directly into the most influential (A) relationship.  This has to be done carefully to avoid alienating either party.  Indeed it is advisable that three conditions be met before senior management are put in front of mainstream investors to discuss sustainability issues:

• The management member is confident about the subject matter
• The mainstream investor is open to engagement with sustainability issues
• The subject matter itself is relevant and of sufficient financial materiality to support a useful discussion between the two

The risk of forcing any one of these factors is that the resultant meeting embarrasses all parties and takes the whole agenda backwards rather than forwards.

Route 2

Route 2 is a three stage process that involves:

• Strengthening the sustainability element within existing relationships (marked ‘B’)
• Developing cross-disciplinary / cross-institution (‘C’) relationships and introducing sustainability into them
• Building up gradually to introducing sustainability issues into the most influential (‘A’) relationship

Route 3

A further option is presented by ‘specialists’.  Technical, regulatory or product specialists within companies often occupy a position that is different from the generalists that can be found in senior management and in CSR/sustainability functions.  They should be able to give deep insight into a particular area of a company’s practice or operating context that, if it has a social or environmental dimension to it could engage both ‘SRI specialists’ and ‘mainstream’ sector analysts. (Examples of such specialists might include the carbon trading specialist within an electricity utility, the head of R&D within an engineering business or the marketing lead of an ‘ethical’ brand within a consumer products company).

In general, we note that companies that seek to engage ‘mainstream’ investors have a choice between working through SRI investors or bypassing them.  The former strategy has sometimes worked; the latter never has.