Although I currently find 2025 to be largely unpredictable, I feel pretty comfortable forecasting that:
- A gazillion hours will be spent casting and re-casting legislation to unpick or recreate (or not?!) regulation on sustainability disclosures by companies within Europe
- A bazillion hours be spent tracking, writing and reading about this process
- A squillion hours will then be spent (by companies) developing and redeveloping the systems required to implement the results of the process
- 96.3% of this time will be completely wasted
- … when all each company needs to do is to spend 20 hours and no money in direct communications with the investors that actually matter to them
I am obviously being a bit provocative but I have to ask: Why is the EU trying to introduce an omnibus when everyone else in the world is using Ubers?
(I must state at this point that I am only writing about investors and not about other stakeholders. In my capacity as a consumer, I will certainly be comparing Carrefour and Casino's CSRD-compliant reports before deciding where to buy brie and apricots on my next holiday to France).
Fundamental active investors use Ubers
A taxi is 'point-to-point'. Similarly, the relationship between a fundamental active investor and a the company that they invest in is focused and specific:
- The investor knows what information they need they need from the company and they can ask the company directly for it
- (This typically extends to a handful of financially-material sustainability factors and a small number of simple datapoints - which are largely used for compliance and reporting purposes)
- Importantly, the financially-material factors differ from individual company to individual company. Equally, most of the information that is relevant to investment decision-making lies outside the company's control anyway.
- The company can easily learn the names of the portfolio managers and analysts at the investors that matter to them (and the research providers that influence these analysts and can target their information needs specifically
- Institutional investors differ from most other stakeholder groups as they are few and individually-identifiable
The rationale above is why smart and progressive companies are now planning their schedule of sustainable investor-facing presentations and meetings for the year ahead.
Basically, these companies are behaving - in respect of sustainability - in exactly the same way as they behave in respect of other investor communications:
- Identify target investors and their needs
- Shape messages
- Communicate directly
- Repeat
The 20 hour / no cost 'Uber' solution
My time estimates for organising a once-a-year sustainability-focused update for investors - via Zoom - on your firm's sustainability exposures and responses are:
- 2 hours: To identify the investors and analysts that are relevant to your firm
- Tip: Start with your largest 20 investors and find out the sector coverage analysts at each.
- This can be done for free using the SRI-Connect / Directory
- 2 hours: To engage your team internally
- Tip: You'll need to engage the Head of IR & the Head of Sustainability / CSR (+ perhaps a couple of technical specialists)
- 1 hour: To set up a webinar presentation on Zoom
- This should actually 5 minutes but you might have forgotten your password or need to double check what settings to use for a group event etc
- 1 hour: To write an invitation to the webinar
- This should be super-short - just what (topics), when and who - no fluff. (Investors have too much in their in-boxes. A 5-line email is better than a 10-line email.)
- You can also advertise it to investors - for free - by posting details in SRI-Connect / Market Buzz
- … and don't forget to add it to the IR Events page of your own website
- 3 hours: To shape the presentation
- The best way to do this is to combine your core sustainability messages with your latest corporate strategy presentation
- We're always happy to give feedback (at no charge) to companies doing this - just so they can get an 'analyst's eye' view on it
- 8 hours: To chase investors
- This is the annoying bit (… but it can be outsourced at low cost).
- You have to get on the phones and on the emails to investors and analysts to ensure that your invitation reached the right person and that they have made space in their diary for it and etc. Don’t underestimate this step. It makes the difference between a poorly-attended non-event to an actively
- 2 hours: To deliver the webinar
- 1 hour for each member of your team
- 1 hour: To write up notes on which investors participated and what they were interested in … so that you are well-informed next time you are in contact with them
The advantages of direct contact with (and feedback from) the investors and analysts that hold companies' shares (over reporting into the void) should be self-evident … and are confirmed by the fact that once companies start with this approach, they tend to repeat it on an ongoing annual basis.
Most significantly: This is the way that companies communicate to mainstream investors. Why should sustainability be any different?
So, why do people think an omnibus is still needed?
Given how simple and productive (for both companies and investors) it would be to model sustainable investor communications on mainstream investor communications, we have to ask why this value chain has - instead - adopted an indirect approach that focuses on investors' supposed need for granular comparable data.
My best analysis is that the expectation that investors need granular comparable data is based on a number of deep-rooted and fundamental misconceptions about the use of information within sustainable investment decision-making
- The myth that sustainable investors use (statistical) quants investment techniques
- … which would certainly require comparable granular data
- … but there are a vanishingly small number of investors using such techniques - any reader should feel free to challenge this point by naming even one.
- The myth that investors make comparisons between companies on fundamentals
- … which would require comparability at a granular level
- … but they don't. They make comparisons based on ratios.
- Nobody compares GSK's market share in oncology with Merck's market share in neuroscience. The different denominator makes such a comparison ridiculous.
- It would be equally ridiculous to try to compare the emissions to water of these two companies
- The use of reporting and compliance to try to force action-taking by investors
- Reporting and compliance always favour quantitative data over qualitative information
- … but … if the reporting and compliance requirements don't actually cause the investment decision-making to happen … they get left behind as 'stranded' data requirements
- An asymmetric focus on risk over return
- … which appears to be pervasive and deep within the sustainability mindset and - in an investment context - is exacerbated by the market dominance of ("just don't take our toys") passive investors
- Knee-jerk data requests and data-centred business models
- … whereby it is the easiest thing in the world for an investor to ask for more data (for engagement purposes or speculative investment purposes) and for data-providers to claim investor use (on scant or spurious evidence)
Data junkies: Uncurable … but ignorable
This was supposed to be a short sharp blogpost based on the observation of a simple parallel.
It has turned into a monster. If you're still with me, thank you, sincerely! I feel I owe you a conclusion.
I think it is simply this:
"I couldn't help it," says the scorpion. "It's my nature"
- Regulators will regulate.
- Data collectors will gather data.
The dynamics of granular, comparable data collection within the sustainable value chain are deeply rooted and will drive forward.
But companies don't have to rely on the omnibus. Ubers are available to help them reach their investor destinations more directly and (in this case) more cheaply … and self-driving (via AI) is on the horizon.
