IR Magazine has recently released a report of good practices entitled “How to add ESG talking points to your earnings call”, as this topic has been increasingly relevant to investment decisions. According to a study conducted by ICR, a U.S. communications consultancy, 60% of the analyzed investors take ESG into consideration.
According to a Goldman Sachs report, not only are companies increasingly discussing ESG during their earnings calls (150 out of 500 earnings calls brought up ESG, according to a FactSet report from June to September 2021), but also it is the CEO who brings up the topic. Additionally, based on a 5-year analysis, the report shows that companies bringing up ESG during their earnings calls present better results. However, presenting a single PowerPoint slide on ESG or talking generally about it is not enough, you need to show that the company considers ESG a significant and valuable driver, using consistent and transparent communication.
Besides presenting ESG results during earnings calls because of its relevance, it is fundamentally important that the IR team communicate it to investors through its most used communication channels. An ICR study has revealed that 54% of investors believe social networks have an impact on their investment decisions, mentioning Twitter and LinkedIn as those networks that are the most effective to communicate with investors. Besides social network-based communication, it is necessary to update the company’s IR website, as it is the first platform used by investors to look for information. As a result, the Corporate Governance section has been increasingly used in recent years, and certain companies are even publishing ESG sections on their IR websites.
Also, it is necessary to assess what ESG-related topics should be addressed. Currently, ESG goes beyond climate, board diversity and governance. A recent Nasdaq analysis pointed out that human capital management, supply chain and corporate culture are among the most discussed themes. There are still no regulations on what ESG-related topics must be addressed by companies, even though this has been discussed among regulators across the world. But we know for a fact that the more information the company discloses, the better the effect will be. The more details the company reveals about its ESG story, the better the market perception will be, thereby including the company in benchmarks.
The report also emphasizes the importance of identifying the stage of ESG the company is at, so that it can focus on the adequate actions to be carried out. “Emerging” companies are those with little information on ESG, they are still considering metrics and KPIs and should focus on preparing an ESG section on their IR websites. “Familiar” companies are those comfortable with their ESG disclosures and should therefore focus on both measuring their ESG performance that will be presented to the market and on being well-positioned in benchmarks. Finally, “mature” companies are those with long-term innovation in ESG, are engaged in ESG structures and measures and should therefore focus on going increasingly deeper into ESG, having experts address specific subjects.
Regardless of the stage the company is at, the report addresses key points that should be implemented. The first is to prioritize the audience, creating a comfortable and transparent environment. Also, it could be interesting to increase the scope of investors attending earnings calls, inviting people engaged in ESG to ask questions and support the company during the debate. Another point made by the report is to spend time talking about specific topics rather than general ones, showing measurable data to the audience. It is also fundamentally important that ESG data is regularly communicated and brought up during most earnings calls, showing the company’s advances and telling its ESG story. However, presenting up-to-date ESG figures is not enough, the company should also present corporate projects and initiatives it has been undertaking, showing the value of the services provided.
Finally, the study also recommends that the company make ESG videos available, as this information reporting format is on the rise in the post-pandemic world. Additionally, it is also important to monitor what the market is thinking and talking about the company after the earnings release – this can be accomplished by conducting Perception Studies where market analysts are interviewed and express their opinions on the company and its results. Get in touch with MZ to learn more. Industry benchmarks are also recommended, so as to look at how ESG topics are being mentioned by the company and when. During earnings calls and meetings, it is recommended that management discuss ESG issues, stimulating in-depth debates in line with the company’s corporate strategies.
Click here for the full report made available by IR Magazine and sponsored by Notified.
The Studies Team