At a panel hosted by La French Tech London about how ESG and sustainability can drive value for organisations, a particular question during the Q&A segment immediately gripped the room. “What do you think about climate dividends and companies incorporating this into their sustainability strategy?” It quickly became clear that this was somewhat of a foreign concept to many in the room, but one which was worth delving into.
In the quest for a sustainable future, the concept of climate dividends has slowly begun to emerge. They represent a mechanism that holds the potential to drive meaningful change by addressing both environmental concerns and economic inequality. Surprisingly, this innovative approach remains relatively unknown in the mainstream discourse surrounding sustainability.
Climate dividends involve returning carbon pricing revenues to citizens, linking environmental policy with individual economic well-being. This spurs sustainable consumption, innovation, and circular economy practices, bridging environmental goals with macroeconomic shift.
Climate dividends can be seen as a form of universal basic income derived from the revenues generated by carbon pricing or carbon taxation. The basic premise aims to be straightforward: as society transitions to a low-carbon economy, the carbon emissions of industries and individuals are regulated through pricing mechanisms. The revenues collected from these carbon fees are then distributed equitably to citizens in the form of dividends. This approach seeks to alleviate the disproportionate burdens faced by low-income households during the transition to a greener future.
These climate dividends lack awareness due to the complexity of the topic and its relatively recent emergence. While carbon pricing and carbon taxation have gained some attention, the concept of distributing the revenue back to citizens has yet to gain significant traction in mainstream discourse. Furthermore, it takes a backseat to discussions surrounding other climate policies and initiatives, such as renewable energy investments or emissions reduction targets.
Taking a step back, it’s worth noting the current pushback against the net-zero agenda. Recent events have prompted political and international scepticism around net-zero commitments. Across Europe, the resistance to green policies is fierce. Poland is suing the EU over its plans to the increase in the bloc’s emissions reductions target, Germany has blocked a ban on new combustion engines to protect the industry and the BBB Party in the Netherlands is in opposition to the government’s plans to drastically cut nitrogen pollution on farms, to name but a few.
As the EU aims to implement its Green Deal legislation and achieve net zero emissions, concerns over economic competitiveness and the capacity to absorb new laws have resulted in calls for a “regulatory break”. Ursula von der Leyen, European Commission President has recently stated the EU needs to assess its capacity to absorb multiple new environmental laws.
From a political standpoint, carbon pricing itself can be a controversial issue, as it requires consensus-building and economically, concerns arise regarding the potential impact of carbon pricing and dividends on business competitiveness, job creation, and economic growth.
These factors, combined with lobbying efforts, can hinder their widespread adoption: climate dividends might face similar political and economic hurdles, especially considering their limited recognition.
Climate dividends could be a powerful tool for organisations to demonstrate their commitment to sustainability and drive value creation. By actively supporting their implementation, organisations can showcase their dedication to carbon neutrality and attaining a sustainable future.
The pros of implementing a climate dividend scheme include the funding of renewables, which in turn will generate revenue for green initiatives and renewable projects and addressing inequality for low-income households during the transition to a low-carbon economy. Designing the dividend distribution system to ensure that these households benefit proportionately and are not adversely affected by the transition is critical. Overall, setting up fair and efficient dividend systems can be complex.
Climate dividends should be viewed within the macroeconomic shift toward sustainable growth. As economies embrace low-carbon strategies, this approach aligns with evolving economic models by directly linking environmental policies to consumer purchasing power. They can incentivise sustainable consumption, stimulate green innovation, and encourage circular business models, fostering economic prosperity.
From an organisational perspective, getting ahead of the curve and incorporating climate dividends in a company’s sustainability strategy can enhance its reputation among stakeholders and the public. Consumers would change their behaviours more if they can see the data and the impact.
Climate dividends offer a unique and holistic approach to addressing both environmental and social challenges as we strive for a more sustainable future. The impact isn’t just financial however, the incentive to change behaviours shouldn’t just be about meeting standards, but rather organisations’ willingness to play a pivotal role in driving positive change, supporting economic growth, and fostering a more equitable and sustainable world. We don’t yet know whether climate dividends will pick up steam in the mainstream, but I believe it is an idea that could eventually become a prominent and integral part of the sustainability landscape.
Over the past decade, the investor relations (IR) profession has undergone a substantial technological transformation, unlocking more effective and efficient communication between businesses and their stakeholders. From the online distribution of announcements to webcasting, webinars, and video conferencing, technology has become the cornerstone of effective IR practices. Now, a new epoch emerges as AI takes centre stage.
The integration of AI into IR offers unprecedented potential for enhancing efficiency, accuracy, and strategic decision-making. Yet, the path to fully harnessing AI’s benefits is accompanied by a trail of challenges that must be navigated with astuteness and adaptability.
A recent pulse survey conducted by Citigate Dewe Rogerson gives us an insight into how Investor Relations Officers (IROs) are approaching the adoption of AI. Despite the furore surrounding generative AI tools, like Chat GPT, over 50% of our respondents haven’t yet explored such tools (but do have the intention to). And, while around a quarter are already using generative AI in their roles, over 15% of respondents noted employer restrictions as the reason for not utilising AI tools.
The survey also reveals that while most IROs recognise that AI technology can support them in their role, they are yet to realise the full potential of AI and risk missing opportunities in an increasingly AI-driven investment landscape.
AI in investor relations: Beyond the mundane
In previous CDR insights, my colleagues have noted that AI in IR, and indeed communications more widely, primarily serves as a means to delegate mundane tasks and elevate efficiency. It was therefore unsurprising to see the survey confirm this suspicion.
However, a closer examination reveals the diverse dimensions in which AI tools are wielded by some IROs. From generating initial drafts of external communication materials and sentiment analysis to market intelligence and peer group monitoring, AI’s impact on investor relations is undeniable.
However, to unlock AI’s potential, IR teams must remain attuned to developments in AI technology and keep pace with the wider investment community’s adoption of such tools.
A new landscape of informed decision-making
Investors are increasingly using AI, including Natural Language Processing (NLP) to analyse materials and, ultimately, inform investment decisions so it was interesting to see that a staggering:
90% of survey respondents have never used AI tools to analyse their investor communications materials
96.8% have not examined their results calls or investor presentations for tone of voice and/or body language.
This gap in leveraging AI-generated insights leaves IROs uninformed of vital information that investors might be employing, thereby exposing them to potential hidden risks.
Preserving the human aspects of IR amidst AI integration
A resounding theme prevails – not only in our survey findings but through the conversations we have with IROs, analysts and investors: while AI’s growing influence on the investment community is undeniable, the fundamental human dimension of investor relations remains irreplaceable. This is particularly evident in relationship-building, trust, and nuanced communication. IROs concur that personal connections, access to management, empathy, and the art of translating corporate strategy into investor-friendly language are dimensions that AI cannot adequately replicate.
Navigating data challenges
While AI’s extensive capabilities are apparent, certain challenges exist relating to data confidentiality and protection, as well as concerns around the quality of AI-generated information. So, it’s no surprise that almost a fifth of our respondents referenced the existence of an established policy for the responsible use of AI and an additional fifth have a policy in development. The absence of policies among two thirds of respondents raises concerns about the potential governance risks companies face by not setting out clear guidelines for the use of AI by employees.
Striking the balance
As AI continues to impact the investment community and the role of investor relations, it’s key that IR professionals strike the right balance between embracing technology in a considered manner and preserving the essence of human connection. By doing so, they can pave the way for a future where AI augments their capabilities, allowing them to serve investors with greater efficiency, accuracy, and depth of insight.
If you have any questions or queries, please do drop us a line: email@example.com
During the first half of 2023, the NASDAQ index demonstrated remarkable resilience, defying macroeconomic headwinds and surging by an impressive 38%. Despite this positive momentum, the US IPO market has been subdued for the past 24 months as companies approached it with caution. However, recent indicators suggest that brighter days lie ahead. With the Federal Reserve pausing interest-rate hikes and inflation showing signs of decline, the outlook appears more stable, prompting a potential change in the IPO market’s dynamics.
Green shoots of recovery are already visible. For instance, Cava, a fast-casual Mediterranean restaurant chain, made a noteworthy debut on the New York Stock Exchange, raising $318 million on an oversubscribed book and witnessing a staggering 117% share price increase on its first trading day. Similarly, Johnson & Johnson’s consumer business, Kenvue, achieved a valuation of approximately $47 billion, establishing itself as the largest US IPO since 2021.
Another significant example is Softbank’s chipmaker, Arm Holdings, which has reportedly filed to sell its shares on NASDAQ. This highly anticipated IPO is targeting a valuation of $50 – $60 billion and aims to raise $8 – $10 billion, injecting further enthusiasm and investor appetite into the already active US IPO market.
Even this week it was reported that private equity owners of German sandal maker Birkenstock are considering an US IPO which could be valued by as much as $8bn.
Barrett Daniels, US IPO co-leader at Deloitte, emphasizes that these success stories are part of an emerging trend. In fact, by his estimations there are over 1,000 companies worth more than $1 billion eagerly await their turn to go public in the US. As market sentiment continues to climb, Daniels predicts that these companies may make their move sooner rather than later.
Recent developments also highlight the US IPO market’s favorable conditions compared to Europe and Asia. While inflation remains persistent in those markets, the US benefits from more favorable economic conditions, with the Federal Reserve’s cautious approach and declining inflation.
Moreover, the US market’s success can be attributed to its streamlined and investor-focused framework, setting it apart from Europe’s stringent regulations which are increasingly being criticized for being overly bureaucratic and as unfriendly to businesses
Similarly, the absence of a unified IPO framework across countries in Asia, creates protracted and often complex listing processes deterring potential IPO candidates from listing there. As a result, companies seeking streamlined and investor-friendly markets often turn their attention elsewhere.
The global capital raising environment remains competitive, however. Start-ups are still having to carefully strategize how to set themselves apart from te competition. Though the tools at their disposal remain largely unchanged, the high level of competition demands perfect execution.
Therefore, the positive momentum in the US IPO market compared to that of Europe and Asia cannot be overstated. Companies are naturally inclined to fundraise where they have the highest chances of success. While it remains to be seen if the US will retain its attractiveness as the most sought-after IPO market post-pandemic, the outlook continues to be optimistic for the sector, and we remain eager to observe its developments with great interest.
As a global agency we are fully aware of the different market dynamics when it comes to IPOs and can advise our clients accordingly wherever they choose to list.
The Hong Kong government has high hopes that its new tax regime, which provides profits tax concessions on qualifying transactions of family-owned investment holding vehicles managed by single family offices, will encourage more family offices to set up and operate in the city, create new business opportunities for the asset and wealth management sector and generate demand for other related professional services.
Globally, the family office market is forecast to grow to USD 16.71 billion in revenue in 2025, from USD 11.08 billion in 2019. According to data from Forbes, New York City has the most billionaires in 2023 at 101 people, followed by Hong Kong with 70 billionaires, and Beijing with 68 billionaires, and this concentration of wealth is making Hong Kong the emerging regional hub for family office business.
When family offices decide where to set up their operations and locate their investments, tax treatment is often a key factor influencing their decisions. However, there is a geographical component too: Hong Kong is strategically situated within North Asia and is a gateway to the Greater Bay Area and China as a whole making it a top choice for families looking to tap into opportunities in this region.
While each family office may have different needs, there are some essential aspects that most family offices value: a sophisticated financial services environment, ease of doing business across borders, and convenience of communication and travel. However, a family office is more than just about investing. It is also about passing on and enriching a family legacy, which includes educating the next generation on topics such as family governance, entrepreneurship, and philanthropy.
Philanthropy, in particular, is a growing focus for Asia’s Ultra-High-Net-Worth Individuals (UHNWIs), as they allocate more of their wealth to good causes. Many family offices now seek to combine capital preservation with supporting broader societal value and solutions to pressing global problems and next generation heirs are particularly keen to steer family office investments to ESG and sustainability themes. However, most family offices are ill-prepared for the demands of greater transparency, public scrutiny and crises.
As family office profiles and influence skyrocket, the ever-increasing demand for transparency and information exchange is a growing concern for more than half of family offices. As this trend continues, controlling the narrative, internally and externally, is becoming imperative. To this end, families are starting to borrow from the playbook of asset managers, investment banks and corporates to deploy sophisticated communications strategies to better access investment opportunities, attract talent and manage reputation.
Private market investors transformed their communications approach in response to growing competition, regulation and public scrutiny, and family offices are now doing the same. As in private equity, family offices should tell their story through their portfolio companies. By communicating the positive impacts of their investments in operating businesses, family offices can craft a reputation as desirable investors and responsible community members, improve access to deals and talent, and mitigate negative attention.
To do this successfully, family offices need to identify relevant journalists to help them tell their stories. However, they must build media relationships before they need them. The default position of many family offices is to hire communications advisors after a crisis strikes. Families should engage advisors before a crisis occurs and develop a plan that assesses potential risks, anticipates future issues and sets out the operating principles and practices for a variety of possible scenarios.
Family offices should also be doubling down on creating their own content to complement the information they share through the media. This could include content about their investment approach, specialism or sector focus, information about their investment portfolio, and stories about the business, philanthropic or personal interests of the principals.
As family offices open up about their objectives, investment approaches, and philanthropic activities, they become relatable to their stakeholders and employees, the media, those seeking investment and the greater public. This allows them to craft their reputations as desirable employers and investors as well as responsible and engaged citizens who want to make a positive impact in the world.
Over the past few years, the demand and sophistication of wealth management solutions by UHNWIs in Asia has increased, giving rise to the emergence of family offices as key players in the region’s economic scenario, and the evolving role of these organizations and the growing responsibilities they take on present new strategic challenges from the point of view of communication and public affairs.
Family offices need to reorient their thinking to focus on larger strategic goals, including transparency, effective communication and reputation management. Those who continually focus on integrating them across their organizations will find themselves in better positions to face the challenges and take advantage of the opportunities that present themselves in the coming years.
Not a week goes by without the news of a new activist campaign being launched. Activist hedge funds generate significant news coverage in the financial media because their campaigns to achieve change at target companies are often rich in drama and colour.
An observer might be forgiven for thinking that activist hedge funds are financial markets’ carnivores, red in tooth and claw, that positively relish the chase and the kill.
But almost invariably, a public campaign is a last resort for an activist investor, a course only embarked upon after their previous attempts with the company’s management to achieve change behind closed doors have failed.
Many activists will say that they prefer to think of themselves as ‘constructivists’ or ‘suggestivists’ that are aiming only to provide good ideas to management, indeed that they are a source of free management consulting.
Indeed, the ideas need to be good because it is usually the views of the other investors in the company that matter most, and they who need to be convinced of any change of strategy.
So a successful activist campaign has to win hearts and minds and ultimately needs to be seen as increasing shareholder value for the company’s shareholders as a whole.
Therefore, it is not the most aggressive campaign that is likely to win, but the one that is most sensible. The loudest voice doesn’t win, the most reasonable one does.
That is why any company seeking to defend itself from an activist campaign will typically seek to paint the activist as acting in its own, short-term interests, rather than the interests of shareholders as a whole.
And it is why an activist attempting to gain traction for a change of corporate strategy has to demonstrate what is going wrong and explain how they can fix it.
To do so, they will have to demonstrate that they understand the company better than its own management. It is not so absurd as it sounds. Some management teams have admitted they were astounded how much detail activists had gone into and how they knew things management did not.
But does this all really deliver results? Academia is divided. “Governance by Persuasion: Hedge Fund Activism and Market-Based Shareholder Influence”, published last year by distinguished academics Alon Brav, Wei Jiang and Rongchen Li, argues that “the empirical evidence supports the conclusion that interventions by activist hedge funds lead to improvements in target firms, on average, in terms of both short-term metrics, such as stock value appreciation, and long-term performance, including productivity, innovation, and governance.”
But “Barbarians Inside the Gates: Raiders, Activists, and the Risk of Mistargeting” by Zohar Goshen and Reilly S. Steel in the Yale Law Journal, comes to a quite different conclusion.
They argue that “the conventional wisdom about corporate raiders and activist hedge funds—raiders break things and activists fix them—is wrong. Because activists have a higher risk of mistargeting—mistakenly shaking things up at firms that only appear to be underperforming—they are much more likely than raiders to destroy value and, ultimately, social wealth.”
Regardless of who is right, one thing is clear. An activist campaign is won and lost in the public domain. To prevail, the winning side must influence the influencers, ie they must explain their case to the journalists writing about it better than the other side.
Christen Thomson is a Senior Director at Citigate Dewe Rogerson specialising in hedge funds
Ever since I graduated from university and entered the world of communications, ESG has consistently been a top priority for all my clients and constantly makes headlines. Throughout my career, I’ve witnessed businesses that have truly led the way in this space as innovators, while others have failed spectacularly. However, in most cases, news stories on ESG feature similar lines from businesses wanting to appear proactive without drawing too much attention to themselves.
Imagine my surprise, then, when I found myself immersed in Coldplay’s Sustainability Report. Yes, you read that correctly—the British pop band that has dominated the charts for over 20 years has produced a comprehensive sustainability report ahead of their current tour. What’s more, it is refreshingly simple, thorough, and ambitious, qualities often lacking in corporate ESG messaging. It involves the entire value chain and discusses tangible goals, empowering the reader to make a difference.
Measurement and Alignment
The first aspect that caught my attention in the report was the emphasis placed on measurement, processes, and alignment with internationally recognised frameworks. Coldplay has adopted the United Nations Framework Convention on Climate Change (UNFCCC), benchmarked their current tour against the previous one, and set clear goals to reduce their CO2 emissions by 50%. They have also outlined various initiatives and partnerships that are enabling them to reach these goals, providing transparency and accountability essential to a robust sustainability policy.
In ESG reporting, the validation of a third party with authority in the space helps legitimise your approach. While many businesses use organisations such as B Corp or the Science-Based Targets initiative (SBTi), Coldplay had their report assessed and validated by John E. Fernandez, Director of the Environmental Solutions Initiative at MIT. By ratifying the methodology for the report with a respected thought leader in the field, it lends confidence to the example being set.
Another remarkable feature of Coldplay’s report is its clarity. Sustainability reports often tend to be dense and difficult to navigate, filled with complex jargon and technical language. Coldplay breaks away from this trend by presenting their report in a clear and concise manner accessible to all readers. They offer a well-structured overview that highlights key achievements, challenges, and future goals.
By simplifying the language and focusing on the essential information, Coldplay ensures that their message reaches a wider audience. This approach not only enhances transparency but also fosters engagement and encourages stakeholders to follow their example and take action.
Coldplay’s sustainability report goes beyond mere numbers and statistics. It tells a compelling story that inspires their stakeholders and audiences to become agents of change. The report emphasises the band’s commitment to reducing their carbon footprint, supporting renewable energy projects, and promoting social justice initiatives.
Moreover, Coldplay’s report doesn’t shy away from acknowledging their challenges and areas for improvement. By being honest about their shortcomings, they demonstrate their willingness to learn and grow. This level of transparency is vital for fostering trust with stakeholders and encouraging other businesses to do the same.
Translating Clarity into Business Reporting
As a communications professional, I wonder how corporations can learn from the approach taken by this pop band. Here are a few key takeaways:
Simplify Complexity: Businesses often fall into the trap of using technical jargon and convoluted language in their sustainability reports. By simplifying complex concepts and using plain language, companies can effectively communicate their sustainability goals and progress to a wider audience.
Tell a Compelling Story: Sustainability reports should go beyond dry data and numbers. They should connect with readers on an emotional level and inspire them to take action. By highlighting the positive impact of sustainability initiatives and sharing personal anecdotes, businesses can build a sense of purpose and rally support from stakeholders.
Embrace Transparency: Coldplay’s sustainability report sets a shining example of transparency. Businesses should be forthcoming about their challenges, setbacks, and plans for improvement. This level of honesty builds trust and credibility with stakeholders, encouraging meaningful engagement and support.
Focus on Visual Communication: Coldplay’s report effectively uses visuals and infographics to convey information. Businesses should follow suit by incorporating visual elements to enhance the readability and impact of their reports. Visuals can help simplify complex concepts, highlight key data points, and make the report more engaging.
Engage Stakeholders: Coldplay’s report actively engages readers by presenting a call to action. Businesses should do the same by involving stakeholders in the sustainability journey. This can be done by interacting with various stakeholders and seeking their views, fostering a sense of collective responsibility.
Coldplay’s sustainability report goes beyond being a mere documentation of their environmental efforts. It sets a powerful precedent, not only for the music industry but for all those seeking to communicate their sustainability and ESG initiatives. By prioritising clarity, inspiring action, and embracing transparency, Coldplay showcases the positive impact that a well-crafted sustainability report can have on stakeholders and the wider community.
Join us as we explore the evolving landscape of retail investors and the communication strategies required to engage with them effectively. In our first episode of CDR’s new insights series, People Opinion Perspectives (or POP for short), we speak with James Deal, co-founder of PrimaryBid, and Sandra Novakov, Head of Investor Relations at CDR, as they share their insights and experiences in dealing with the challenges and opportunities of engaging with this growing faction of the investment community.
CDR was proud to support the Investor Relations Society conference hosted last week in London. Following disruption from the pandemic in 2020 and 2021, and rail strikes in 2022, the 2023 conference felt like the first opportunity in a long time for the IR community to come together to share insights, experiences and best practice.
The conference, hosted once again by journalist Evan Davis, had a wide-ranging agenda and an impressive line up of speakers and panellists from CEOs (from TalkTalk and Informa) and IROs (including those from British Land, GSK, Haleon, LSEG, Redde Northgate and Segro), to fund managers (from Invesco, Legal & General Investment Management and Norges Bank) and bankers (including from Bank of America, Credit Suisse and Goldman Sachs).
Perhaps unsurprisingly, given its rapid rise in recent months, AI was the thread that ran throughout the sessions, replacing ESG as the hot topic in previous years. While Goldman Sachs economist, Fillippo Taddei, reported that 25% of tasks we currently do could be replaced by AI, the consensus view throughout the conference was that human interaction can’t be replaced or replicated.
Despite being relegated to second place by AI, ESG clearly remained an important theme throughout the conference. But perhaps in a more embedded way than in the past, giving credence to the view that it is succeeding in becoming integrated. While the ‘E’ remains more of a standalone topic – with a panel session dedicated to TCFD and scenario analysis – the lines are more blurred when discussing ‘S’ related themes. In the wake of the CBI and Crispin Odey scandals, the handling of matters such as these arose in conversation. In his opening remarks, Evan Davis, with reference to the #metoo movement, noted that “often, the handling of [an incident] gets judged more than the occurrence itself” and in a later fireside chat, Sanjay Nazerali (Brand President, dentsu X) commented that “people don’t mind mistakes as much as the cover up” reinforcing the importance of authenticity, accountability and transparency from companies and the individuals running them.
Another theme that emerged through many of the conversations was the importance of clarity. Hardly a surprising observation, but one that was made most notably by the panel of investors who urged companies to simplify messaging and make content digestible and accessible to generalist portfolio managers.
At an event dominated by listed-company representatives, it was fascinating to hear from Tristia Harrison, CEO of TalkTalk which was taken private in 2021. Having begun her career in investor relations, and having led TalkTalk as a listed business, her observation of IR for a private company is that “it’s not really different” as the core principles of good governance and transparency still apply. She did, though, concede that it can be “easier to do some things out of public glare.”
While delegates from private companies will have been unlikely to join the ‘consensus management’ panel discussion, it was a well-attended session covering the use of consensus management tools, the importance of intra-period communication for short term expectation management and broader capital markets events for longer term prospects and the potential of AI around the qualitative aspects of managing consensus (but not the quantitative ones!).
Through the fireside chat with Informa’s CEO, Stephen Carter, it was evident how much value he, and the company, placed on IR. Looking back on the outset of Covid, he reflected that when turning to debt and equity investors to raise capital, the relationships they had really mattered. The fact that investors knew them well and trusted management counted for a lot, commenting that they were “100% in a better position because of good IR in the past.”
There was so much valuable content covered over the course of the day, it’s impossible to summarise it, but some of the top practical take-aways we wanted to share are:
Develop a clear and concise narrative: Regardless of the complexity of your business, it is important to have a succinct story that can be easily understood by investors.
Target a broad investor base: With UK investors having broader remits and competing globally for capital, companies should make sure they are appealing to generalist fund managers and not just sector specialists.
Leverage existing relationships when targeting new investors: Seek tips and introductions from existing investors to potential investors and ask brokers for information on who is downloading their research to inform your engagement strategy.
Invite investors to your offices for face-to-face meetings: they find this valuable for getting a feel for your corporate culture and gaining exposure to the broader management team
Collect feedback from investors during meetings: Leave time at the end of each meeting to collect direct feedback on how investors perceive the company and its investment narrative.
Be mindful that investors are increasingly using social media for research: Investors use social media platforms like LinkedIn, Glassdoor, and web scraping to research company culture and background information. Twitter is seen as less relevant for this purpose.
Engage with sales teams: In a post-Mifid II world, engaging with sales teams is increasingly important as they can provide valuable insights and often have a broader view of the market.
Focus on effective and meaningful communications: Bite-size group events can be more effective than lengthy CMDs in educating the market; in any case, only host an event if you have something meaningful to communicate. Consider breaking down CMDs into smaller segments and make them available as videos/webcasts.
Prioritise engagement at conferences: Assess the attendees and prioritise engagement accordingly. Asking investors about their preferred conferences can provide valuable insights. Additionally, identifying the attendees and sending direct emails to arrange meetings can lead to high-quality interactions, although the response rate may be low.
Focus on governance and reputation management: Representatives of Vanguard and LGIM emphasised the importance of governance in the context of ESG and making board directors available for investor meetings. ‘Me too’ type issues, which have a social element to them, result from poor governance when appropriate checks and balances are not in place to prevent dominant leaders from abusing their power.
Take a glance at some of the recent news headlines and it’s clear that litigation around ESG is a hot topic.
The prospect of reputationally damaging lawsuits is cited as the reason behind one investment bank pulling funding for new gas projects. Then there are employers like P&O Ferries who dismissed staff via video call and text message. P&O quickly found themselves in the firing line – with litigation around unfair dismissal. The E, the S and the G are becoming ever more entwined – and litigation is becoming a common theme.
With increased scrutiny and stricter regulatory requirements regarding ESG disclosures, the risk of litigation for companies in breach of regulation is rising. Good governance is essential and in our view there’s an opportunity for communicators to work closely with legal counsel to advise what companies need to prepare and mitigate risk.
Last week CDR and Clifford Chance convened an expert panel under Chatham House rules at the Royal Society of Arts to unpack what ESG litigation is, the trends, role for communicators and how individual Directors can find themselves as much at risk as the company they represent.
In the room? Senior communication leaders, regulatory experts to some of the UK’s largest listed companies as well as advisers to fast growing but sometimes resource constrained growth companies. For this latter group, interpreting the wave of ESG regulations remains a significant headache. So, what were some of the key things we heard?
What we mean by ESG litigation
There is a lot of focus currently on litigation arising out of climate related causes but the challenges for businesses in managing the “S” were highlighted by some of the missteps we saw in the reaction to Covid, “Me Too” and the killing of George Floyd. One panellist joked how companies have historically thrown around green claims ‘like confetti’ but those days are now coming to an end. Roger Leese, Partner at Clifford Chance:
“For many businesses risk will lie in a misalignment between their public claims and reality. The golden rule therefore is to say what you do, and do what you say.”
What are the big ESG litigation trends?
New assessments of companies are being formed in the capital markets. Non-financial metrics are increasingly the norm. The London Stock Exchange Group has launched the Green Economy Mark, which recognises London-listed companies which derive more than 50 per cent of their revenues from products and services that contribute to environmental objectives from climate change mitigation and adaptation to the circular economy. Claire Dorrian, Head of Sustainable Finance, Capital Markets and Post-Trade at LSEG:
“This is a fast-changing landscape, the role of a Corporate Sustainability Officer didn’t exist the way it does today, 4-10 years ago.”
Evidence verification is becoming even more crucial. Simon Gleeson, Partner at Clifford Chance:
“Never allow anybody to say anything unless someone has decided this is true, know what you have said and if you set targets ensure there is a paper trail to substantiate this.”
The role for communicators
Communications alone should not be viewed as a substitute for a carefully mapped out ESG strategy informed by a robust materiality analysis. Lorna Cobbett, CEO of CDR UK:
“Ultimately, it’s about accountability and how you manage your reputation. You also need to articulate the journey that you’re on with full transparency. Your audience goes beyond investors and every stakeholder needs to be considered.”
It was also noted that ESG litigation is not always about financial action but can often be about challenging behaviours and holding companies (and individuals) to account for their actions.
The digital world has also made an impact as there is now a permanent record of what a company has said and when. Doing due diligence on a company is enhanced by Natural Language Processing allowing anyone to see exactly what was said, when – and who actually said it.
The consensus on the panel was that communicators with proximity to the board and ability to influence senior leaders gave them a key role to work alongside legal counsel to map the risks a client might be able to face. Eleanor Hervey-Bathurst, Associate at Clifford Chance:
“There can often be a discrepancy between sales teams who are keen to promote green credentials of products and the legal team who understand the burden that brings. Good communication between all parties including reputation advisers is vital to ensure that products do as marketed.”
The good news is there is a path forward to safeguard reputation with ESG upskilling, mapping key stakeholders and engaging in the right way and the right time key to success. Roger Leese, Partner at Clifford Chance:
“The connection between the comms advisers, risk/compliance and legal team is pivotal when mitigating ESG risks. Ensure you engage with NGOs earlier and be transparent to mitigate the risks.”
The organisation, Chapter Zero equips non-executive directors with skills and knowledge around the impact of climate change and what is needed to build robust plans and measurable action. Sharon Flood, Fellow at Chapter Zero says boardroom education is critical:
“There is a need to ensure companies can upskill their board of directors to meet ESG expectations.“
With new research this year from the World Business Council for Sustainable Development highlighting that lawsuits against companies concerning ESG issues have risen sharply, expect to see a continued focus on activities in the value chain, breaches of policy and regulatory frameworks (which are getting more stringent and at various stages at a national and supra-national level) and more cases around ‘softer’ laws such as biodiversity conventions, OECD guidelines and more. ESG litigation is not going away.
Huge thanks to our stellar panel for their contributions.
Kishida’s support ratings rise, focus shifts to chances of an early general election
The conclusion of an expanded Group of Seven summit in the western Japanese city of Hiroshima was the last of a series of foreign policy wins for Japanese Prime Minister Fumio Kishida that has bolstered his domestic ratings, which is feeding speculation that he will dissolve parliament and call a general election.
Ukrainian President Volodymyr Zelensky’s surprise visit to the summit was widely reported in Japan as an example of Kishida facilitating discussion on Russia’s invasion of Ukraine, which is one of the most significant geopolitical risks facing the global economy.
Inviting Brazilian President Luiz Inacio Lula da Silva and Indian Prime Minister Narendra Modi to the summit also displayed the Japanese government’s will to expand debate and include emerging market countries in the Southern Hemisphere, recently known as the Global South, in acknowledgment of their rising influence on the global economy.
By hosting the G7 in Hiroshima and using the Atomic Bomb Dome, which is one of the only structures left standing after the US dropped an atomic bomb on the city almost 80 years ago, as a backdrop for his closing press conference, Kishida sent a powerful visual message to the world about the costs of war and won approval from domestic supporters of Japan’s pacifist approach to global affairs.
The G7 leaders’ final communique, issued a day earlier than expected, included stronger language about the importance of peace across the Taiwan Strait and a condemnation of North Korea’s launch of several ballistic missiles into the Sea of Japan that were not in last year’s communique, so Kishida can say he convinced G7 countries to express their concern about the significant risks that lie at Japan’s doorstep.
Japan’s courting of foreign semiconductor companies has also borne fruit. Micron Technology Inc and other chip makers are planning to invest billions of dollars into manufacturing their products in Japan and into training future semiconductor engineers. This is significant because Japan could regain the share it has lost in the global semiconductor market as G7 countries draw up plans to diversify their supply chains away from China.
In the months leading up to the G7 summit, Kishida managed a surprise visit to Ukraine to meet Zelensky and became the first Japanese prime minister to travel to South Korea in five years when he met South Korean President Yoon Suk Yeol in Seoul earlier in May. Japan also invited Yoon to attend the G7 summit as an observer as the neighbouring countries seek to improve ties.
The latest round of public opinion polls show an increase in support for Kishida after the G7 summit, but the biggest question political journalists are trying to answer is how Kishida will use this increase in approval ratings.
One argument is that Kishida should dissolve the lower house either before the current session of parliament ends on 21 June or sometime later this year and hold general elections to capitalise on his recent foreign policy gains. In his public statements so far, Kishida has ruled out this option. This may be prudent, because some Japanese political analysts say this approach could easily backfire because Japanese elections tend to be won or lost on domestic policy, and Kishida’s domestic policy record is less convincing.
Kishida has been in office for less than two years and has so far struggled to provide new ideas for solving some of Japan’s long-standing problems, such as the declining birth rate, a rapidly ageing society, low wage growth, and the loss of corporate competitiveness.
In by-elections held last month for five parliamentary seats, Kishida’s ruling Liberal Democratic Party (LDP) lost one seat in the lower house. The LDP won the remaining four votes, but one victory was by a margin of less than 400 votes, which highlights the risks when you do not have an abundance of positive messages about domestic policy to communicate to voters.
If you go back to ancient Greek literature, philosophers like Aristotle and Plato wrote about the possibility of creating intelligent machines that could perform tasks in a human-like manner. Today, artificial intelligence (AI) dominates the headlines and is impacting our everyday interaction, from dinner recommendations on food delivery apps to wearable tech diagnosing early signs of medical trouble.
Following my colleague’s dissection of why AI will likely augment the work we do as communications advisors, I thought it was worth exploring ways in which it is already exists in the Investor Relations (IR) industry.
Traditionally, IR has been seen as a field which needs a human touch and a friendly face. While this is still fundamentally true, there have been a number of interesting developments which have made it increasingly important for IR professionals to have a firm grasp on AI, and how it can be used to our clients’ advantage.
The first of which is in financial media and the rise of programmed journalism. This can be seen most obviously at Bloomberg and their increasingly sophisticated Cyborg algorithm. For several years, the firm has been investing in AI software which analyzes financial reports as soon as they are released and almost instantaneously publishes news items which incorporate all essential information.
In March, Bloomberg also announced updated information on their Automated Intelligence system, highlighting its capability to predict market events with Natural Language Processing and sentiment analysis. For an IR professional, it is becoming important to understand how these systems work and their limitations to evaluate how a client’s messaging and key figures are included in automated articles. Failure to do so could have a material impact on trading at market open.
AI has also been tipped to start encroaching on one of the very cornerstones of the IR profession. Gartner, the prominent Management Consultants, expect 90% of material in quarterly financial reports to be synthetically generated by the year 2025. That is a significant upheaval of the results process engrained in many of those from our industry.
There is a danger of looking at developments such as these as a threat to advisors, but I would disagree. In my colleague’s article mentioned above, this level of automation frees up a significant amount of time for IR practitioners to think more deeply about the core messages they are trying to convey and the overall equity story they are trying to tell.
Not only is AI set to streamline the work we can do for our clients, it also promises to fundamentally change their businesses.
A report by CCW Digital recently suggested that by the end of the year, over 80% of organizations will be looking to implement some machine-response capability.
This creates an imperative for comms advisors to understand these systems in order communicate the commercial benefit they are having in their clients.
Indeed, in a recent IR Magazine Webinar, speakers urged IR professionals to use ChatGPT and other artificial intelligence technologies in their daily work to gain a better grasp of this new technology. Efficiency, thoroughness of data assessment, and the ability to accommodate a talent that would otherwise need to be outsourced were just a few of the benefits which were discussed. Christoph Greitemann, a senior IR manager at Deutsche Telekom, said that his group utilized ChatGPT to write website content and postings for social media. Although the feedback was “never exactly what was needed”, he acknowledged that 80% of it is there, leaving 20% to finish manually.
However, this is not to say that utilizing artificial intelligence in Investor Relations will be without complication. It is a profession that is dominated by various regulations which will take time to catch-up with AI. In the interim, a level of human due diligence will be essential to catch any mistakes or inconsistencies thrown up. Furthermore, AI is still a nascent technology, particularly for this industry, and it is difficult to truly estimate the extent of its positive impact.
Nevertheless, while IR teams should remain cautious about using this technology, it is undeniable that AI will continue to change the nature of Investor Relations and reshape the financial landscape. Being an authority on the space and knowing how to best use it can give a competitive advantage that sets advisors apart from the competition.
As artificial intelligence (AI) continues to grab headlines, it is becoming increasingly vital for communications advisers to understand its impact on clients and our industry. Russell Shen from CDR’s US office, has put down his thoughts on how AI is transforming the Investor Relations (IR) industry. He emphasizes the critical need for IR professionals to keep themselves abreast of new AI developments to stay ahead of the curve and effectively serve their clients.
Potential crises and side effects of aggressive interest rate hikes pose communications challenge for policymakers
This week, Japan is playing host to a critical meeting of finance ministers and central bank governors from seven of the world’s richest nations as part of the G7 summit. The gathering of some of the most powerful figures in international finance comes at a pivotal moment, with the global economy and financial markets facing heightened risks. As policymakers seek to tackle stubborn inflation, recent turbulence in US markets and the ongoing economic impacts of Russia’s war in Ukraine, the outcome of this meeting promises to have far reaching effects
Turbulent times in the US
The meeting comes at a time of acute tension in the US, with government at risk of shutdown unless Congress raises the debt ceiling by June 1st. Indeed, US Treasury Secretary Janet Yellen warned that should this happen there would be a risk of unprecedented defaults , unleashing financial turmoil on the markets.
Meanwhile, the sale of failed US regional lender First Republic, one of three US bank failures in less than two months and the largest collapse in US banking since the 2008 financial crisis, has not stopped a slide in shares of other US regional banks amid growing signs that there are more problems lurking in the US financial sector.
Furthermore, the next interest rate move from the US Federal Reserve is being eagerly watched. The Fed – whose communications are always a delicate balancing act – has hinted at a pause in its interest-rate hiking cycle. Economists are becoming increasingly vocal in arguing that rates may be high enough to contain inflation. However, the concern is that central bankers will be forced to quickly pivot to cutting interest rates to limit the fallout from an economic slowdown that could happen in the second half of this year.
Persistence of war induced inflation
Since Russia’s invasion of neighbouring Ukraine in February 2022, central bankers have been grappling with the challenge of communicating what they are doing to combat rising energy and food prices effectively. Unfortunately, the messaging from policymakers has been inconsistent, leaving investors unsure and often caught off guard. With the negative impact of rate hikes on the financial sector now receiving more attention, it means clear and consistent messaging from central bankers is even more imperative in order to avoid exacerbating existing problems.
G7 policymakers certainly have the tools needed to bolster the economy and ensure financial liquidity, as seen in the response to the coronavirus pandemic. Indeed their communication about these tools helped shift investors’ attention to how to prepare for an anticipated post-pandemic bounce in economic activity.
While Russia’s war in Ukraine continues, inflationary pressures are more contained. For this year’s joint statement, more attention will be paid to whether and how G7 countries of Britain, Canada, France, Germany, Italy, Japan, and the US acknowledge concerns about the risk of US default, unease about US mid-tier lenders, persisting inflation and the collateral damage caused by a year-long cycle of global interest rate hikes.
The decisions taken by policymakers in this meeting, and the way in which they are communicated promise to have a significant effect on whether the second half of 2023 will be more or less turbulent than the first.