August 18, 2021
True to Dix & Eaton’s “one-size-does-not-fit-all” approach to environment, social and governance (ESG) communications, we recognize companies are at different places on their journey. While some companies may be preparing to publish their first ESG report, others have been reporting on their performance and progress for more than a decade. Regardless of where you are on your journey, such communications require a long-term ESG strategy that addresses the current situation and prepares you for the future.
Continuing to elevate your ESG communications over time is very likely to be an ongoing expectation of your key stakeholders ― especially investors, who are accustomed to evaluating your annual (even quarterly) performance.
Consider the following strategies to elevate your ESG disclosure with investors.
Meet with investors through a “road show.”
While investors can learn about your ESG strategy and performance through your annual report, ESG report, proxy statement and other communications, these are one-way forms of ESG disclosure. There is great value in the two-way engagement that can occur through an ESG/corporate governance “road show.” The “road show” should focus on firms and individuals who have an interest in ESG, and it is best scheduled the few months leading up to proxy season. Learning what’s on investors’ minds can help you refine your ESG strategy and messaging going forward. In addition to executive management, consider involving your highest-ranking ESG leader in the meetings.
Reach out to influential ESG ratings and rankings organizations.
The alphabet soup of ratings and rankings organizations may seem overwhelming, and a lot of companies wonder, “How many of these groups really matter?” and “Who listens to them anyway?” Like it or not, these groups ― most notably ISS, Sustainalytics and MSCI ― are well positioned to have an outsized influence on how your company is perceived by investors who care about ESG metrics. Each organization employs its own methodology, and often the information used to evaluate your company is not as transparent and easy to understand as you might like. However, you can proactively engage with these raters and rankers to better understand your scores and how to improve. Many Dix & Eaton clients have benefited from establishing a cooperative relationship, but there are no guarantees that ESG ratings will improve or that it won’t come at a significant cost.
Consider alignment with SASB standards or TCFD recommendations.
The Sustainability Accounting Standards Board (SASB) has published industry-specific sustainability accounting standards covering financially material issues for 77 industries. The standards are intended to guide companies in communicating their ESG performance to investors in a uniform and useful way. In addition, the Task Force on Climate-related Financial Disclosures (TCFD) has developed reporting recommendations to improve and increase reporting of climate-related financial information. Whether you integrate these disclosures into your current ESG report, or produce stand-alone reports, it’s important to determine what works with your broader ESG communications strategy. There is increasing interest among investors in the topics these standards address, so it’s critical that you begin evaluating how these may fit into your reporting strategy.
While these three strategies can help to elevate your ESG disclosure, they’ll also raise expectations, so be ready to commit to ongoing communication.
Interested in learning more about how Dix & Eaton can help? Contact me.
You can also read more posts from our ESG series.