May 28, 2019

by Angela Rodenhauser

Investor interest in environmental, social and governance (ESG) matters continues to pick up momentum, as summarized by my colleague Kellie Friery in her May 22 blog post. How should companies respond if they’re not able to launch a full-blown ESG program or publish a report rich with details? The answer lies in leveraging your current materials (such as investor messaging, annual report, proxy statement and investor presentation) and determining if there are areas for proactive outreach.

Drawing upon examples from our ESG client base as well as non-clients, below are best practices to start or add to your ESG communications with investors.

Be ready to answer questions

ESG ratings organizations and mainstream investors are asking questions on a wide range of ESG-related topics, most notably board diversity, senior management diversity, board refreshment, cybersecurity, climate change and more. A critical first step is consulting with internal subject matter experts to develop and carefully vet key messages, talking points and data that, once approved, could be shared externally. Investor relations staff may have to convene these meetings, unless someone is specifically responsible for CSR or sustainability in your company.

Consider opportunities to be proactive

With the availability of approved ESG messaging, you can begin to integrate ESG messaging into your investor messaging, including the proxy, annual report and investor presentation.

Expand proxy statement disclosures. Even without ESG-related shareholder proposals, the proxy statement in particular has emerged as a go-to resource for ESG information (which makes sense given the proxy’s traditional role as a governance document). Many companies are expanding their governance disclosures and adding environmental and social information. For example, Tech Data (D&E client) and Prologis include an ESG summary page in their proxy statements. Prologis highlights its commitment to ESG as a “competitive differentiator” and also features an in-depth section later in its filing.

ESG in proxies examples
Prologis 2019 Proxy Statement

To see more examples, check out the General Motors, Prudential Financial and Salesforce.com proxies.

Address ESG in your annual report. The traditional annual report provides another venue for an ESG update. ITW (D&E client) published a one-page corporate social responsibility (CSR) overview in its 2018 annual report and built a CSR report microsite.

ESG in annual report example
ITW 2018 Annual Report

Huntington (D&E client) highlighted its ESG report theme of “Purpose Drives Performance” in its 2018 annual report letter to shareholders. The most aggressive solution in utilizing the annual report would be to develop an integrated report — which combines financial reporting and ESG disclosures into one comprehensive document.

Add ESG content to the investor presentation. Many companies have not yet taken this to the mainstream, but we would point you to two strong examples:

  • Unilever includes “sustainable business and brands with purpose” as one of its 2019 priorities and summarizes its Sustainable Living Plan.
  • Prudential Financial highlights its integrated ESG framework as one that “creates financial opportunities and sustainable returns.”
ESG Framework Examples
Prudential Financial 1Q19 Investor Presentation

As you consider where your company is on the ESG disclosure journey and want to figure out the next steps, contact me about how Dix & Eaton can help.