July 16, 2019
Around June every year, the National Investor Relations Institute (NIRI) hosts its annual conference. This year marked the 50th anniversary of NIRI and the conference was themed “The Power of IR,” which attracted more than 1,000 attendees from around the world and featured nearly 150 speakers and panelists and 50 educational sessions. The scheduled sessions and all-day-into-the-evening networking included a series of lively and informative discussions around global trends in investor relations.
The tipping point for ESG performance, reporting and integration in investment decisions
The importance of every company finding its own environmental, social and governance (ESG) path was the main theme. And many companies have been working hard to improve their communications around this topic, yet there are still those that think it is an over-hyped fad. Comments from institutional investors and rating agencies focused on how they are integrating ESG factors into investment decisions. Demonstrating progress is key and investors claim to appreciate even companies with low ratings that are taking steps to engage with their shareholders. ESG ratings organization Sustainalytics claims investors have reached a tipping point to make ESG part of the normal set of factors for consideration. While many attendees said they had not yet engaged with Sustainalytics or MSCI, representatives from Sustainalytics strongly encouraged companies to be open-minded about starting such a conversation.
Pro tip: Whether or not investors are asking you about your ESG efforts, they are paying attention. It is clearly time to have a point of view on ESG that is appropriate for your organization and takes credit for what you are already doing.
AI not the hottest topic, but an interesting one for public companies
IR practitioners have been analyzing earnings calls for years, but a more recent development is the increasing ability of a machine to tell if a CEO is fibbing or lacks confidence in what he is saying. Best advice from Cognizant’s Malcolm Frank, an expert on AI: listen to your CEO in a relaxed setting and then listen for fluctuations on the call, especially around difficult questions. While a machine cannot use good business judgment, interpret visual cues or read a room, it can detect fluctuations faster than a human and instantly aid investors in their decisions as a result. An upcoming corporate governance best practice is to determine how AI can inform the board on how the market is likely to respond to strategic decisions.
Pro tip: AI is fascinating and it is not going away – it’s only growing in influence and sophistication. Get up to speed on the implications for public companies and try your hand at services such as those offered by Prattle or AlphaSense.
Not keenly aware beforehand, IROs now need to understand SEC’s Pilot Access Program
Brett Redfearn, director of the Securities and Exchange Commission’s (SEC) division of trading and markets, provided an overview of the nexus of the capital markets structure and investor relations. Interestingly, the SEC’s new pilot program generated a strong debate on the pros and cons of the program. In plain speak, the transaction fee pilot program has been created to test whether more regulation is needed around certain stock exchange fees. There have been more than 100 comment letters and three exchanges have sued the SEC as a result. Redfearn’s comments at the conference reinforced the importance of this issue for IROs, even though many at the conference questioned why IROs should care. Bottom line: it may impact stock performance and trading activity in your company’s stock.
Pro tip: It’s complicated. But anything that has the potential to provide data-driven information on the pricing and liquidity of your stock is worth getting smart about.
Strong corporate culture aligns vision and drives performance
Albertsons Companies Co-Chairman Jim Donald believes culture matters to employees and customers – and, yes, to investors too. In his spirited session, which included a live large fish on stage (everyone needs a way to be remembered), he shared his vision for turning companies around by fostering a strong culture. Change at companies is hard – creating a vision that aligns employees and a culture that motivates them is not easily accomplished. ESG creates an opportunity for companies to share culture metrics that can be aspirational, measured over time and drive performance.
Pro tip: Investors do factor in intangible assets to their investment decisions, and they are increasingly open to understanding and appreciating how culture can make a difference.
Those are just a few of the takeaways from the 2019 NIRI annual conference. In addition to all of the great discussions, this year featured more than 40 exhibitors, including innovative firms such as Virtua Research and Annodata. While not everyone has the budget or is able to use outside services, it helps to understand what you can learn from them and how they can enhance your investor relations program. Not sure where to start? You can always contact me for guidance.