What are the latest trends in Investor Relations? How can we, as Investor Relations Officers (IROs) continue to add value to our organisations in times of change? These four trends and opportunities for Investor Relations and Financial Communications came up during the latest global IR conference in Amsterdam.
1. Mifid II increases IRO’s workload
Since Mifid II, more contact is required between corporates and investors because pension funds and asset managers are contacting IROs more often. In addition, analysts who used to follow a company’s stock, might not do so anymore. Therefore IROs should redevelop the relationship with those analysts, encouraging them to continue following the stock. As the full impact of Mifid II is still unclear, we need to understand how Mifid II is changing the market. It is important to continue meeting people close to the market, such as analysts, investment bankers, local sales and specialist sales forces to better understand this. It is advisable to use more local brokers who know the people in the funds. All these changes will obviously be adding to the workload of Investor Relations teams.
2. Technology impacts Investor Relations
Due to Mifid II, it might be more difficult to reach new investors through conferences. Investors now either go to conferences, but don’t request meetings with corporations. Or investors don’t attend conferences and have a meeting instead. This adds complexity to the Investor Relations teams, especially to those of a smallcap, without any internal or external consultancy support. Online platforms help us as we are finding new ways to reach out to investors. Established investor road show events are unlikely to change, however the software of conferences is changing and brings us opportunities to research attendees and get in touch with them.
3. Relations with activist and vocal investors
Another complexity layer for IROs has been the rise of the vocal (activist) investor, the majority being activists on governance topics. There are a few steps we can take, such as: Engage! Find out more about the viewpoint of these investors on certain issues. Make sure your company is transparent about possible risks it faces and what it does to fix those. Also explain how your company measures against peers. Engage with all investors – or at least with the most influential ones. Help educate them. Engage with institutional investors and proxy advisors to find common ground and create trust. The key is to be open, to know your investor, to understand what they care about. And we need to do this during the year, well before the AGM takes place. Timing is crucial, so issuers should not expect to be able to engage with institutional investors when any concerns arise during the AGM.
4. ESG and SDGs demand IR engagement
Investors increasingly expect IROs to articulate and be knowledgeable about environmental, social and governance criteria (ESG) and sustainable development goals (SDGs). For IROs this means to better understand what ESG analysts need. So in this case again we need to engage! Which data are organisations not (yet) publicly providing? There is more focus on information about the supply chain. Example given: In case of fashion retailers, analysts need data about where garments are produced and how much people in the supply chain got paid. Or, they are looking for data about how climate change will affect the company. Portfolio managers use ESG research to complement their views about a company. How to manage these questions as an IRO is to explain about steps the company is taking.
SDGs have been developed in 2016, in an effort to contribute to a future world. Investors are investigating how companies can contribute to one or more SDGs. Some of their clients want an x% investment in SDGs or ask to have their investments aligned. There is a demand for more purposeful brands, whose vision exceeds profits.
Maintaining relations is key
As an investor relations specialist, VS Financial and Strategic Communications is a reliable partner to support your company in facing these trends head on. We will also help you benefit from emerging opportunities. Investor Relations remains all about meeting the right people, building and telling the equity story and providing access to management. Our role is to educate our stakeholders, to help them understand a company. Relationships remain key, in fact, and are now more important than ever.
If you would like to contribute with additional trends or feedback, please leave your comment.