As we approach the end of the year, we have been drawing insights from sell-side investors with a view towards uncovering actionable recommendations that can help shape our clients’ reputation and investment outlook.
In this blog, we delve into five key insights from sell-side investors, illuminating the importance of corporate reporting in connecting companies with investors.
...corporate reporting is not just about compliance but a strategic tool that can significantly impact a company's reputation and investment prospects.
1. Prioritising value-add reporting
Investors are increasingly valuing quality over quantity when it comes to disclosure. Rather than focusing solely on post-results write-ups, funds are placing greater importance on “value-add pieces” that demonstrate thought leadership. This encompasses a range of channels and topics, including industry insights, culture, a company’s approach to global challenges, engaging corporate videos and interviews with management that delve into the long-term vision of the company.
2. Navigating the energy transition
Investors are closely watching how companies pitch their energy transition strategies. Different funds have varying ESG rating requirements, so it's crucial for companies to report against multiple metrics to cater to diverse investment preferences. Additionally, geographical data representation and reporting on avoided emissions and Scope 4 emissions are evolving areas that companies should be considering.
3. Crafting an equity story
Companies that have a compelling equity story – why they are stronger than their competitors and what they will achieve in the future – tend to stand out in the eyes of investors. A strong business model and investment case, seamlessly integrated into the company's messaging and consistently reported across all communication channels, can distinguish a business in the eyes of investors. Investors are seeking companies that exhibit not only financial strength but also a clear and transparent narrative that aligns with their strategic vision and long-term objectives.
4. Clarity and conciseness in disclosures
Transparent and concise disclosures and financial statements are imperative. Streamlining the annual report is a trending priority for many companies, bolstered by harnessing the hybrid nature of communications channels. The annual report should be considered a hybrid document which drives the reader to digital content that can be optimised to provide authentic messaging. Presenting disclosures clearly with as little repetition as possible will help investors find information easily and will better inform investment decisions.
5. ESG considerations
When making an investment decision, 74% of investors critically analyse how a company manages ESG risks and opportunities. Having strong ESG communications can help your company stand out to investors. These are key things investors are looking for:
Proactive ESG engagement: Companies should have a forward-looking ESG strategy so they can proactively address future ESG issues rather than reacting to them.
Governance matters: Governance is the foundation of good business practice, in which effective governance disclosures are growing in importance. Sell-side investors are looking for greater detail around board skills, diversity, social and environmental activities, approach to audit and the effectiveness of the board.
Comprehensive reporting: Some companies might not be obligated to report on specific ESG factors, but failing to do so can affect their ESG ratings and visibility to the sell-side. Reporting against a wider range of ESG ratings can help cast a wider net of sell-side investors, as different investors use different ESG rating criteria when evaluating prospective investments.
Data accuracy: Ensuring the accuracy of data incorporated into ESG indices is paramount for companies looking to enhance their sustainability practices and attract responsible investments. As regulations demand greater comparability in data points, having credible data is essential. Improving the overall standards of data collection and assurance increases the reliability of ESG data when it comes to investment decision making.
Ever Sustainable are specialists in helping companies develop multi-pillar, actionable and reportable ESG strategies as well as help them understand the world of ratings and what they can do to improve their performance.
Conclusion
In conclusion, corporate reporting is not just about compliance but a strategic tool that can significantly impact a company's reputation and investment prospects. Embracing these insights from the sell-side can help companies navigate the complexities of ESG reporting, foster productive dialogues with investors and ultimately enhance their position in the market. Staying ahead in this ever-evolving landscape is crucial for companies aiming for long-term success.
Design Portfolio can help your business adopt these recommendations. Design Portfolio advises on corporate communications and sustainability strategies to ensure businesses are effectively communicating to their stakeholders.