When thinking about your relationships with large investors and their ESG needs, it is not so different than any other relationship dynamic. Some thoughtful consideration of basic communication principles will go a long way in fostering strong relationships with the larger institutional players in your investor base.

It is important to do your homework, be proactive and be thorough and accountable in how you communicate and engage. Treat these relationships as an investment that can be made during smooth times because when more challenging times come, you will be grateful to have a solid foundation to rely upon.

Do Your Homework

Each large shareholder will have specific needs and potentially take a unique approach to ESG. Some will have dedicated ESG professionals as part of their team, but others will simply integrate ESG into the responsibilities of the portfolio manager. Governance concerns will dominate the list of priorities for some, while others may focus entirely on climate risk in their portfolio. The frequency of outreach can also differ greatly among shareholders. For example, an annual touch base with management and potentially Board members will suffice for some, while others may seek more frequent opportunities to interact.

It is important for the IRO to understand these unique needs and document them to ensure consistency across your team and plan for succession. A lot of this can be gleaned from public documents, including annual reports, proxy voting guidelines and policies on investor websites, but if not – simply ask. Investors are more than happy to share their needs proactively to ensure that they get the most relevant and useful information possible in the most appropriate format for them.

Gathering such information proactively will save loads of time down the road and help to establish trust between an IRO and its investor base.

Be Proactive

Proactive engagement and open dialogue with large shareholders are essential for addressing their ESG concerns and building strong relationships. This may involve regular meetings, roundtable discussions and/or investor days with a focus on ESG topics, depending on the extent to which these issues impact your business. Providing platforms for shareholders to voice their opinions and feedback can foster mutual understanding and collaboration.

These types of conversations are important not only when you have something to report. In between quarterly reporting cycles, use the time to gather input on how reporting can be improved and more tailored to the needs of your larger investors. Do not simply rely on earnings calls as your main source of feedback. These are generally seen as serving the needs of the sell-side analyst community, and large investors are seeking something more targeted and less scripted.

Be Thorough

I am sure every IRO delights in sharing good news with investors, but the real test of the relationship will come when the news is not all positive. My point about being thorough is to emphasize that you should not shy away from more challenging messages that need to be delivered. Being honest, direct and balanced will be appreciated by your larger shareholders and build trust over the long term.

When more difficult news needs to be conveyed, investors always value hearing from those close to the issue. If you experience a cyber breach or supply chain problem, bring your Chief Information Officer or Chief Operating Officer to shareholder meetings. For investors, this avoids boilerplate, high-level messaging and allows investors to get to know the bench strength your company has available – not only to address the issues but to prevent them going forward.

This requires adequate preparation so that the individuals who might be called on have the appropriate training and appreciation for the investor audience. Especially for governance matters, ensure your Board has access to key information about your investor base and is provided with some annual training so that appropriate boundaries are respected.

Be Accountable

To engage effectively with large shareholders, companies should develop a robust ESG strategy with clear, achievable goals. These goals should align with the shareholders' priorities and reflect the company's business model. They should also be specific, measurable, and time-bound to demonstrate accountability and progress.

Setting objectives with management will force you to be strategic about what you are hoping to accomplish each year with your large shareholders and how this will be measured. It can also set clear expectations for investors, especially if some are demanding more of your time.

Utilizing multiple communication channels will help you serve a variety of investors. A mix of formal reporting, data portals, social media, and other sources will disseminate information to a broader audience and keep you accountable. Some of the effort you expend while doing your homework will assist you in narrowing down which channels your shareholder base is actually using and for what purposes.

Conclusion

Engaging with large shareholders on ESG is a dynamic and ongoing process that requires a strategic, transparent, and collaborative approach. By understanding shareholders' priorities, developing a robust strategy, communicating effectively, and fostering dialogue and collaboration, companies can build strong relationships and drive sustainable, long-term value. In an era where ESG considerations are integral to business success, proactive engagement with large shareholders is an investment in future success.

Jennifer Coulson is Vice President, ESG, Public Markets, at BCI.