October 15, 2018

10 Lessons from NIRI Chicago 2018

Investors are increasingly seeking transparency across all financial communications, according to the investor relations professionals gathered at NIRI Chicago 2018. Not only do they seek more detail in proxy statements and financial annual reports, but they also want to know how companies are addressing potential environmental, social and governance (ESG) risks. Here are some of the most interesting things we learned.

    1. Tell your own story. Nearly half of the publicly available information about your company comes from other sources. By improving disclosure, you make it easier to tell your own story. If you don’t, others may not get your story right.
    2. Maintain consistency between investor decks (ideally 6–8 pages) and your 8-K and 10-K. Companies noted for using the same, strong company descriptions and charts across multiple communications included PepsiCo, GE, Mondelez, BNY Mellon, and McDonald’s.
    3. Describe your board in a simple matrix. Best Practices in Board Matrices, published by the NYC Comptroller’s Office, provides many examples.
    4. Include ESG information. ESG factors are now being used in a variety of ways, from determining lending rates for ESG-linked loans to informing passive ESG funds and ETFs.
    5. Address the “ES” in ESG. Regarding the environment, there is now much more demand for coverage of climate risks, and in the social realm more companies are discussing human capital management and addressing the #MeToo movement.
    6. Include more specifics on “G”. Investors want to see more details on executive compensation, succession planning and board diversity—in particular the geographical, ethnic and gender mix. They want to see boards that reflect the future of the company, and that look like their customers.
    7. Update your investor website to respond to ESG queries. Provide a limited number of proactive disclosures, and direct readers to other disclosures on the corporate website in your biggest impact areas. Describe how you are applying the “3 Ps”—policy commitment, programs and initiatives, and performance data (year-over-year). Refer to the website’s ESG section during investor calls.
    8. Leverage SASB. Consult the Sustainability Accounting Standards Board’s materiality map to review material issues for your sector. Many companies are providing SASB reports (such as NRG Energy, JetBlue, and Bloomberg) or cross-referencing data in an SASB index (such as Merck and Nike) to help analysts find information easily and make comparisons.
    9. Hear what other CEOs are saying. The Strategic Investor Initiative is hosting CEO Investor Forums and videotaping their CEO presentations. Strong presentations recommended for viewing include Becton Dickinson, PG&E, GSK and NRG Energy.
    10. Be aware that some institutional investors are obtaining your compensation information from third parties instead of reading your Compensation Disclosure & Analysis (CD&A). Data rating services such as Equilar can capture public information and create a dashboard to inform say-on-pay decisions. These analyses can reveal disconnects between board member pay and performance.

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