IR Monitor – 31 January 2024

In this week’s newsletter:

In this week’s newsletter:

• François-José Bordonado appointed as Senior Adviser to FTI’s IR team in Paris
• How IR can juggle the conflicting desires of the board, management & shareholders: though often portrayed as a romantic role, IR is more of a tightrope walk warns IR Mag
• Global ESG and sustainable funds post first net quarterly outflow on record
• Japan cuts investor access with less frequent corporate reports: Bloomberg on the concern that Japanese bad actors will escape scrutiny
• The activists are coming: London-listed firms are worrying about more than takeovers
• And finally… We are all hypocrites on corporate governance. Sound management and controls don’t improve returns — far from it, claims the Financial Times

This week’s news

François-José Bordonado appointed to FTI’s IR advisory team in Paris

We are pleased to announce the appointment of François-José Bordonado as Senior Adviser in our IR and Financial Communications team in Paris. With 25 years’ experience in Investor Relations, including the last 14 years as VP Investor Relations at Dassault Systèmes, François-José will bring his expertise to the diverse issues faced by our clients across all sectors. François-José was also for many years Vice-Chairman of Cliff, the French association of investor relations professionals. To learn more about our IR team in France, please contact:  [email protected].

How Investor Relations can juggle the conflicting desires of the board, management and shareholders

IR Magazine dispels the romanticised notion of IR as a glamorous career, likening it more to a challenging tightrope walk. Instead of a carefree jet-setting lifestyle, the IR professional is portrayed as a juggler balancing the diverse expectations of management, the board, and shareholders. Some of the challenges involve navigating the tug-of-war between management’s optimism and the board’s realism, addressing the diverse interests of shareholders, and managing the constant influx of financial data. This article emphasises the importance of transparency, tailored communication, and information synthesis in effectively conveying complex financial information to different audiences. Despite the complexities, IR roles are rewarding and allow professionals to contribute to a healthy and sustainable financial ecosystem, being fundamentally built on trust. If you’re looking for a new challenge, this article suggests you get onboard.

Global ESG & sustainable funds post first net quarterly outflow on record

Morningstar’s Global ESG Flow report reveals that the outflows from sustainable funds mirrored broader market trends. Europe, the largest market for such funds, witnessed a decrease in net inflows in the fourth quarter of 2023. Passive funds were resilient, attracting $21.3 billion, while actively-managed sustainable strategies saw outflows of nearly $18 billion. In the US, sustainable fund outflows doubled to $5.1 billion, highlighting the challenges faced by active managers in retaining assets. Despite outflows, global sustainable fund assets increased by 8% to nearly $3 trillion by the end of December, supported by a general market rally. Key factors influencing the decline in inflows in Europe, as well as related product development, included an investor shift towards government bonds and concerns about greenwashing and regulatory changes.

Japan cuts investor access with less frequent corporate reports

Originally aimed at reducing the reporting burden for companies, Japan’s Financial Instruments and Exchange Act has generated significant concerns, according to Bloomberg Law. Starting in April, Japanese companies will provide auditable securities reports every six months, as opposed to every three months currently, leaving reports on the first and third quarter unaudited. The change is a coup for Japan Inc., which has been pushing to simplify quarterly reporting for more than a decade. However, critics warn that the reform will lead to a deterioration in the quality of corporate reporting, creating delays or failures in unearthing major wrongdoing. As it may take up to a decade to find out the actual impact of the less frequent reports, all we can do now is watch with bated breath.

The activists are coming

In another warning for UK Plc, City AM reminds us of some high-profile activist battles that have targeted London in recent years; Vodafone, GSK & Aviva all falling into the sights of investors after a perceived under-performance in share price. While 40 firms were picked off from London’s markets in takeovers last year, many also fell apart on the gap between buyer & seller price expectations. For example, Apollo Global Management launched a series of bids for Wood Group and THG, but the efforts were rebuffed by boards. Following warnings of the UK being a “fertile” market for activists, particularly from across the pond, boards of UK public companies, especially those with diversified portfolio businesses or facing depressed valuations, should be prepared to evaluate how viable their strategies will be when faced with activist criticism. The price dislocation in UK-listed investment trusts is well established for instance, with heavy discounts to Net Asset Values (NAVs) leading activists to build significant stakes. There is, however, a silver lining for IROs and boardrooms up and down the country, as research suggests that UK firms targeted by activists have outperformed the market. A bit of blue-sky thinking never hurt anyone.

And finally … We are all hypocrites on corporate governance – Stuart Kirk

The boss of LVMH, home to 75 of the most luxurious brands in the world, this week proposed the nomination of two more of his sons to its board. Investors may know bad governance when they see it, but it seems turning a blind eye has its benefits; the FT suggests that poorly governed stocks have outperformed good ones since 2008. Even in the face of practices considered obvious, such as the monitoring of executives and the prevention of conflicts of interest using independent board members, evidence of a positive correlation between good governance standards and share price performance is weak, and academics at Florida State University have concluded that CEO power simply trumps boards’ independence. Of course, there will always be governance horror-shows, but the reality is that there are as many ways to run a company as there are companies. Celebrating this diversity, and letting the caveat emptor principle prevail, may be more beneficial in the long run.

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