IR Monitor – 21st December 2020
Investor Relations News
This week we begin by discussing the continued growth of London’s finance jobs, especially in asset management, since the Brexit referendum. We then explore the importance of equal access for investors and the role that digital transformation plays in achieving this, before examining the expected recovery of shareholder activism in 2021. After that, we examine the market for ESG ratings, and the calls from regulators for increased oversight of ESG ratings agencies. Next, we take a look at London’s strong listing and governance rules, which some believe are holding back Britain’s brightest and boldest entrepreneurs. Finally, we ask why the salaries of IR professionals do not always reflect the importance of their role. The IR Monitor will return on Monday 11th January. In the meantime, we wish all of our readers a Merry Christmas and a Happier New Year.
This week’s news
Despite Brexit predictions, employment in London’s finance sector has continued to grow
Brexit’s impact on London’s finance jobs has not been as disastrous as predicted. City A.M. have provided a breakdown (of a survey conducted by the FT) which found that most international banks and asset managers have hired more employees in the last five years. Nine of the biggest asset managers, including the likes of JP Morgan, BNP Paribas, UBS, Japan’s MUFG and Goldman Sachs have boosted UK hiring by 35% since the Brexit referendum. There is still concern, however, that the city will lose its current level of access to Europe. UK-based firms have already moved over 7,500 jobs and £1 trillion in assets to new EU hubs to ensure they can still offer services across Europe; but for now, London holds the lead over its European counterparts.
Webinar: Actions speak louder than words on retail investors
In a webinar hosted by Investor Meet Company’s CEO, Marc Downes, a panel of experts came together to discuss the importance of better access for retail investors. It was highlighted that while institutional investors have ample opportunities to communicate with the companies on a 1-on-1 basis, there is no equivalent for retail investors, who are limited to AGM’s. The webinar explored how greater diversity in the market is healthy and improves market liquidity, with overall benefits being shared by all. It concluded that in the wake of Covid, there is no longer an excuse to not engage with smaller shareholders, as tech and new digital platforms have been created to ensure access and engagement with investors can continue.
Shareholder activism poised to rebound in 2021
According to Bloomberg, shareholder activism will recover in 2021. This year, there were 181 campaigns initiated by shareholder activists against companies with a market value of over $1 billion. This 20% decline from the previous year is due to the outbreak of the pandemic coinciding with peak proxy season in March. It is expected that there will be a tremendous amount of activity taking place next year. Companies will attract activists based on their performance; those who have performed well and adjusted their business models may attract activists looking to take advantage of their sustained outperformance, while those struggling may be compelled to sell all or parts of their business. Due to the current strength of the equity market, activists may make larger bets at mega-cap companies, where it is perceived there is less risk and good dividend yield. With activists pushing for more environmental and social changes, ESG-focused proposals may also get a lot more support in 2021.
Do ESG ratings need a regulatory overhaul?
Following its recent boom, mainstream sustainable investing is here to stay, with the 3,000 signatories to the United Nations Principles for Responsible Investment now representing over $100 trillion in assets under management. This has created a massive market for data providers, who can assess companies’ ESG credentials and help sustainable investors separate the wheat from the chaff. However, Breakingviews reported this week that the market for ESG ratings is worryingly opaque when it comes to the metrics used to assess a company’s sustainability, leading to calls from French and Dutch regulators to impose minimum transparency standards. At present, ratings agencies can use a vast array of undisclosed metrics to judge firms’ ESG credentials, leading to huge disparities in ratings and the risk of greenwashing and confusion among investors. The regulators’ proposals would create controls to ensure that data is up-to-date and accurate and would require ratings agencies to disclose the metrics they use when assessing companies. These proposals were celebrated by Breakingviews, which said that increased oversight of ESG ratings would be a blessing in disguise for the industry.
Strong governance rules are holding back Britain’s best
Among the chaos and misery of this year there have been a handful of big hits on the stock exchange. Most notable was the floating in September of Matt Moulding’s Hut Group, which has risen in value from £5.4 billion at the end of its first day’s trading to £6.5 billion this week. Also commendable in its consistency was Tim Martin’s Wetherspoon’s. What these two owners have in common, claimed a piece by Christopher Williams in the Telegraph this week, is their maverick nature, unconstrained by London’s strict governance and listing rules. Martin reportedly fears that upon his retirement his pub chain will fall into the hands of City men in grey suits, lacking the authority to make the big calls for which he has become famous. Williams writes that this is a fear shared by many bold owners looking to list but perturbed by London’s constrictive governance and listing rules, leading them to look instead to New York, where they have more latitude for managerial creativity and personality. If London is to retain the next generation of bright, bold entrepreneurs, Williams believes that its governance rules need to be reformed to allow greater latitude for characters such as Moulding and Martin to easily raise capital without bending the rules.
And finally … Why doesn’t IR command a higher salary?
IR professionals are vital intermediaries between the C-suite and investors. They drum up interest from new investors, maintain the faith of existing shareholders, and put up a shield against activist investors and short sellers. Nonetheless, IR professionals don’t seem to earn as much as they may deserve given all of this valuable work. IR magazine has theorised that this may point to the need to prove the value of investor relations as a discipline. Where IR is recognised as an important part of a company’s investment strategy, remuneration for IR is generally higher. IR isn’t generally a career path that people train for, and this means that a multitude of other factors play into IR salaries. Previous careers, additional responsibilities and time in the role all play a part, resulting in vast disparities across the profession.
Conferences
5th – 6th Jan: Davy and Peel Hunt Ireland & UK Equity Conference (Virtual)
5th – 7th Jan: Citi’s 2021 Global TMT West Virtual Conference (Virtual)
7th Jan: Citi’s European Insurance Conference (Virtual)
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