Capital Markets & Investor Relations

IR Monitor – 4th October 2021

Investor Relations News

This week, we start by looking at how the UK can revamp the lagging London Stock Exchange. We then hear from investors and business leaders on methods to enhance investor engagement and integrate ESG into the IR function. We analyse how moving from a bull market to a bear market will have an impact on communication with investors before examining how asset managers are changing the way they discuss ESG. Moving on to the world of hybrid work, we note the differences in opinion between CEOs and CFOs in relation to remote working and, finally, we learn how impersonation on a conference call has sparked fears of possible fraud.

This week’s news

How to revive Britain’s stockmarket

London’s high-flying stockmarket has spent the past decade tumbling back to earth and it’s time for a revival, according to The Economist. In 2006, the companies with shares listed in London were worth 10.4% of the global equity market. Today, that figure is 3.6%. This is due partly to the underperformance of large British firms and the departure of global firms with international capital-raising options from the City. The piece notes that the dearth of start-ups choosing to list in London is another key issue, which threatens reducing the LSE to a “museum”. The Economist view is that the government must resist the temptation to veto takeovers or block delistings. The stockmarket can be made more attractive by letting dual-class shares join the LSE’s premium segment and corporate governance rules should be deregulated. Looking ahead, the prospect of a new cohort of promising firms and an influx of venture capital into Britain could see a “Big Bang” revival for the LSE.

The Essential Guide to Enhancing Investor Engagement

The IR Society held a webinar to ask both investors and business leaders how to enhance investor engagement, particularly around ESG issues. Attendees agreed that the degree to which the sustainability agenda is relevant has come a long way in the last two-three years and is now a must-have for investor dialogue. On the investor side, it was noted that the landscape has changed dramatically, driven by regulation from EU, awareness in society that things are changing and a focus during covid on suppliers and customers. These trends are driving capital flows and changing the way in which investor relations should be conducted. Integrating ESG and CSR functions with a company’s IR approach and enhancing board oversight to challenge senior management on these issues will be key moving forward. It is also vital to establish a link between compensation and ESG targets and follow the benchmark set by the Sustainable Development Goals to avoid greenwashing.

How to manage investor relations in a bear market

A generation of IR professionals has known only a bull market and with inflation rising and the spectre of a more sustained bear market looming, IR Magazine has looked at how communication evolves when the cycle shifts. The Covid-19 pandemic triggered a bear market in March 2020 although stocks rallied back to historic highs and there have historically been frequent sector-specific downturns. This has an impact on the language used in earnings calls, with recent data showing a spike in immediately pressing issues being addressed. In the energy sector for example, transcripts with mentions of ‘redetermination’ (a secured lending term related to the industry) spike during times of distress. A similar increase was also seen after the global financial crisis, again in the 2015-2016 energy crisis and yet again during Covid-19, when oil futures actually turned negative.

Fund Managers Start Axing ESG Buzzword as Greenwash Rules Bite

Some of Europe’s biggest asset managers are starting to drop the ESG label from their company filings amid concern that regulators will no longer tolerate vague descriptions of ESG investing, according to Bloomberg. It is reported that money managers including Allianz Global Investors and DWS Group have either stopped using the catch-all term “ESG integrated” in their public documents or are playing down its relevance in interactions with investors. This is the latest indication that Europe’s anti-greenwashing rulebook is reining in an industry that ballooned to more than $35 trillion last year. The Sustainable Finance Disclosure Regulation was enforced in March, but already in the lead-up to its arrival, European investment managers stripped the ESG label off $2 trillion in assets in anticipation of stricter rules.

As CEOs push for office returns, CFOs don’t mind staying put

CFO Dive has discussed the differences in opinion between CEOs and CFOs in relation to remote working. While high-profile Wall Street CEOs David Solomon and Jamie Dimon have labelled remote working as an “aberration”, the piece notes that the same sentiments have not necessarily held true on the finance side. Finance chiefs working at mid-size and large companies throughout the US, Canada and Oceania, have often reported no problems with remote work, maintaining that the trend has not materially impacted their bottom lines. Some CFOs have said that the migration to digital has come as a welcome respite from unnecessary meetings or in-person commitments with one or two even including investor roadshows in this category.

And finally … A $40 Million Conference Call Gone Wrong 

Last year, Goldman Sachs was in the process of closing a $40 million investment into the digital media company Ozy. The New York Times has reported that while this seemed like a straightforward investment deal, things took an unusual turn; it was revealed through an investigation by Goldman that Samir Rao, the co-founder and chief operating officer of Ozy, had been impersonating Alex Piper from Youtube (a flagship customer) on a critical conference call between the three companies. Ozy’s CEO Carlos Watson has apologised to Goldman and attributed the incident to a mental health crisis that Mr Roa was dealing with. The explanation seems to have appeased the company’s board and prevented any formal investigations but nonetheless the $40m conference call gone wrong almost certainly qualifies for our “How not to conduct IR” hall of fame.

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The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.

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