IR Monitor – 11th May 2022

This week’s news

Everything you need to know about Digital Investor Relations

It’s become something of a cliché to suggest that the Covid-19 pandemic has changed investment habits but, whilst some of the more extreme market behaviours are now unwinding, the shift towards digital investor relations looks set to be permanent according to FTI’s digital practice. In a recent presentation, our Digital team outlined how investors have access to multiple, divergent information sources, different data points, immediate company news and the ability to interact at shareholder meetings without even leaving their desks. Yet, despite these tectonic shifts, many companies have failed to reassess and adapt their investor relations strategy. According to FTI’s proprietary research, this is at odds with investors’ (both institutional and retail) demands that companies communicate with them differently. If you’d like to hear more about FTI’s digital IR expertise, and their proprietary research, please get in touch.

Protest is back on agenda in return of face-to-face Annual General Meetings

As we return to in person annual meetings, The Times has investigated the return of protestors and their surprise stunts. Barclays’ meeting in Manchester became the site for one such protest with reports of some shareholders gluing themselves to chairs and setting off alarms. Protests are not the only challenge boards need to contend with given an increasing number of damaging revolts unfolding every day. Just last week 38% of investors rebelled against a new pay plan for GlaxoSmithKline’s chief executive Dame Emma Walmsley and 31% voiced their dissent at top pay for executives at Standard Chartered. According to the Investment Association, which maintains a record of resolutions where more than 20% of shareholders vote against, there have been 63 revolts at FTSE 100 or FTSE 250 companies so far this year. Climate change and stewardship have emerged as key battle grounds with one of Britain’s biggest institutional investors, LGIM, disclosing that it voted against 370 directors worldwide last year over diversity concerns. With the UK plc only into the third week of the main AGM season there may well be more acts of rebellion to come.

ESG funds suffer quarterly outflows for the very first time 

Investment Week has reported on data from Morningstar revealing that, for Q1 2022, Article 8 funds had outflows (of €3.3bn) for the first time. Article 8 funds, defined as funds that promote environmental or social characteristics, began experiencing outflows for the very first time in February (€2.2bn) which accelerated (to €13.7bn) in March. Is this the top of the market for ESG funds? Perhaps, perhaps not. Article 9 funds, which have sustainable investment or carbon emissions as a core objective, have reported continued inflows. And collectively, Article 8 and 9 fund assets grew by 8.5% in Q1 2022 to €4.2trn. The two fund groups also accounted for an increased share of overall EU fund assets rising from 42.4% in January to 45.6% at the end of March 2022. Amundi, JP Morgan and Nordea ranked as the top three providers of Article 8 funds while Pictet, BNP Paribas and BlackRock were the largest providers of Article 9 funds.

Crisis as usual: Q1 profit warnings 

As Q1 concludes, EY has issued an analysis of UK profit warnings. There were 72 warnings issued by UK-listed companies in Q1 2022, the highest since Q2 2020 and 44% more than Q1 2021. The main reasons for this increase include increasing costs and overheads, sales falling short of forecasts, coronavirus, supply chain issues and delayed or discontinued contracts. Inflationary pressures and the war in Ukraine have compounded challenges and put renewed pressure on consumers’ real incomes and company margins in 2022. As businesses continue to embark on their post pandemic recovery, amidst a sustained climate of volatility and uncertainty, EY have asked when ‘crisis as usual’ might become the norm for which companies plan.

Is it ever worth getting on the plane for a company roadshow? 

Potentially not. Home country bias is highly prevalent among investors, according to Stephen Clapham from Behind the Balance Sheet, even if it is a bias that can kill investor returns. This is a challenge for any company looking to tell its story in overseas markets. For many of us there is comfort in sticking to what feels familiar; behavioural economists have long observed familiarity bias and, on occasion, this can even be an advantage for investors. Local knowledge can often be overestimated, however. The bias can be overcome when an investor buys an overseas stock that is less familiar; in such instances individuals are more likely to place greater weight on the investment facts, and on the data, rather than on emotional influence.

And finally … the Investor Relations Officer: overworked and underpaid

IR Magazine met recently with the female led Canadian IR company, irlabs, to discuss the future of the industry. The company’s leaders, Alyssa Barry and Caroline Sawamoto, touched on the evolving remit for IR professionals with many now requiring knowledge of several issues including ESG, media relations and corporate governance. There is also greater emphasis now on compliance and regulations; Barry cites the increasing scrutiny of news release content. Yet, despite greater expectations of IR professionals’ experience and accreditations, employers have been slow to increase remuneration with even less being done to address the gender pay gap in the industry. The IR remit may be expanding but pay is not keeping up.

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