IR Monitor – 12 February 2025

In this week’s newsletter:

• Attract capital, not controversy: how to do ESG right in the current landscape: some thought leadership from FTI Consulting’s Bryan Armstrong
• IR trouble in Silicon Valley as Google goes heavy on investment but light on detail. Absence of guidance on what tech companies are buying as they raise bets on Artificial Intelligence begins to stretch credulity, warns the Financial Times
• Five key steps companies should take before launching their next shareholder meeting 
• Beyond earnings calls: Forbes on how executives are engaging investors with video
• European equities are becoming more shareholder-friendly, according to Lazard
• And finally … The Sunday Times on why so many CEOs are quitting. Investors, in general, are less patient & forgiving while activist investors, in particular, are on the rise

This week’s news

Attract capital, not controversy: how to do ESG right – FTI Consulting

Despite recent legal and political challenges, ESG factors remain critical to any investment strategy, according to FTI Consulting’s experts. A US court recently ruled that a company violated federal law by allowing Blackrock to consider ESG factors in managing retirement plans. However, sustainable investment is continuing to grow rapidly, with global sustainable funds reaching a record $3.2 trillion in assets under management at the end of 2024, according to Morningstar – an increase of 8% since 2023. With the second Trump administration reversing ESG-friendly policies, political opposition is proving to be a challenge, as 18 US states have introduced anti-ESG laws since mid-2023. On the flip side, ESG regulation is still widely supported in places such as California and the EU, while many asset managers integrate ESG factors into investment strategies for long-term value creation. Companies should not overreact to political or legal changes, but instead prioritise aligning ESG initiatives with business goals, ensuring transparent communication in terms of value and risk. ESG should serve as a means of improving efficiency, managing risk and driving innovation. Well-structured ESG plans will secure long-term investor confidence if they can show how they plan to weather changing regulation. 

IR trouble in Silicon Valley

Google parent Alphabet lost $200 billion in market cap after announcing a $75 billion capex plan for 2025, which exceeded analyst expectations of $60 billion and is 50% more than what the company spent last year. As reported by the FT, a lack of transparency on spending details, particularly on AI and cloud infrastructure, has caused concern among investors. Unlike other industries such as mining and banking which have learnt to provide their investors with clear ROI targets, the tech industry remains vague about the financial impact of its AI-driven investments. Alphabet CFO Anat Ashkenazi revealed that Google’s spending would focus on servers and data centres but gave no specifics on suppliers or locations. Investors are increasingly expecting to be provided with forward-looking visibility and their patience seems to be running thin. Without greater clarity on expected returns,  Alphabet and others might be having a more volatile journey.

Five key steps for shareholder meetings – IR Magazine

As we’re in the middle of the full year earnings season, it is important for companies to understand shifts in corporate governance trends and investor behaviours, reminds IR Magazine reminds us. There are five key actions a company should undertake before finalising its proxy statement. One: analyse your shareholder base. Companies need to know who own their stock, because understanding voting policies and trends of different investors supports engagement efforts. For example, it may not be worth engaging with an institution that strictly follows proxy advisors’ recommendations. Two: conduct a stock loan analysis. This helps ensure accurate voting registers and flags any reductions in voting power for specific institutions, especially the likes of BlackRock and Vanguard. Three: review investor voting guidelines. This will identify directors who may be vulnerable to negative votes due to issues such as over-boarding or insufficient diversity. Four: do your homework. When proposing new equity plans, companies must analyse key metrics like burn rate and voting power dilution whilst aligning proposals with investor and proxy advisor policies. And finally: don’t forget your retail investors. Whilst they don’t necessarily represent a significant share of your register, retail investors who have been solicited accordingly have the ability to push a proposal over the finish line.

How executives are engaging investors with video content

As short-form video content continues to dominate social media, why should this not apply to the world of investor relations? Increasingly, traditional earnings calls are being replaced with video content, from bitesize takeaways on social media to AI-powered earning videos. Forbes reports on the current shift, where companies explore additional, refreshed methods of communicating and building rapport with investors to supplement traditional earnings events/conference calls, press releases and SEC filings. Through digestible, high-quality video content, executives continue to engage investors with authenticity, transparency and real-time insights. By injecting creative digital content, companies extend trust and engagement levels with their stakeholders. Blackstone’s COO Jon Gray exemplifies the added value of video content on his LinkedIn channel, offering investors a behind-the-scenes look at the company’s strategy whilst adding his personal touch. Social media has become a key channel for investor research, particularly for retail investors, and is conveniently simple to integrate into IR workstreams. 

Europe’s quiet revolution in equity IR

Shareholders’ interests rise up the agenda of European companies. With the continent traditionally less focused on shareholder value than the US, Lazard suggests a more investor-friendly environment may be underway in Europe. Characterised by improved free cash flow and more generous capital allocation plans, prioritising shareholders has driven a rise in both dividend payments and in share buybacks. Lazard CEO and Chairman, Peter Orszag, identified four indications that European companies have become more shareholder friendly. First, companies have become more disciplined with their investment strategies, facilitating the return of ROIC figures to post-Global Financial Crisis highs. Second, operational streamlining initiatives mean European corporates tend to focus increasingly on core assets. An increase in free cash flow generation, in part driven by improved cost management and the expansion of asset-light operating models, is also contributing to the trend. And lastly, with more cash on hand, European firms have seen a rise in both share buybacks and dividends. Although European stocks remain in the US’ shadow, these recent trends suggest Europe offers an attractive, alternative investment destination. 

And finally… why so many CEOs are quitting: stress, scrutiny & 80-hour weeks

C-suite executives are jumping ship at record rate, reports The Times. According to the headhunting firm Russell Reynolds Associates, 202 CEOs leading companies in 13 of the world’s largest stock markets stood down in 2024, about 9% more than in 2023, with a similar trend observed amongst CFOs. The role of the CFO is indeed continually expanding, encompassing regulatory affairs and ESG disclosure, making workstreams much harder to manage. According to many in the City of London, the nature of executive roles has changed. Although still rewarded with a hefty paycheque, C-suites are increasingly exposed and subject to significant public scrutiny. Higher interest rates and persistent inflation have also forced the boards of underperforming companies to overhaul their strategies and remove CEOs. A slump in valuations for certain sectors has also placed added pressure on CEOs to revive share prices, incurring increased scrutiny. Activist investors are on the rise, particularly in the UK, with the CEO typically sitting in the firing line. This leaves some executives deliberating at what cost are the stresses associated with these leadership positions worth sticking out.