IR Monitor – 18 October 2023

In this week’s newsletter:

• FTSE companies are “unhappy” with proxy voting agencies and are keen to see that investors are not “slavishly” following their recommendations
• Investors grow wary of ‘greenwashing’, warns The Times. A survey has found only 53% of respondents consider ESG factors before investing vs 60% last year and 65% in 2021
• The struggle to reanimate Europe’s IPO market:it’s not just London                
• Meanwhile: Why it’s not all doom and gloom for the City’s embattled bourse
• The view from the board room: the New York Times DealBook takes an exclusive look at PwC’s annual survey of board directors for 2023
• And finally … French market says quoi?! IR Magazine defends an IR department after a strategic update exposed the gap in expectations between investors and Soc Gén 

This week’s news

FTSE companies are “unhappy” with proxy voting agencies  

UK companies fear that a small number of proxy advisors hold too much sway over investors, Ignites Europe reports. The power of these advisors has grown in recent years, as investors are increasingly compelled to balance multiple corporate governance issues. The issue of their influence was raised at a conference hosted by the UK’s Capital Markets Industry Taskforce this summer, and has reportedly also come up in meetings between companies and investors. Despite this, recent research has found that negative voting recommendations don’t lead to negative outcomes as often as some might think. A vote of 20% or more against a resolution relating to remuneration or director elections, for example, occurred in only half of the cases where one of the leading proxy advisers made a negative recommendation. The advisers in question were insistent that they provide objective research to help investors make their own decisions.  

Investors grow wary of greenwashing

Recent research by the Association of Investment Companies, relayed by The Times, has revealed that enthusiasm for ESG investing may have peaked in 2021. Whilst investors remain concerned about sustainability, many have become sceptical of funds’ ESG claims, in a signal to firms that they need to ensure their ESG rhetoric is matched with substantive action. There is also waning faith in the performance of these funds themselves, with only 22% of survey respondents confident that ESG investing would improve the performance of their investments vs 33% in 2021. The data is perhaps not only a sign of ESG fatigue, but a reminder that investors need to be more transparent about how sustainable their ESG funds really are.  

The struggle to reanimate Europe’s IPO Market – Financial Times

Whilst much has been written about the state of the UK’s capital markets, the Financial Times argues that European stock exchanges are facing many of the same challenges, which are rooted in many of the same structural problems. Planisware in France and Renk Group in Frankfurt had impressed investors, but neither IPO materialised despite reports that both were oversubscribed. London’s lack of IPOs has been widely attributed to Brexit, but this may neglect the significance of issues which the UK shares with continental Europe: inadequate scale, thinly spread liquidity, and limited equity pools. Reforms in pensions, tax, and regulations will be critical in fostering an equity culture and, in turn, preventing equity-capital raising moving to the US on an even wider scale according to the article.  

Not all doom and gloom: a sunnier outlook on the Square Mile

The LSE has finally offered a long-awaited glimmer of optimism after a year-and-a-half of IPO stagnation and investor wariness. According to CityAm, in the first three quarters of 2023, newly listed firms raised only £953 million, down from £1.16 billion in 2022. Months of economic uncertainty had supressed investors’ appetite for risk, and London fell behind Budapest and Istanbul in IPO rankings. But reforms aimed at streamlining the listing process may have inspired fresh capital raising activity, at least in firms’ post-IPO phase. Research conducted by PwC indicates that, between January and September 2023, companies listed on the British bourse raised £14.6 billion in cash from follow-on equity issuance. This exceeds fund values raised by listed companies in European markets and has left commentators confident of a positive effect on IPOs in the coming year. 

A look inside the annual survey of board directors for 2023

An exclusive review of PwC’s annual board directors’ survey featured in The NYT DealBook this week. Noting that 2023 has provided immense challenges to businesses and nations alike, the newsletter identified three highlights sure to guide investor relations teams in the year ahead.  Firstly, since 2021, the percentage of American companies citing ESG goals in their corporate strategy has dropped by 10%. While the general public’s mounting criticism of ESG likely contributed, DealBook suggests eschewing ESG is a tactic to appease Republican presidential candidates. Secondly, the priority placed on board diversity is waning. In 2016, 90% of directors thought it was valuable to have women and minorities on their boards; now 73% do, even as the firms they supervise carry out inclusion efforts. Finally, there was yet another decline in the percentage of directors who believe executive pay is too high & exacerbates income inequality. PwC posits that corporate pay transparency efforts might explain this shift in perception. 

And finally…French market says quoi?! 

On 18 September, investors gathered to hear Société Générale’s strategic update. As economic turbulence continues to strain European banks, SocGen’s newly installed CEO Slawomir Krupa laid out plans for conservative profitability, a reduced growth trajectory, and increased cost efficiency. Alongside were hopes for an augmentation of the bank’s active investment business and American client base. Put lightly, the strategy did not resonate with investors. Off the back of the announcement, the bank’s stock fell by 12%. According to Laurie Havelock, writing in IR Magazine, the prevailing criticism that SocGen had failed to gauge the expectations of the investor cohort is an oversimplification. Investor relations, he argues, is not the ultimate factor driving a firm’s share price, and the drop was far more likely a reaction to Krupa’s more realistic view on the bank’s value, as it vies with far mightier American counterparts. 

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