IR Monitor – 26 February 2025

In this week’s newsletter:

• When activist investors ask for board seats and how to deal with it: advice from HBR
• Big news for investor relations in the Gulf: JP Morgan reclassifies both Qatar and Kuwait as “developed markets”. The United Arab Emirates may be next
• Scaling IR with a ‘team of one’: knowing how to get the right information, at the right time, and from the right people is key according to IR Magazine
• Global investors wary of Irish firms’ sustainability claims reports the Irish Times
• CEOs’ forced smiles show the limits of AI-driven investing. A really radical idea, from the Lex column, would be to pay attention to companies’ actual financial performance
• And finally … there’s no smoke without IR (ouch): It’s getting so bad on the sell-side, even BAT pays for its own research, warns FT Alphaville 

This week’s news

Dealing with activist investors who want board seats – Harvard Business 

Activist investors have been successful in influencing who sits on corporate boards – in 2024 alone, there were 243 activist campaigns globally, which influenced a total of 119 board seats. Given how quickly campaigns trigger the appointment of activist-nominated directors, it is crucial to understand how it all works. ANDs can be either independent professionals who have no prior relationship to the activist fund that nominates them, or activist principals who are directly employed by the activist fund itself and therefore are aligned on strategic goals. The nominees gain board seats through either proxy fights, settlements, or informal recommendations. To prepare for activist intervention, boards should assess composition strategically, aligning members with the company’s key opportunities/risks. Additionally, they should address gaps in board composition to strengthen decision-making, especially in transformative M&A situations. Finally, robustly disclosing the diversity and expertise across the board to shareholders will build trust and ultimately drive long-term value. In the case that an AND does join a board, it is important to understand what the frustrations of the activist fund were, in the first place, to ensure better communication going forward. Additionally, implementing an engagement strategy & facilitating a constructive dialogue dynamic with the new ANDs will ensure that their goals are aligned with the company’s strategic vision & governance norms.  

IR in the Gulf: Rehabilitation 

JP Morgan Chase & Co will soon proceed with the removal of Qatar and Kuwait from its Emerging-Markets Bond Index, ahead of promotion for these countries to developed market indices, with the potential for a similar removal of the UAE next year. This will take place over six months and, from now on, new bond issues from these markets will not be included in the EM index. Investors have been expecting this to occur. In terms of the UAE’s future, JP Morgan confirmed that the country’s cost-of-living has exceeded what might legitimately be regarded as an “emerging market” for two consecutive years. If the cost of living remains elevated in 2026, the market will no longer be eligible for the EMBI series and will be scheduled for upgrade in a phased manner. The rehabilitation of the Middle East as a mainstream destination for institutional investors continues. 

Scaling IR with a team of one 

A good IR professional does not need to be an expert – often IR teams are a one-person operation, so scaling via collaboration and preparation is often much more effective than trying to know everything. A few suggestions: Firstly, in preparation for results days, IROs should gather input from various teams across the business to inform the financial cheat sheet for senior management ahead of earnings calls. Secondly, pre-emptively aligning with internal experts on robust Q&As will mitigate the different brands of questioning that a company spokesperson may encounter at industry events. Thirdly, it is important to remember that IR is the bridge between company leadership and its investors. Knowing how to get the correct information from the right people is vital. In other words, scaling should be seen through the lens of delegation. And finally, the best IROs are simply translators who break down complex business language into basic, investor-friendly terms. The objective is to understand the company’s shareholders and, crucially, to know who to call when questions become technical. Connecting investors with the right internal experts, ensuring that messaging stays consistent and compelling, and making sure a company is understood in the market is the key to success within IR.  

Global investors are wary of Irish firms’ sustainability claims

According to PwC’s latest global investor survey, a majority of international investors believe Irish businesses are making unsupported claims about their sustainability credentials and they desire more comprehensive reporting. The survey, which polled more than 345 investment professionals globally (including 32 in Ireland), also found that 69 per cent of global investors want sustainability information to be reported with the same level of scrutiny entailed in financial audits.  Fidelma Boyce, an assurance partner at PwC Ireland, noted that “Investors continue to prioritise action on the impact of climate”. 60% said that they would like sustainability targets to be taken into account in executive pay agreements.  

The limits of AI-driven investing 

Bank of America’s measure of S&P 500-wide corporate sentiment is at its highest recorded level since 2004. For the past two decades, BofA’s sentiment indicator has been steadily rising upwards with the occasional short, sharp drop during crises such as the 2008 financial crisis or the start of the coronavirus pandemic. Yet, despite such a high level of optimism from investors, analyst estimates for first-quarter growth are actually deteriorating. An explanation of the mismatch may lie with AI. Fund managers have opted for ever more advanced ways of measuring companies’ confidence which have moved on from simple tricks, such as assessing the smile on the CEO’s face, to complex analysis of audio for the micro-tremors that wouldn’t show up in a textual transcript. One such company, Speech Craft Analytics, has been drawing interest from investor relations specialists looking to train executives in how to sound good to the algos. There must be an end to this game, however. In a world where everyone’s presentation is pitch –perfect, investors will inevitably look for a fresh method to differentiate companies. A radical idea, posed by the FT, would be to pay attention to companies’ actual financial performance too. 

And finally… there’s no smoke without IR 

There was a time when commissioned research was purely for the small companies, not covered by mainstream analysts, where institutional investors might have some need for consensus estimates (or, indeed, a need for any estimates at all). No more. Things are getting so bad on the sell-side now, the FT suggests, that even a company the size of BAT is paying for its own research. This raises all sorts of questions about what the big companies are looking for. Do they feel misunderstood by the investment community? Would they like a bigger, broader following? Are they unhappy with the quality or reach of the independent analyst coverage? European spending on investment research was actually slightly higher last year, for the first time since MIFID’s introduction, but it is clear that gaps remain between what the companies are demanding and what the analysts are supplying.