IR Monitor – 9th March 2022

This week’s news

Global dividends: poised to hit new records in 2022 or set to stall?

Commentary often feels inherently polarised when it comes to politics, business or any news really and this week the Financial Times and Investment Week were great examples. The latest Janus Henderson Global Dividend Index has found that global dividends hit a record $1.47tn last year and, whilst both publications acknowledge this, from here onwards they clearly diverge. IW cites the 3% dividend growth forecast from Janus Henderson for 2022 and promises new records in 2022. By contrast the FT’s position, which relates to the Ukraine/Russia conflict, is that the overall dividend contribution from Russian banks and oil companies will be severely impacted and growth of dividends will therefore stagnate. The 3% forecast may have to be trimmed on this view.

UK quoted shares far more popular with investors based outside the UK 

London remains the roadshow destination of choice for non-British companies: the numbers prove it. The Office for National Statistics has released a report on the value of ordinary shares held in UK incorporated companies listed on the LSE by type of owner, with a geographical breakdown for shares owned outside the UK. For all the talk around the resurgence of the retail investor, the report found that the proportion of UK shares held by UK-resident individuals has actually fallen to 12%, down by 1.3 percentage points from 2018. Meanwhile, the proportion of UK shares owned in the rest of the world has increased to a record high, at 56% of the value of the UK stock market. This means a key trend of 2020 was the popularity of UK shares, but with this popularity driven by foreign investment, as overseas investors sought to diversify their portfolios with stocks such as tobacco, pharmaceuticals and utility companies.

AGMs – Preparing for 2022

On the 7. March 2022, the IR Society hosted the webinar: AGMs preparing for 2022 with a panel including Aneta McCoy- Asset Stewardship Officer at State Street, Eva Hatfield- Investor Relations Executive at NinetyOne and Kiran Vasantham- Head of Investor Engagement at the IR Society. The panel were first asked what their key takeaways from 2021 were. Aneta began by explaining the systemic risk of climate change and described the 80 climate related proposals the firm had seen in the first half of 2021, (compared to only 53 in the first half of 2020). Eva cited remuneration and executive pay as topics at the forefront of discourse in 2021 which led to a broader discussion on the diversity of boards as a whole. Aneta stressed that companies should look beyond their geographic roots to further their diversity agenda; for example a US company with 73 global locations can find a female CEO if it just looks at the talent spread across its own network. Eva echoed this by highlighting that firms cannot expect companies in their portfolios to propagate social governance, if they do not lead by example.

UK Prospectus Regime 

In November 2020, the Chancellor commissioned an independent review of UK listings to help boost the UK as a destination for IPOs and optimise the capital raising process for large and small companies on UK markets, (so as to take advantage of newfound financial freedoms following the UK’s departure from the EU). One year on, the government have set out a policy approach to reform the UK’s prospectus regime. The changes will simplify regulation in this area, making it more agile and effective, as well as facilitating wider participation in the ownership of public companies and improving the quality of information investors receive. As part of this, the government will delegate a greater degree of responsibility to the FCA to set out in detail the new regime through rules.

Median pay for heads of IR rises 

Last week, IR Magazine’s ‘Global IR and Salary and Careers Report’ found that the global median salary for heads of IR had climbed to $200,000, based on a survey of more than 650 IR professionals. The figure marks a notable increase from the previous $150,000-$199,999 median salary recorded in the same report, two years prior. Meanwhile, whilst the global median salary for heads of IR has increased, that of IROs as whole remains at the same level as two years ago – in fact, IRO salaries have remained in the same median pay bracket for the last five years. The survey comes amid a global hiring frenzy in the investor relations profession, following a surge of new companies coming to market.

And finally … on “the idiocy of exclusionary investment”

IR officers in some sectors should prepare for the return of investors who have historically excluded them. ESG investors tend to focus so much on the environment, that they tend to overlook the social – the wellbeing of communities and the maintenance of living standards. The Financial Times reports that we are seeing the direct effects of structural under-investment in efficient energy in oil and gas prices resulting in the largest energy price hikes in decades. Nor has it been a successful investment strategy; in Europe this past February, Deutsche Bank found that companies with lower ESG ratings fared better and, as gas prices soared, carbon saw high single-digit declines. Those who expected investors to be happy to lose money over ESG principles may want to have another think. The future is turning out to be less about green transition and more about energy security, potentially pushing ESG funds to think about industries that could be reclassified from “a bit iffy”, to completely fine. The fundamental question here is what constitutes ethical (and who gets to decide). The defence sector is another to have been excluded by “ethical” investors. But as the FT memorably puts it,  “surely supplying weapons to the invaded underdog in an unprovoked fight is a social good”.

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