Despite the growing pile of assets invested with ESG criteria in mind, few IR teams are actively targeting ESG-focused funds, according to a forthcoming research report from IR Magazine.
The report, based on a survey of more than 350 IR professionals, finds that globally just over a fifth (21 percent) of respondents say they target ESG investors. European IROs are twice as likely as North American ones to say they target this group of investors, although it is Asia-Pacific respondents who appear the most active.
As companies get larger, they are more inclined to target ESG investors. That is likely down to ‘their increased resources and higher profile with the investment community,’ notes the report.
The report asked respondents to comment on the main benefits and challenges of targeting ESG-focused funds. The two most popular benefits are that these investors are potentially long-term holders and offer an opportunity to diversify the shareholder base.
‘They are long-term investors, even though they need a lot of time to conduct their thorough analysis before they are convinced of the investment story,’ comments one respondent.
The IROs who took part in the survey name three main challenges of targeting ESG investors:
• This is a small group of investors and may not be worth spending time on
• The criteria used by these funds can be too exacting or changeable
• ESG investors can be demanding in terms of reporting and shareholder engagement.
‘Alignment and reporting at a smaller company is not always robust enough for sophisticated ESG investors,’ mentions another respondent.
ESG investment continues to grow quickly. Speaking on an IR Magazine Webinar last year, Gregory Elders, senior Bloomberg Intelligence ESG analyst, noted that more than 50 percent of all assets in Europe are now managed through an ESG lens of some kind.
‘We have seen a big increase in investors’ focus on ESG – the latest statistic to come from the US Forum for Sustainable and Responsible Investment is that 22 percent of assets under management in the US have sustainability,’ he said.
‘What that actually means in practice is a different story. It ranges by company [and] by investors so it is really important for companies to understand what the issues are in their sector and how they can respond to investor needs.’
The full report, titled Global IR Practice: ESG Communications, will be published in early September and made available to subscribers to IR Magazine. For more information on IR Magazine’s research reports, please follow this link.
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