For many companies, ESG communications really get going when the general counsel is taking the lead, according to Stephen James, head of EMEA business at ISS Corporate Solutions.
Speaking at the ESG Integration Forum – Europe 2019, hosted by IR Magazine and online sister publication Corporate Secretary, James said investor relations, along with other departments, tend to play a supporting role as ‘influences’ on the process.
‘As a service provider to many corporates, I bring more of a broad view than a single-company view,’ he said. ‘My own experience is that when the rubber hits the road, [that] tends to be when the corporate secretary or the general counsel has ownership of the ESG fundamentals.
‘IR is clearly a hugely influential driver to the overall management of ESG risk. But my sense is that IR is this valve that interfaces between the board and the outside world. The general counsel is somebody who seems to have ownership of ESG risks, certainly governance risk.
‘So when we plug into companies, and we’re helping companies solve ESG problems and understand what they look like, we tend to find it’s the CFO [and] the general counsel who really catapult that process forward with the likes of HR, compensation, sustainability and IR as influences.’
For IROs and corporate secretaries who want to get a handle on the growing investor demand for ESG information, James said it was vitally important to understand which data points your shareholders are following.
‘As an IR practitioner, you are required, as a prerequisite, as a starting point, to know your register, know the policies of your register, the preferences of your register,’ he said. ‘If you understand which data points your investors are relying on, you can begin to shape the areas you should be prioritizing.’
James explained that companies should understand how ESG plugs into their business ‘on a sector basis’ along with ‘the key drivers of ESG’ for key investors. By mapping that, companies can focus ‘on the easy wins and the most important wins – these are the two things we tend to advise our clients to focus on.’
But he cautioned that the ESG investment landscape is a challenging and fast-moving environment: ‘Even those who are proactively engaged in this cannot get their arms around it. It is moving too quickly, and there are too many players bringing something to the story – so you absolutely need to plug into a third party.
‘As an IRO, as a general counsel, you want to understand: what are companies like [mine] doing? What are the problems that companies like [mine] are having and how are they solving them? So the extent to which you can benchmark and understand the holes other people fell down [means] you can avoid falling down those same holes. Understand your strengths and weaknesses: leverage your strengths and mitigate your weaknesses.’