Investor Relations Must Get Up to Speed on Sustainability

Our most recent sustainability report, Investing for a Sustainable Future (part of a collaboration between MIT SMR and The Boston Consulting Group) highlighted the shift of investor interest in sustainability and the fact that many executives are behind the curve, none more so than managers in the investor relations (IR) function. While 75% of investors in our survey say sustainability performance is material to investment decisions, only half of IR professionals thought sustainability was important for business. This is a significant gap, and one that deserves additional attention.

What might explain this IR gap? One issue is that company functions are often siloed and staffed by specialist professionals with limited time and ability to consider a bigger picture beyond their own function. The IR function is no different, with extensive obligations like preparing quarterly disclosures, meeting with current investors, and so on. This specialization has meant very few IR professionals are either involved with sustainability decision making or familiar with what the sustainability side of the company is doing. Nearly 40% of IR professionals who responded to our survey said they aren’t given direction on sustainability communication with shareholders.

On the other hand, operational managers and sustainability professionals who work on sustainability issues usually have a very limited understanding of what the IR function does. They have limited knowledge about the investment community and little interaction with shareholders. As the official spokespersons for the company, it’s the top of the house that has access to investors, not sustainability managers.

Because of this arrangement, investors don’t call sustainability professionals directly for information about corporate responsibility initiatives. When investors do call, they reach out to the IR department, which is unable to engage in the kinds of nitty-gritty sustainability conversations investors are looking for. Given this situation, it shouldn’t be a surprise that nearly 80% of IR managers say they don’t include sustainability talking points in their investor conversations.

In addition, when investors do speak with company executives, they often use different terminology for sustainability activities. Sustainability managers can be dealing with roughly 100 different Global Reporting Initiative (GRI) indicators, each with its own unique terminology. Investors are not usually immersed in this jargon.