The role of the office of the CFO, particularly as it relates to investor relations, continues to expand. A role that once squarely focused on financial performance management now includes ever-growing operational responsibilities. All eyes are on IR leaders to address complex, multidimensional issues, such as ESG and global risk transparency, on behalf of the enterprises they serve.
Never before has the global business landscape been so complicated, or shareholder and stakeholder expectations so high. What was once largely a “push” strategy that dictated communications to stakeholders on enterprise risk profile and ESG philosophy and approach is now very much a “pull” from the buy side. Investors, both retail and institutional alike, are seeking updates at unprecedented levels of granularity, transparency and frequency.
As stakeholder expectations continue to evolve in today’s increasingly unpredictable economic and geopolitical climate, below are some key considerations for investor relations professionals to keep in mind as they refresh their roadmap for 2023.
(ES)G: Same letters, enhanced focus
While governance has long been a core pillar of IR, recent events have placed a significantly stronger emphasis on the environmental and social pillars of ESG. Consumers and investors vote with their wallets and dollars — in 2023, environmental policy and social impact will be key voter issues. PwC’s recent Asset and Wealth Management Revolution report, released in October, supports this thesis, noting that global asset managers are on track to increase, with ESG-related assets under management projected to grow to $33.9 trillion by 2026, up from $18.4 trillion in 2021. At this rate, ESG-compliant funds are on pace to represent more than 20% of total global assets under management in less than four years. CFOs and IR leaders can no longer afford to not build and measure comprehensive ESG strategies, as the future of affordable capital access will increasingly depend upon it.
When it comes to ESG initiatives, you can’t manage what you don’t measure. IR leaders have the unenviable task of solving for cross-departmental ESG data aggregation, defining and complying with standardized calculation methodologies for measurement, and supporting disclosed performance during audits. Although we’re still in the early innings of ESG measurement, IR teams should begin evaluating and implementing key processes and tools to ensure they are ahead of impending regulatory disclosure requirements.
Establishing a comprehensive measurement and benchmarking program enables enterprises to be better positioned to set, achieve and even surpass their sustainability targets. Enterprises will not only be able to share benchmarks internally for goal-setting, but externally to compare against an industry peer set — potentially attracting favorable buy-side attention or enhancing the sell-side talk track.
Preparing for the unexpected with risk management
The last few years have shown that the world can change dramatically overnight. Enterprises across all industries are constantly forced to adapt to an onslaught of various business interruptions and challenges, including pandemic-related health concerns, supply delays and shortages, inflation and dramatic foreign exchange swings, as well as ongoing geopolitical turmoil.
With global stabilization seeming like a somewhat antiquated concept, CFOs and IR leaders are increasingly expected to understand an array of operational risks with resulting financial implications. As investors navigate risk and continue to seek stability, C suite leaders are ultimately left asking, “How can one control performance in light of so many uncontrollable factors?” The short answer is you can’t, but you can be better prepared.
IR leaders should consider an enhanced focus on risk management in 2023. Showcasing risk management strategies and practicing increased transparency around measured risk exposure will be a unique differentiator for enterprises during increasingly turbulent times.
Why cross-collaboration between IR and PR is crucial
As the global emphasis on both ESG initiatives and risk management strategies continues, solidifying and aligning messaging around these topics is vital for any organization. As a result, we’ve begun to witness the convergence of IR and PR departments within our own client portfolio. It’s essential for organizations to bridge the gap between these departments and approach their communications strategies as a single, unified effort. From crisis management to business narratives that can attract new buyers and investors, ensuring consistency in this messaging eliminates the opportunity for conflicting commentary and miscommunication.
Unifying IR and PR departments also better positions organizations to take advantage of a variety of key benefits. For example, by implementing regular cross-collaboration between these departments, IR teams can capitalize on positive PR outcomes and media placements to share key messages with their target audiences to better attract potential investors. Conversely, PR teams can take equal advantage of positive momentum surrounding business growth and development — including new fundraising rounds, investor relationships, analyst feedback and more — to develop and place fresh story angles in a variety of new publications. This symbiotic relationship also serves as a core facet of any successful crisis communications strategy, as alignment between IR and PR on key messages ensures that in the face of business challenges, there is greater opportunity for mitigating stakeholder impact and negative impressions on both sides.
As 2023 approaches, CFOs and IR leaders should take the opportunity to further solidify their ESG programs and approach to enterprise risk management, collaborating on the final strategy with their PR and marketing counterparts. Focusing on the above will enable enterprises to better adhere to increasing stakeholder demands and help to build early momentum as we head into next year.
