Is your IR website optimized for ESG?
3 ways to update your IR website to get the credit you deserve
IR Website Whitepaper
Tom Runzo, Equisolve
ESG (or “Environmental, Social, and Governance”), also known as Sustainable and Responsible Investing (or “SRI”), is no longer optional. In fact, ESG investment strategies account for 25 percent of all money under professional management in the United States today, according to a report by Charles Schwab.
The best way to tell your company’s ESG story is to do it proactively rather than leaving it in the hands of rating agencies.
What is ESG?
For many investors today, the value of an investment is more than the sum of its monetary return.
When eyeing possible investments, a growing number of investors want to make a positive impact on society, and this may matter to them as much as the return.
ESG refers to the three main factors that measure the sustainability, risk and ethical impact of an investment: environmental, social, and governance.
Here’s a high level breakdown of what ESG entails:
- Environmental: Climate change, energy, and sustainability
- Social: Human rights, diversity, consumer protection, and animal welfare
- Governance: Management structure, employee relations, executive compensation, and employee compensation
Not only are issues like climate change, poverty, racial and social inequality, and the environment now important to investors, they also impact economies, and by extension, businesses themselves.
ESG factors are tools investors use to understand what companies do, how they do it, why they do it and the associated risk.
What are ESG rating agencies?
Hundreds of ESG rating agencies exist worldwide. Prominent agencies include the Dow Jones Sustainability Index, MSCI, and Sustainalytics.
The agencies that should matter most to you are the ones your investors and potential investors tend to go to for ratings. For example, Yahoo! Finance uses Sustainalytics, while many institutions and investors use MSCI and Bloomberg and most IRO’s want their company to be included in the DJSI.
It’s essential to find out which agency your current and prospective investors turn to for their ESG ratings and reports so you can make sure you address the nuances of that agency.
Regardless of the agency your investors use, they will always end up on your investor relations (IR) website looking for ESG information. Your investors (and potential investors) and agencies will use the information you post to formulate opinions about how you view ESG issues. Make sure they can find ESG on your IR website!
Why are ESG rating agencies increasingly used and why is ESG so important today?
Because investors are demanding an analysis to reduce crisis-linked investment risks, ESG rating agencies are flourishing—and increasingly influential. In fact, they are drastically changing how capital is being allocated.
At the start of 2018, sustainably invested assets reached $30.7 trillion, a 34 percent increase over two years, according to Global Sustainable Investment Alliance.
The growth of passive investing and the sharp rise of ESG-focused equity indices (designed to target companies that focus on ESG) have also contributed to the interest in responsible investing.
Why is your IR website critical to communicating your ESG efforts and what are some best practices?
Since ESG initiatives reveal your company’s position on many important issues, your investors and potential investors will want to know where you stand and hopefully join you on your mission.
Again, the first place your current and potential investors go to find out about your ESG efforts is your IR website.
If there is nothing about ESG on your IR website, investors may assume your company isn’t making any efforts in those areas.
Use the following best practices to communicate your ESG efforts on your IR website:
- Tell a story.
Be sure to do your research to gain a deeper understanding of your sector’s trends and nuances related to ESG. This way, you’ll be better prepared to predict what your potential investors might be looking for. When you’ve gathered this information, tell your story in a compelling way and make it accessible through your IR website.
- Make sure your ESG story is well integrated.
It’s important that your ESG story is integrated and makes logical sense.
Some companies release “integrated reports” or annual reports about diversity, sustainability, etc.
Whether or not you release an integrated report, make sure your IR website includes engaging information about how your company interacts with its external environment.
For example, include at-a-glance information about your sustainability efforts along with your revenue and expenditure information.
This way, investors (and rating agencies) can plainly see that ESG efforts are an ongoing part of your short-term and long-term strategy and outlook.
- Be memorable.
A great way to stay top of mind is to portray your people and communities in unique and relatable ways.
Ease your investors’ worries by showing them that you always rise above what is expected—while keeping healthy revenues in mind.
Use pictures and words to show how your ESG activities are impacting communities, employees, and the environment.
What does your IR website need to say about ESG?
So how do rating agencies decide your ratings who’s in and who’s out of an index? Every rating agency analyzes and rates companies differently, leading an investor to choose one agency’s methods over another’s.
Outlined below are a few factors rating agencies might look for to calculate their ESG ratings.
- How does your company address climate change?
- What is your company’s usage of natural resources?
- How much pollution and waste does your company emit?
- What are some clean, green, and renewable opportunities your company might be interested in or already partaking in?
- How much does your company care about people, e.g., health, safety, development, and labor?
- What are some of your company’s social liabilities, e.g., product, security, privacy, finance, and demographics?
- How much does your company focus on responsible sourcing, or the voluntary commitment to considering social and environmental costs while managing relationships with suppliers?
- What are some social opportunities your company provides, e.g., access to health, wellness, communication, and finances?
- Corporate governance: The system of rules, practices, and processes used to direct a firm. Governance involves balancing stakeholder (i.e., shareholders, senior management executives, customers, suppliers, financiers, government, and community) interests and nearly every aspect of management (such as action plans, internal controls, performance measurement, and corporate disclosure).
- Corporate behavior: The company's ethical strategies and standards.
Don’t forget to address your company’s shortcomings in any of these areas. Most importantly, remember to discuss your plans for improving them. This will go a long way with both rating agencies and investors.
What is the right way to integrate ESG into your IR website?
There are 3 ways you can integrate ESG into your IR website:
1) Create an ESG option in the top-level navigation of your IR website.
At a bare minimum, you’ll need to link to all your ESG information from your IR website. This information can include a sustainability/CSR/impact report and/or a section/pages on your main website. If there are multiple pages, sections, and/or reports, you should create a drop-down menu to easily guide your visitors to the specific areas about ESG.
2) Create an ESG overview page that organizes all your ESG assets.
This will make it easy for rating agencies and investors to find the information they need. Think of it as a landing page for all things ESG. Modern website design uses rows of information, so your ESG section should also follow these best practices.
3) Create a comprehensive ESG website section for an interactive experience.
How this is accomplished will vary from company to company and will depend on whether you have a specific ESG report or are pulling ESG components from many different sources.
- If you’re using an ESG report: Following website best practices, use your ESG report to create an interactive and visually engaging user experience that follows the content strategy of the report. Build it out within the IR section of your website, and be sure to include the underlying data whenever possible (as an additional, deeper layer of content.)
- If you’re pulling from various sources: Start by auditing and organizing all your ESG content and then create an outline of it. Then, turn your outline into a navigation structure of pages. Create a low fidelity wireframe, page by page, for each row of information. This should be done by subject matter and should include links to all supporting documentation.
Whether you choose to use an ESG report or pull from various sources, you will create the best possible user experience. Keep in mind, however, that this process will be costly and time-consuming, both initially and on an ongoing basis.
Note: Consider including your ESG information as part of your annual report and discussing ESG in your quarterly calls.
The importance and use of ESG is growing at an exponential rate, especially with institutions and younger investors.
The best way to be known, appreciated, and credited for your ESG efforts is by incorporating them into your IR website which is exactly the first place anyone will look. Make sure that “ESG” is part of your top-level navigation inside your IR website.
This white paper has been prepared by Equisolve to provide information on recent best practices and developments of interest to our readers. It is not intended to provide legal advice for a specific situation. Equisolve assumes no responsibility to update the White Paper based upon events subsequent to the date of its publication, such as changes in best practices, new legislation, regulations, and judicial decisions. You should consult with counsel to determine applicable legal requirements in a specific fact situation.