Simon Propper, Context: Court responsible investors

Demonstrating your commitment to corporate sustainability may be a pain, but it will pay off.

Simon Propper, Context: Court responsible investors
Simon Propper, Context: Court responsible investors

What's quicker; circumnavigating the world or completing the questionnaire for the Carbon Disclosure Project?

A jumbo jet would be back in time for supper while you were still puzzling over question 4.1, the anticipated physical impacts of climate change. Welcome to the information-hungry world of responsible investing (RI).

It would be convenient to dismiss this often irritating niche activity of the financial community were it not such an important part of establishing your company's reputation.

Originally a saintly pursuit of church groups and charities to avoid sinful stocks, RI now packs a significant investment punch. In 2009, the Financial Times reported a 27 per cent growth in RI funds and a rise of assets under management by nine per cent. The UN's principles for responsible investment attracted more than 700 signatories representing assets worth $18 trillion. Financial information providers, such as Bloomberg and Thomson Reuters, now include environmental, social and governance data in their analyses.

The maturing of RIs has brought with it a new level of corporate scrutiny, but establishing a good reputation with responsible investors presents a particular challenge to investor relations teams.

First, it is difficult to judge which organisations are most important and which are peripheral. Second, the complex nature of the subject means that meeting their needs is time consuming. You must prioritise.

Identify the RI organisations most likely to affect your company and target them aggressively. Most RI organisations are either asset owners, asset managers or researchers.

Most large quoted companies already have RIs among their major share owners. Seek them out.

Also give time to RI asset managers such as Henderson and F&C. Passive funds track indexes, but active fund managers pick their investments based on bespoke analysis. Make sure they know what you're up to.

Researchers compile indexes and supply information to the other two groups. Some, such as EIRIS and SAM, are more influential than others.

Decide which organisations you will respond to, and ruthlessly reject tangential requests.

Target selected RI organisations with pertinent information by understanding what they want. They need strategic information that shows companies are managing risks and seizing opportunities. They are not interested in charity donations or other marginal activity.

Companies must demonstrate high-level commitment to corporate sustainability (CS); an ability to capitalise on CS opportunities; that they have the right policies, processes and people in place to deliver on their commitments; and that they set targets, measure performance and can demonstrate improvements.

Preparing the pitch to investors is easier if you have a good quality sustainability or CR report.

Your annual report and investor presentations should also contain a strategic summary that explains how your business and sustainability strategies are aligned or can be in future. Finally you should engage the engagers. If their questionnaires are frustrating, invite them in and explain how your business views sustainability.

It may not seem like it, but UK companies are fortunate to have an investment community that is so interested in CS. Most of what they are pushing for will make your company more successful and sustainable in the long-term. Make them your friends.

Views in brief

- What is the most important lesson to have emerged from the BP saga?

BP's problems are issues of management and culture that permitted short-term profit to override management of risk. It is not a comms issue.

- To what extent do dwindling public sector budgets offer an opportunity for corporate CSR programmes to fill the void?

The most significant function of business now is to get off its knees and start employing, training and investing again. Corporate philanthropy is a marginal activity compared with, for example, public sector budgets for health, education or unemployment.

Simon Propper is managing director of Context

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