firms told: 'don't be bashful with mainstream investors'September 2003
Companies will have to be bolder about raising CSR issues in meetings with mainstream investor analysts if they are to get the business case across to the financial community, a study has concluded.
The Arthur D Little analysis says companies have to be more forceful when talking about their CSR programmes, rather than assuming that mainstream analysts are not really interested in such issues. Until they do so, there will be little chance of improving communications between companies, mainstream investors and the socially responsible investment community.
The three parties are on different wavelengths, it says, even though all would benefit from improved communication.
In particular, analysts would be able to use a company’s CSR policies and practice to assess the quality of management and whether non-financial risks are being addressed effectively.
But for this to happen, companies will have to include CSR issues in presentations to mainstream analysts, and alter the structure and content of their social reports and other communication tools used by investors so that they focus on how the company is managing the material risks it faces.
Glossy reports dominated by case studies are of little use to investors seeking to identify reputational and other risks that might affect shareholder value, the report notes.
In the long term, many communication problems would be solved if socially responsible investment analysts worked more closely with their mainstream colleagues, and buy-side analysts received training in the basics of SRI.
For their part, SRI rating agencies and researchers should make clearer to companies the purpose of their inquiries and should phase out the use of questionnaires to gather information (EP5, issue 1). SRI index providers also need to be ‘more transparent on how they conduct their assessments’, the study says.
A recent survey of 105 European fund management firms by the UK Social Investment Forum and Thomson Extel found that of quoted companies, ExxonMobil, McDonald’s and Dixons were least impressive at communicating their performance on sustainable development, while the most impressive were BP, Shell and Rio Tinto.
The survey ranked Mike Tyrrell of HSBC as best individual SRI analyst with 41 per cent of votes, followed by Miles Packman of Dresdner Kleinwort Wasserstein, (20 per cent).
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