Recently, NIRI (the National Investor Relations Institute) issued an updated ESG Disclosure Policy Statement that “outlines key criteria, best practice recommendations, and the steps IR professionals should take to support management in the evaluation and communication of ESG factors for the benefit of stakeholders.”
In the guidance, NIRI recommends that
“… IR practitioners develop an understanding of best practices for incorporating non-financial ESG disclosures, whether or not their company decides to provide voluntary disclosures. NIRI’s ESG Disclosure Policy Statement outlines key criteria, best practice recommendations, and the steps IR professionals should take to support management in the evaluation and communication of ESG factors for the benefit of stakeholders.”
NIRI’s suggestions fall into three broad categories:
1. Maintain the pulse of stakeholders’ ESG expectations. “…today’s IR practitioners must develop cross-functional ESG-specific subject matter expertise. This knowledge is key to successfully identifying environmental, social, and governance risks, challenges, and opportunities that potentially impact a company’s equity valuation… there is now a growing list of independent entities—or key ESG stakeholder groups—seeking ESG information from companies in order to better assess a company’s sustainability profile, both in terms of its impact on the planet and the potential of externalities to influence the company’s performance. The differing perspectives of these groups have led to several different sets of asks that must be carefully considered by the company for relevance and materiality.”
2. Provide management with well-informed recommendations. “The more familiar an IR professional is with the latest ESG developments, reporting styles, and stakeholder sentiments, the better able they will be to identify relevant ESG trends and counsel management on to how to strategically respond to various requests for information.” For instance, NIRI states “The concept of materiality has been a hot button in recent comment letters regarding SEC proposed amendments to regulate ESG disclosures. In these letters, it is not always clear whether the threshold should be enterprise value, revenue, or another quantitative metric. NIRI contends that the scope and nature of ESG disclosures should be based on company-specific considerations and industry/sector practices. The IR team must help define these parameters for their organizations and provide disclosures that are meaningful, auditable, and repeatable.”
3. Lead the development of meaningful and accurate ESG disclosures. “As the “gatekeeper” of public disclosures, the IR practitioner must champion a consistent approach for ESG information that will be disclosed and how that data should be verified before release.” This includes data collection, encouraging company-specific disclosures rather than boilerplate language and ensuring disclosures/messages are consistent with each other and past statements.
Our take: Investor relations professionals are sometimes caught in the crossfire between executives, legal, environmental, procurement and other internal department in crafting ESG messages to investors. IR can be seen as a hindrance or as a valuable disclosure control mechanism. NIRI’s updated guidance offers practical and reasonable guidance to IR staff on how to integrate more fully into various company departments that play a part in ESG disclosures and proactively act as a trusted check and balance function.
To be candid, this isn’t an easy task and IR professionals may be outside of their comfort zone. PracticalESG.com provides an array of resources that can help. If you aren’t already a member with access to our growing collection of member-exclusive blogs, checklists, podcasts, guidebooks, sample disclosures and other resources, sign up now and take advantage of our no-risk “100-Day Promise” – During the first 100 days as an activated member, you may cancel for any reason and receive a full refund.
