Maximising investor engagement for CFOs in the CSRD era
Proactive investor engagement on the climate transition plan is a powerful opportunity for CFOs to strengthen relationships and secure long-term support from the investor community.
Both public and private market investors expect companies to integrate ESG factors into their business strategies and reporting. Through CSRD-compliant reports, companies can proactively engage with investors to demonstrate their commitment to sustainability, strategic planning around climate risks, and readiness to adapt to regulatory requirements. The optimal time for companies to engage investors is now, this is during the preparation and publication of a company’s Climate Transition Plan.
Company benefits of proactive engagement include:
- Enhanced transparency: An opportunity to provide investors with deeper insights into the company’s business model, plans, and operations.
- Clear misconceptions: Identify and directly address any misunderstandings or misconceptions. There are many idiosyncratic nuances that need to be discussed and that go beyond any type of ESG or transition plan assessment available in the market.
- Actionable feedback: Obtain practical and actionable feedback on various topics, typically financing instruments, whether related to sustainability or not. This is important as the sustainable finance market is in constant evolution and companies offering innovative answers to investors needs and concerns are often the winners.
- Provide feedback to the Board & sustainability committee about the plan: The exercise provides the sustainability committee and the board with insights into how investors may view certain aspects of the plan, particularly the more challenging and company-specific issues. Or it can provide answers to very simple but important questions. For example: Are investors using our ESG ratings or specific reports that we make available?
Requirements for successful company/investor engagement:
- Courage: Don’t shy away from discussing the main challenges head-on. To ensure the engagement is productive, it is important to openly discuss what investors may be considering. An expert moderator can facilitate this dialogue.
- Teamwork: Investor engagement through the transition plan serves as a valuable test of how effectively different teams within the company are working together under a cohesive plan. Strong collaboration between the sustainability, finance, CFO, and Investor Relations teams is essential.
- Foster favourable conditions to the dialogue:
- Ensure you’re engaging with the appropriate individuals within the investment community. There are different profiles that are likely to be interested in understanding your transition plan and how it connects with business. However, sustainability analysts, credit/equity analysts, and portfolio managers, all have different perspectives.
- Set clear objectives for yourself: For example, focus the engagement on the three main topics that are on the minds of investors when they consider your business. Share your perspective, gather their feedback, and report back to the sustainability committee.
- Do the follow-ups: This may seem obvious, but it is a vital step. The dialogue will generate follow-ups and action points, which could include methods for reporting or developing new initiatives. Following up on these will further strengthen the company’s relationship with the specific investors involved.
Maximising investor engagement through strategic sustainability reporting is not just a compliance exercise; it’s a powerful opportunity to strengthen relationships and secure long-term support from the investor community.
I look forward to your feedback,
Fabrizio
