Investor Relations Conferences: ‘Tis the Season by Lisa Wannell
For IR associations and societies around the world, the annual conference and awards are always a highlight in the IR calendar, perhaps more so in 2022, given the scarcity of opportunities there have been to connect in person over the past two years. Whilst some organisations have opted for virtual or hybrid events, for those gathering for the annual IR jamborees in Boston, London, Sydney and Riyadh, the excitement is no doubt palpable; there will be a great deal to talk about, much to learn, reflect on and debate. The world has changed over the past two years and investor relations, like many other corporate functions, has found itself having to respond to these changes in unprecedented ways.
Nowhere is this more clearly reflected in the themes of the upcoming IR conferences around the world: Words such as adaptability, agility, re-invention, resilience and sustainability feature prominently in the conference titles, highlighting a profession keenly aware of a need to move with the times. The agendas cover every hot topic in IR and the capital markets: break-out sessions and fireside chats with senior IROs and fund managers are set to grapple with issues of how to adapt and respond to hybrid models of engagement, embracing new technologies, the rise of stakeholder capitalism and activist investors and what the buy-side will expect of IROs and leadership in the future. And of course, ESG. ESG is everywhere. So, which of the themes populating the agendas of global IR conferences are most relevant to South African investor relations practitioners?
There are greater demands than ever on business leaders to communicate their response and strategy across the ESG pillars in the context of capital allocation. How public companies are prioritising and articulating their environmental, social and governance strategies whilst navigating ESG’s rapidly changing reporting and regulatory landscape, are challenges for every board, management and IR team. Properly integrated into business strategy and aligned to a company’s core business, and clearly communicated to all stakeholders, ESG can certainly be a differentiator. But a quick straw-poll of a few executives and business leaders indicates that there may still be some confusion about ESG and its place in South African companies. ESG is not only complex but has a high potential reputational risk element to it. South African companies are also ill prepared for shareholder activism that has accompanied demands for more complete and appropriate disclosure and insistence to “walk the talk”.
So, who should own ESG internally? Who drives the ESG strategy and where should companies be looking for ESG specialists? A snap poll of attendees at a recent IR Society of SA webinar asked which of several ESG issues the society should focus on at its upcoming conference: strategic alignment, the needs of investors or the role of ratings agencies? Respondents felt that all were important, perhaps pointing to the fact that when it comes to ESG, IROs are perhaps still figuring out which elements should be prioritised. But emerging from the ESG debate is a growing awareness amongst some fund managers of the dangers of falling prey to marketing ‘spin’ around ESG and a ‘one size fits all’ application of ESG principles/metrics. Shareholders are increasingly more discerning about how they look at ESG issues and which are relevant to the future financial success of a business. After all, ESG will cease to matter if companies don’t make money.
Spare a Thought For the Sell-Side
The fate of analysts received a lot of coverage in the aftermath of MiFID II but has abated somewhat since. Any discussion about investor relations in South Africa, however, must take into account the career path of future IROs - where they will come from, the training available to them and, critically, the extent to which the role of IR is understood by corporates. Based on recent conversations with several local sell-side analysts, it seems the struggle is still very real. Most are thinly stretched and battling to be relevant; How does one find something new and meaningful to say when covering 20+ stocks? No wonder they’re accused of making a noise for the sake of it and looking for sensational headlines after every results announcement. Covering multiple sectors may make for an adaptable analyst, but often comes at the expense of a sector specialism – a valuable skill when moving into an IR role.
Bonuses in the sector aren’t what they used to be so that’s no longer an incentive to work all hours, ‘picking holes in companies’ as one analyst described her job. Invariably therefore, they burn out and leave the industry. However, equity analysts often make excellent IROs and this is a well-trodden and aspirational career path elsewhere in the world, often en route to a C-suite role. So in South Africa, where there is a dearth of IR training and a tendency to employ relatively junior people in IR roles, this removes a natural pipeline for future IRO’s and undermines the importance of the function. It also perpetuates a perception of the role as being relatively unsophisticated and unexciting. Where will our IROs of the future come from unless there is greater awareness of IR as a senior, strategic, even board-level role? Few corporate roles enjoy the exposure to every aspect of a business as IR does, providing a multitude of future opportunities. Training is vital to ensure IROs are equipped not just with the skills to do the job well but with an understanding of what separates excellent IR from mediocre IR. The IR Society in South Africa is tackling this issue though and have promised exciting changes. What will come of these, only time will tell?
Awards Tell a Story
Excellent IR deserves recognition. It is a demanding role requiring a rare combination of skills. Internally, the role can sometimes be regarded as little more than a ‘postbox’ function - or it can be a game-changer. The difference is down to many factors and can change over time, but taking the pulse of how a company’s IR function is regarded by the buy- and sell-side is essential for IR teams to identify what they’re doing well and which areas need work.
A recent survey by Intellidex which ranks South Africa’s top IR teams delivered some revealing findings: 31% of all respondents voted the overall quality of investor relations in JSE listed companies as “Good”, 11% voted it “average” and only 15% voted it excellent (Inaugural Investor Relations Awards 2022 - Summary report - Intellidex). The various categories were based on buy-side and sell-side analysts rating the quality of IR in JSE listed large-, mid- and small cap companies based on elements such as access to management and the quality of their market communications. Winners in each category were generally praised for their clarity and consistency of messaging, quick response time and the IRO having a comprehensive knowledge of the business. It’s no secret that companies with well regarded, best in class investor relations programs, clear, consistent narratives, and good access to management benefit from an optimal valuation and reduced cost of capital. Ensuring that an IR strategy is put in place which is responsive, proactive and agile would go some way to ensuring that the verbatim feedback in the report is more positive in the future. Comments from the recent report included ‘..largely do what is required but not much more’ and “South African companies utilise the IR function less than other countries – they tend to be less proactive and respond to the narrative rather than drive it”.
The awards provide some valuable pointers for companies looking to improve their IR programmes and shines a spotlight on those teams which are delivering excellence in IR. And there are several individual IROs and teams doing exactly that: displaying the agility and resilience needed to keep pace with the demands of all their stakeholders and using technology to drive their IR programmes in innovative ways to ensure their organisations are well positioned for the future.
This is sure to be a vibrant and insightful IR conference season. We hope you enjoy it wherever you are in the world.
The South African Investor Relations Society hosts its annual conference on 13 October 2022 at the JSE.
Lisa Wannell is the founder & Director of Halogen Search & Selection and specialises in corporate affairs and investor relations recruitment.