Off-Season is the New On-Season for ESG Engagement

Proxy season is no longer the only or even the best time to talk ESG with your passive institutional investors. Indeed, the fourth and first quarters, when the ESG stewardship and compliance officers from institutions have significantly less on their plates, can be the perfect time for you to share the details of your environmental and social journeys and showcase your best-in-class governance practices.

It’s also a great time for your executives and board members to hear first-hand from your investors about any ESG concerns they may have, especially issues that could lead to unfavorable votes come proxy season. Get investors’ input now, while there’s still time for your company to take action and make adjustments before those votes are cast.

The invites can go both ways.

In many cases, investors themselves are initiating these meetings because they have something specific they’d like to discuss or because they simply want an update on your ESG activity. You may have already received an email request or two to that effect, saying something like this:

“Our team would welcome the opportunity for an offseason engagement with members of your management team, including an independent director from your Board. We are looking to schedule a 30-minute Microsoft Teams conference call to be provided with an update on any relevant strategic, corporate governance, and sustainability-related measures taken by your company to date.”

If you haven’t, it’s okay to do the inviting yourself. Again, passive investors have the time for engagement right now outside of annual meeting season. And they are always eager to know what their portfolio companies are doing when it comes to material ESG issues.

According to State Street Global Advisors, a top passive institutional shareholder, “Our approach to stewardship is designed to have an impact through thought leadership, engagement, proxy voting and client disclosure. Our stewardship program utilizes a risk-based approach to identify material ESG thematic topics deemed to have the most material impacts on the long-term value of our portfolio companies.”

So, if you have news to share on any of these ESG topics, take the initiative and reach out to get a touch base scheduled.

5 ways to make the most of off-season meetings.

Whether you are responding to a request or sending one of your own, do the homework to make the engagement time as valuable as it can be for all participants. Keep these tips in mind:

  1. Get the invite list right. Requests for meetings that come from key institutional investors often specifically ask for time with members of your management team as well as an independent director from your board. Ideally, this board member will be the head of your ESG or sustainability committee. It’s also important to make sure your CEO, GC or compliance officer, and head of investor relations have a seat at the table.
  2. Make the time. Most institutional investors have a single compliance email scheduler and have made it relatively simple to get the meeting booked. Return the favor by doing your part to prioritize these meetings and find time in everyone’s schedules. In the near term, at least, you can expect these meetings to take place virtually and last for around 30 minutes, which makes scheduling a bit easier.
  3. Hit the high notes. Use your time to address the issues that are most important to your investors:
    • Start with a quick overview of the company and its-, three-, and five-year performance with a focus on strategy, growth, and cash flow.
    • Touch on key focus areas of the strategy to enhance shareholder value.
    • Address financial KPIs for long-term performance. And their tie into Executive Compensation.
    • Give an overview of ESG policies including environmental targets and goals along with a snapshot of any recent actions and the long-term ESG roadmap.
    • Discuss any ESG elements of your compensation strategy.
  4. Leave time for questions. Especially if your investors have initiated the meeting, plan enough time in the agenda for them to have the floor. Here are several new(er) questions you can expect to be asked:
    • Has the Compensation Committee discussed the possibility of integrating ESG metrics with the short-term incentive plan within the executive compensation program?
    • When is management planning to set targets for your Scope 1 and 2 emissions? Does your company plan to report aligned with the TCFD framework in 2022?
    • Are management and your board satisfied with your current diversity levels? What do you view as the most important goals and actions for improving diversity at your company?
    • What is your corporate strategy regarding climate change? Does your company identify risks and opportunities related to environmental issues? Do you consider 1.5-degree to 2.0-degree expectations in your analysis?
  5. Put insights into action. Off-season meetings with your investors’ ESG stewardship and compliance officers give you an opportunity to hear investors thoughts on your ESG strengths and weaknesses and to learn about any emerging areas of interest they may have. Most importantly, you can find out what investors are looking to see and hear more of from your company going forward. Your GC will be key in helping to ensure the feedback from these meetings is leveraged to shape company responses to social and political issues and ultimately increase shareholder engagement percentages.

Get that calendar filled.

Make the most of the off-season by taking advantage of gaps in schedules to open the lines of communication between your company and your passive investors. The more proactive you are about discussing ESG with these shareholders now, the better prepared you’ll be come proxy season.  Need some guidance? ESG Infinite can help. Within the online platform, you can access ESG investor profiles, develop effective ESG presentations, and prep with top investor questions to show up ready for your next meeting with shareholders. Contact ESG Infinite to learn more today.