Addressing 10 key ESG challenges for investor corporate relations

For many companies, addressing ESG issues is a complex and challenging matter. While climate change and governance dominate investors’ questions, and companies acknowledge the importance of ESG reporting, there are varied views on the financial materiality of ESG topics.

To provide corporates with useful benchmark data, BNP Paribas Exane spoke with 375 managers from 322 listed companies across Europe (Benelux, France, Germany, Iberia, Italy, Nordics, Switzerland and the UK), representing over €6 trillion in market capitalisation.

In this inaugural ‘International ESG Corporate Survey’, BNP Paribas Exane identified 10 key ESG challenges for investor relations and how corporates can respond.

1. Position ESG at a C-suite level

Almost half of the respondents said their Sustainability department reports to the CEO and nearly two thirds appoint a board member to monitor ESG issues.

2. Integrate ESG into the Equity story

According to three quarters of respondents, less than 5% of ESG issues addressed by investors have a financial impact.

3. Explain again and again to convince

Management roadshows are the primary interaction between companies and ESG investors ahead of ESG conferences.

4. Translate ESG into financial strategy

Nearly two thirds of companies integrate ESG into their financial strategy but less than 50% define ESG KPIs.

5. Understand both specialist and generalist ESG investor expectations

The main challenge on ESG investor engagement is the heterogeneity of the ESG analysis methodologies of their stakeholders.

6. Engage diverse stakeholders

Almost all respondents want to retain ESG investors in their shareholder base but only 6% set quantitative targets.

7. Anticipate new ESG-related shareholder activism risks

Around one in three companies had been challenged recently on ESG by activist investors, though managing the risk of ESG-adverse voting at AGMs is not yet perceived as a priority objective.

8. Master ESG regulations

Only one third of respondents had a clear view of the impact of ESG regulation on the company and over half acknowledged having difficulties following these regulations.

9. Align your reporting with ESG standards

Only one in three companies aligned its ESG reporting with the EU taxonomy and one quarter of respondents consider these external ESG databases to be of good quality.

10. Allocate the right level of resource to ESG challenges

Less than half of companies have a dedicated person in the finance department to monitor ESG issues. Nearly two thirds of them do not have a full-time investor relations professional dedicated to ESG.

Nearly 80% of respondents came from Investor Relations functions across various sectors, including industrials, financials, consumer discretionary, healthcare, energy, real estate, materials, IT, communications services, consumer staples and utilities.

To learn more about the report, please contact the Corporate Cash Equity team at corporate.equity@exanebnpparibas.com.

This BNP Paribas Exane Survey was led by Benedicte Thibord, Head of Corporate Cash Equity (Europe), and Laurie Fitzjohn-Sykes, Co-head of ESG Research, BNP Paribas Exane