I was reading the US-based Corporate Responsibility Officer(CRO) web site today and found an article citing research done by Thomson Financialabout the importance that investors are now placing on corporate responsibility. While this isn’t news anymore, the findings are still worth noting:
- Over 82% of investors consider corporate responsibility criteria when evaluating their investment
- Almost 73% of shareholders and 59% of investor relations officers (IROs) believe that corporate responsibility impact share price
What I found more interesting was that “though 97 percent of IROs feel that corporate responsibility is important to their firm, and over 78 percent of shareholders feel that corporate responsibility is important to their investment decision, little information is communicated between the two groups.”
Why is there such a gap between what corporations feel is important and what the investment community knows about corporate responsibility? According to Thomson Financial, it’s because corporate responsibility data is diverse and difficult to collect. The survey reports that only 3 percent of IRO’s had a system to track corporate responsibility information; “the remaining 97 percent did not or else were unsure of their companies’ practices.”
The problem may lie in the difficulty of trying to quantify results that are largely qualitative and, as a result, fall outside of customary and accepted financial reporting systems. However, valid measurement systems for environmental, social, and governance are available. Toronto-based Innovest Strategic Value Advisorshas become recognized globally for their innovative Intangible Value Assessment Methodology that balances “the level of environmentally and socially driven investment risk with companies’ managerial and financial capacity to manage that risk successfully and profitably into the future.”
Karin Kane, a contributor to Thomson Financials Strategic Research Group advises IROs to consider the following:
1. Recognize that shareholders are focused on CR issues and proactively reach out to top shareholders to identify their main CR concerns.
2. Add CR information to the investor relations or corporate website. Include details on: governance policies and practices , product safety standards , labor standards and employment practices (including those of vendors ), corporate guidelines and codes of conduct , and any other concerns mentioned by your shareholders.
3. Consider adding a slide or two on corporate responsibility practices to analyst day presentations. Include any information that may have a material impact on share price.
4. Brief all corporate officers, including the IRO, CEO, CFO and operating heads, on corporate responsibility practices at least once a quarter.
5. Actively communicate all relevant and material information to the board of directors.