A tribute to Investor Relations
By CEO and communications advisor Lars Sandstrøm, Corporate Relations
DIRF DAGEN 2023 was a tribute to Investor Relations – as a function and role, and in celebrating the significance IR has today regarding management, communication and value creation in companies. Indeed, DIRF DAGEN proved that IR plays a significant role in gaining trust, in navigating in a changing global and geopolitical landscape, and in prioritising strategies to create long-term sustainable growth.
Regaining trust to Zealand Pharma
CEO Adam Steensberg of Zealand Pharma talked about the turnaround of the company – a process that is only 18 months old. However, a lot of results has already been achieved; a new CEO, new management team, strong equity story, increasing investments, stronger pipeline and a much higher share price.
The IR function plays a key role in a turnaround process.
“The IR team make sure that the process of implementing the strategy is being communicated broadly. However, we did not have an IR function when we started the turnaround, but IR is a huge supporter of the business, and they play a major role in the process of regaining trust in the investor market”, said Adam Steenberg.
ESRS is a game changer
Position Green presented their latest ranking analysis on ESG reporting from the 100 largest listed companies in Denmark, Sweden, and Norway. The Danish companies are least prepared for the ESRS (the new EU standards for sustainability reporting) and it will take a lot of effort to meet the standards in the coming years.
One of the key and obligatory methods in meeting the ESRS is conducting a Double Materiality Assessment (DMA).
“IR has a vital role to play in facilitating this assessment. They know the stakeholders, and the DMA will provide the framework for reporting going forward,” said Simon Taylor of Position Green.
“However, ESRS is not just a compliance effort. It is a tool to enhance your business model and equity story – and a way to contribute to the EU green deal and the road towards net-zero”, he concluded.
New focus for IR
The ESRS and the increasing focus on sustainability and ESG are surely going to be a huge job for the IR profession. But there is more to come.
In the last couple of years Artificial Intelligence (AI) has found a prominent role to play in IR. It is and can be used for market intelligence, enhanced investor targeting, compliance, predictive analysis, reporting, and natural language processing.
Henrik Gøbel of Morgan Stanley: “AI gives us an opportunity to analyse enormous amounts of data. But you need to be critical of the input and output. The IR function plays an important role in assuring the substance of the output and how we use it.”
AI is the new big deal on the IR agenda, but the profession has seen many changes in the history of the now 35 years old DIRF. That was evident from the celebration session with Thomas Kudsk Larsen, Pernille Friis Andersen and Lynge Blak.
Pernille Friis Andersen: “I have seen a lot of changes in the IR function and role; more compliance and harmonization within the EU, digitization, virtuel AGMs and conferences – and the IR function has got a more strategic role with IR subjects now being a matter for the board.”
Thomas Kudsk Larsen agreed to these points, but also stressed that globalization and geopolitical matters has changed the role of IR. Lynge Blak pointed out that you will find many differences in the way IR is carried out in Asia vs Europe, and that IR is also a very specialized competence from which you can build a career.
The pitfalls of investor targeting
Investor targeting is both a central and quite specialized discipline within IR. The objective is to match the issuers investment story with funds investment strategy. And that is not an easy task as strategies and investments change from year to year, quarter to quarter. The task is finding the potential current fits of issuers and funds.
“There are many pitfalls and challenges in this task,” said CEO Mark Simms of CMi2i. “Much data about funds investments and strategies is not publicly filed, that means you must look to other sources of information to be sure you talk to the right funds. Also, it is not enough to look at the current investment portfolio of funds. You also need to know which direction they are moving.”
To avoid critical and activist investors working against issuers strategies and objectives, you must evaluate funds from a number of criteria. E.g., you must know how they look at corporate governance issues and how they match your company, because if they do not, you might end up with an investor who counter work your business and IR strategy.
The geopolitical issues and macroeconomic situation had a lot of focus on DIRF DAGEN. From the discussion between Allan von Mehren, Danske Bank, Timothy Ash, RBC Blue Bay Asset Management, and Thomas Kudsk Larsen it was clear that especially the US-China “cold war” and the Russian-Ukrainian war was considered to be the most essential geopolitical issues to focus on from a company perspective.
Their view on these issues and advice to companies operating in these regions:
Allan von Mehren: “You need to have a strategy to deal with changes in China, and you need to have a strategy for how to balance Chinese and Western values and opinions.”
Timothy Ash: “Sometimes you are too invested in a country with geopolitical issues and have difficulties balancing stakeholder expectations.”
Thomas Kudsk Larsen: “Transparency is key. If you change your strategy or behaviour in particular regions or countries let the market know. Be proactive.”
The macroeconomic situation was also discussed in a debate on debt investors. From ISS, Danske Bank and S&P Global Market Intelligence. They agreed that the increasing interest rates have increased focus on servicing these investors, and it is important to balance the story told to both debt and equity investors. The debt investors are focused on stability and earnings, and this must be part of a transparent communication to all stakeholders.
Diversity for better performance
At the end DIRF DAGEN we all got our cultural intelligence tested. Bobby Bovell of Living Institute talked about the unconscious bias that we tend to have in judging people and situations, and the benefits we may reap from being more diverse and inclusive.
Not the least, he pointed out the benefits from diverse teams:
“Studies show that they are more successful than other teams in reaching new market opportunities, in being innovative, and they have a positive impact on productivity and performance,” Bobby Bovell said.