Investor communications: Why ESG matters when going public
Going public has always been a process. But, nowadays, there is a lot more to consider than just financial documents. Most recently, there has been a notable emphasis on the importance of environmental, social, and governance (ESG). This is now a key factor when it comes to IPO investor communications.
In today’s blog, we’ll be breaking down the basics of ESG, the advantages to investor communications, and ways that companies can act on ESG as they prepare for their initial public offering (IPO).
Environmental, social, and governance: Breaking down the basics of ESG
It’s quite a broad umbrella term, but at its core, ESG refers to the tracking of a business’s practices and policies in regards to its three headings: environmental, social, and governance. It’s first and foremost a form of risk management. Each of those headings represents an issue that could present a risk to the business in question. By acting on ESG, you’re reducing those risks.
For ESG policies to be effective, a great deal of internal effort is required. When you’re going public, ESG cannot just be another box ticked. It’s vital to investor communications that you intend to do ESG right. If not, it won’t matter how good your finances look; investors are far less likely to come on board.
When assessing their ESG, companies need to be asking themselves questions. For the environmental side of things, they need to be considering their carbon footprint, their timeline for achieving net zero emissions, and where & how they source their raw materials. For the second heading, social, they need to consider things like diversity, inclusion, and equity. And, for governance, they should be thinking about their standards for running their company. This includes, but is not limited to, transparency when it comes to their board and executives.
Benefits of ESG for investor communications
There are a number of benefits to taking ESG seriously. This will be particularly true in 2023 and beyond, as demonstrating your business’s sustainability becomes increasingly essential. The foremost benefit to investor communications is that strong, transparent ESG disclosures are likely to attract investors for whom financial documents aren’t enough. And, these days, that’s most investors. But it can also increase your IPO’s chances in a competitive market. Your credibility will be much improved, and therefore your reputation.
Act now on ESG for your investor communications
There are a number of ways in which you should be acting on ESG. Here are the main actions you should be taking as you prepare to go public:
- Identify risks. This has always been crucial for companies going public. But, now more than ever, it’s important to analyse potential impediments to your ESG model.
- Identify benchmarks. It’s no good having lofty targets if you can’t translate those targets into measurable criteria.
- Lay out your strategy. Avoid greenwashing at all costs by implementing a holistic, transparent strategy. By deploying a publicly accountable pre-IPO approach, you’re showing investors, and the public, that you’re fully committed to your ESG targets.
A leading provider of corporate finance services, Perivan is the UK’s number one producer of annual reports, IPO prospectuses, and investor & shareholder communications. For secure data rooms and more, head to our Engage page.