How to talk to the capital markets about ESG and Corporate Purpose
An interview with Brian Tomlinson, Director of Research at the CEO Investor Forum at CECP.
ESG is an increasingly important topic for investor relations professionals. To understand how it impacts this role, we interviewed Teodora Bozhilova, ESG Investor Relations Manager at Wienerberger AG - a leading international supplier of building materials and infrastructure solutions. We discussed everything from learning about Wienerberger’s work in ESG, hearing Teodora’s advice for other investor relations professionals to understanding how you can measure key ESG topics and popular misconceptions around the rapidly growing area.
My role in investor relations and ESG is interesting as it involves two sides. On the one side, I manage communication externally with rating agencies and investors with an ESG focus while on the other I interact with different departments within the organisation, starting with the managing board. ESG is not solely rooted in our department as it is actually quite a broad topic. We interact with corporate sustainability, legal, compliance, and public affairs. All of these departments are important for us to get the information required for the capital market.
One part of our toolkit are ESG roadshows. For example, we have organized already in 2021 our third ESG roadshow as we believe that this is something every company should to on at least an annual basis.
Concerning rating agencies, responding to their questions is something that has increased a lot in the last year. We’ve also noticed that investors not only use scores provided by these agencies, but they are also creating their own proprietary models and score-cards about ESG. Like companies, investors are experiencing a lot of pressure to evaluate how green their portfolios are.
ESG is not new for Wienerberger. It has been deeply rooted into our DNA since the business started over 200 years ago in Vienna. We have always been dedicated to running a sustainable business and thinking for the next generation and we are aware of our responsibility towards people and the environment.
For the last 10 years we have been publishing sustainability reports focusing on the ecological and social aspects of our communities along the entire value chain. We also aim to measure our performance relating to employees, production, product, and our social commitments. In 2014 we set up a sustainability roadmap, which we successfully finalized in 2020. We are already continuing our sustainability commitment as we have published our new sustainability strategy last year, which has clear targets until 2023 in ‘E’, ‘S’, and ‘G’ areas.
With our clearly defined ESG targets for 2023 we will report on the progress of these every year. On the “Environment” side we have highlighted climate protection, circular economy and biodiversity as our material topics.
Climate Protection: We aim to decrease CO2 emissions by 15% by 2023, compared to 2020 as a base year, concerning scope 1 and 2.
Circular Economy: We are aiming for all our new products to be designed 100% recyclable or renewable.
Biodiversity: We plan to roll out a program for all Wienerberger sites by 2023, particularly on how you treat a clay pit after you have used it.
Our previous work revitalising old clay pits has been very successful, such as the park created in Vienna at an old site. Currently, we are running many local programs because every country has different local laws, but our plan is to rollout one program for all sites.
On the “Social” side we have defined diversity targets, which is very important not only for investors but also for employees as well. We are aiming for more than 15% female employees in senior management positions and more than 30% female employees in white collar positions by 2023. Next to diversity we have health and safety, which is not new for us - we are underlining the statement that zero accidents per year is our highest goal, and we are working towards it with a strong track record over the last decade. We have also set ourselves a target in training and development, where we aim to offer +10% more training hours per employee. Finally, we have a multitude of CSR projects. Currently we are cooperating with Habitat for Humanity, an NGO that provides homes for socially vulnerable people from across Europe. We have been working with them for a couple of years already. Our goal is, by cooperating with them and with other non profit organizations to have 200 housing units built with our products per year for people in need in our local market by 2023.
Last but not least, on the “Governance” side, we are underlining our commitment to the highest international governance standards and the Austrian Corporate Governance Code.
After completing our strategy 2023, we will evaluate our progress again and set new targets considering breakthrough technologies and developments in the upcoming years. By setting up the strategy for 2023, we are following a step-by-step approach with targets aligned with the EU Green Deal. In the long run, our aim is to be net-carbon neutral by 2050.
It is crucial for every company to have a good communication strategy to capital markets. There are multiple tools we are using in order to do this. Dedicated calls with investors and ESG roadshows are the most important ones. These are highly appreciated by investors and actually are expected from all companies. It is also important to give ad hoc information to the market in the case, for example, of the Covid-19 crisis. You should be ready with responses and should be able to talk about the companies’ performance during crisis periods.
The work in investor relations has changed a lot even within the last year. We have had an increased communications effort due to Covid-19, not only regarding financial figures but also around ESG metrics. Two years ago, almost nobody spoke about ESG performance, now there is almost nobody who does not talk about these topics. ESG has become a mega-trend and is impacting every investor relations department.
You are right, ESG is a journey, it is not something you have immediately. My advice would be that if you do not know where to start, then start by evaluating your ESG performance by analysing scores provided by key rating agencies. I think, this is the easiest first step one can take because you can see what they require and you can try to collect the low-hanging fruits i.e: Things that your company is already doing but are not disclosed. Next, be proactive. Make sure you are proactively engaging with rating agencies and with investors. From there, look at best in class examples, and think about how you can apply them in your company. For me this approach has worked quite well, and I think that this is something every company can use.
We have KPIs which we track and report in the sustainability report. The number of KPIs will increase when reporting on the progress of our strategy. On top of this, I think it is important to monitor your ESG performance according to the rating agencies and according to the investors’ scorecards and models. There you can see what their requirements are and can define which requirements are important for your company.
This is very important of course. We are aware of new regulatory developments, especially the news and guidance from the EU regarding taxonomy regulation and others. It is also an important topic for investors because they want to evaluate the environmental impact of their portfolios, so we are being asked about our position on EU regulations all the time. Generally, we expect to see more support for the companies, not only from the EU but also from local governments. If we all want to be climate neutral by 2050 then everyone needs to make an effort, not only big companies. We would also like our industry to be involved in the development of the strategy at European level. You can not only have regulatory developments without taking into consideration the companies’ view, because they are the stakeholders who are going to apply these regulations.
I can imagine why people are saying this. As mentioned earlier, there are hundreds of ESG ratings, which all have different requirements. Meeting all of them could be really quite challenging. But I also believe that focusing on the material things for your company is crucial. I believe that you should make your own path and just follow it; as long as it makes sense for the capital market you are on the right track. The size of your company is really not an excuse of not making your business sustainable. Find what is material, start your ESG journey and you will see how it will develop. We are all doing this for us, not just for rating agencies or shareholders.
Some people may think that ESG is something new, because you read a lot about it on social media and in newspaper articles. For me it is simply a new way of measuring your sustainability performance.
My second point is that ESG requires a lot of resources. Of course, if you are a big company you will need a lot of resources, but if you are a smaller company you can define what is material to you and use the resources you have. Companies should be aware of their responsibilities and make a positive contribution to society and the environment, because in general ESG is a journey.
I believe that the work towards ESG from an investor relations perspective is going to grow. We are looking forward to the new developments, we are all doing our best.
An interview with Brian Tomlinson, Director of Research at the CEO Investor Forum at CECP.