As we wrap up a turbulent year of tense trade negotiations with the U.S., China and Mexico, high-stakes elections in Quebec and Ontario, and the legalization of Cannabis in Canada, Edelman has put together a list of Top 10 Critical Insights to prep IROs as they plan their 2019 financial communication strategies.
According to Edelman’s Trust Barometer Special Report: Institutional Investors buy-side behaviors are realigning with consumer habits as investors increasingly focus on longer-term impact issues when considering a value proposition. Edelman surveyed more than 500 chief investment officers, portfolio managers, and buy-side analysts split equally across Canada, US, UK, Germany and Japan, representing firms that collectively manage over US$4.5 trillion in assets.
Here are Top 10 Canadian Investor Insights for IROs to consider heading into 2019:
1. Companies must step up their ESG performance
96 percent of Canadian investors state that addressing societal issues impacts trust in a potential investment and a further 91 percent of investors would consider investing with a lower rate of return if it meant including sustainable or impact investing considerations.
2. Management must take an authentic stand on real world issues
Globally, respondents strongly agree that Environmental and Social practices are equal in importance to sound Corporate Governance. Subsequently, public companies are increasingly expected to address one or more societal issues with cybersecurity, globalization, and income inequality considered top priorities.
3. All Investors are potential activists; but companies are unprepared
90 percent of institutional investors say their firms are more interested in taking an activist approach to investing and 95 percent will support a reputable activist investor if change is required. Yet 90 percent of investors believe most companies are unprepared for shareholder activism.
4. Corporate culture is now an investment KPI
Investors increasingly recognize the positive impact that healthy working culture, code of ethics and engaged employees have on corporate performance stating that these practices have a significant impact on their trust in a company.
5. Trump policies drive Canadian investment in U.S. equities
The political environment has a tangible impact on buy-side decisions with 85 percent of Canadian investors more inclined to invest in U.S. assets as a result of the Trump administration’s economic, trade and immigration policies.
6. A Bear Market is on the horizon
25 percent of Canadian investors expect the bull market to come to an end within the next six months (versus 18 percent of U.S. investors) and 53 percent believe that the run will end in less than one year’s time. However, 93 percent of Canadian investors continue to hold a positive stance on the 12-month investing outlook compared to 77 percent of U.S. respondents.
7. Personal relationships are the keys to building trust
Canadian investors are placing greater importance on personal relationships or verbal communications with senior management and the Board. In comparison, U.S. investors look more to quantifiable KPIs, such as long-term financial guidance and operational metrics, as the primary trust drivers for investments.
8. Investors want modernization
87 percent of investors believe the way most companies share IR information is outdated with 89 percent wanting to see more visual ways of sharing information and 92 percent want more qualitative, forward-looking disclosures.
9. Management alone does not control the corporate narrative
While a company’s CFO is still ranked as the most credible voice, a wide spectrum of influencers including academics, experts, and regulatory agencies are considered highly trustworthy sources. Furthermore, 98 percent say an engaged and effective Board is important, 96 percent agree that they must trust a company’s Board, and 94 percent require good Board access to take or maintain an investment position.
10. Digital IR is essential
Consumer behavior is filtering through to the investment community with over half of investors using LinkedIn, Facebook, or Youtube on a weekly basis to gather news to inform their portfolio management decisions. Twitter, Search Engines and Instagram are also used frequently to remain updated on investment opportunities. 91 percent percent also consult a company or executive’s social media channels when evaluating an investment.