Over the last five years, the function of investor relations (IR) has grown significantly in strategic importance for global organizations. Not only has this resulted in increasing engagement with investors, it’s also engendered more sophisticated and strategic targeting. These changes are being driven by a number of intersecting factors, including changes in regulations, technology and investor priorities. Let’s look at three key influences behind the recent flourishing of global investor relations.
MiFID II
From January 2018, an updated version of the EU’s Markets in Financial Instruments Directive, or MiFID II, came into force. Designed to make European markets safer, more transparent and efficient, the regulation affects anything that has an underlying product listed in the EU, which means its influence is global. With a focus on moving trading towards online systems, more companies are engaging directly with investors, with the consequences for investor relations teams being an increase in direct inquiries.
This leaves investor relations officers (IROs) with a greater responsibility to profile and target investors, as well as requiring them to spend more time educating potential shareholders. Here, localized content is absolutely key to help potential global investors understand the company’s profile, risks and highlights clearly.
Engaging through fintech
According to Mediant’s 2018 report, 78% of companies within the financial industry are increasing their investment in technology, with one in seven citing investor relations as their primary driver. Fund companies, which invest the pooled capital of investors in financial securities, see new technology as an essential part of engaging with investors, with 80% of these respondents investing in fintech for this purpose.
Unsurprisingly mobile technology is considered the main priority, with new communication methods such as text-based messaging not far behind. Nearly half of companies are already implementing digital services to enhance communications with investors, with 42% utilizing mobile applications and a quarter using a cloud-based solution or engaging via social media.
Digital engagement has the potential to open companies to investment from anywhere in the world. This means localized content is equally important in the virtual world as it is offline – especially given internet users’ notorious impatience for anything other than a seamless digital experience.
ESG investors: the rise of the social conscience
Where fintech comes into its own is in helping investors access meaningful data and the right tools to identify clear benefits of less well-known stocks. According to BNY Mellon, engagement by investor relations officers with environmental, social and governance (ESG) investors has grown by almost a third since 2013, from 26% up to 34% last year. As ESG investments become more mainstream for investors interested in sustainable or social investment opportunities, the 2018 Morgan Stanley Sustainable Signals report cites the lack of robust tools and data as major hindrances.
Nevertheless, the popularity of these investment products will likely continue to grow, with 86% of millennials interested in sustainable investing. While it may not surprise you to learn that organizations courting these investors tend to demonstrate a greater level of socially conscious activity, they are also more likely to have a written strategy to communicate with key investors about corporate governance issues and their board members are more likely to have met with investors in the past 12 months.
The correlation between more companies demonstrating a social conscience and increased engagement with ESG investors is not an accident. A study by the European Corporate Governance Institute recently concluded that successful engagement with ESG investors has a positive effect on sales growth without harming a company’s profitability.
Stay ahead of the curve
With a new generation of highly technologically literate, engaged and socially conscious investors, global IROs must ensure that the material they rely on is accurate, effective and properly localized for their audiences. To speak to us about our specialist financial translation services, contact us today: projects.alpha@rws.com.
