Techniques for enticing the green investor
October 15, 2007
How can you persuade the green investor to invest in your company, if your environmental credentials are looking rather weak?
Some industries, by their very nature, are going to do more harm to the environment than others. Companies working in consumer services rather than in basic materials are bound to find it easier to ‘go green’, and to target the green investor.
But how picky should the green investor be?
Is it better for the green money to go to the company who is already performing well, and for whom the percentage improvement possible is relatively tiny, or to go to the company who has performed badly in the past, but who is making huge improvements?
Wouldn’t it better for us all, in the long run, to support those companies in the more harmful - but essential - sectors who are doing the most to improve?
Improving the performance of those companies who currently do the most damage to the environment, and rewarding those who manage to make the most improvement each year, will surely make a bigger difference, overall, than rewarding those whose industry has a relatively light footprint in the first place.
We need assessment techniques that show us not only how good/bad each company’s performance is on a number of different measures, but also how much that performance has changed over time. We need to see the trend for each company, and, ideally, to be able to compare this to the performance of other companies.
Some companies make it easy to see how their performance in this area has changed over time, such as BP, who provide 5-year data for visitors to review. It would be great if we could see the same measures on other sites for comparison purposes.
How is CSR performance measured?
There are several major CSR indices, awards, and other methods of assessing a company’s CSR performance, including:
- Dow Jones sustainability index
- FTSE4Good index
- Global Reporting Index (GRI)
- BiTC award
- CSR Network’s Accountability Rating.
All these are wonderful tools and techniques for reporting and rewarding companies who work hard at CSR. Many companies are signed up to one or more, and some have won awards.
If your company hasn’t considered any of the above - why not think about it now? There are resources available to help on each of the sites above.
However, some companies are excluded by their very nature from some of the above. The FTSE4Good Index, for instance, excludes tobacco companies, weapons companies, and those working in the nuclear industry.
What can be done to support these companies in their efforts to improve?
What can be done to encourage those companies who have no interest in it to improve their performances in CSR?
What are the benefits in CSR - and in green investment?
There are definite benefits to engaging in CSR activities, and these have been outlined many times (see CSR Network for a summary of the argument for CSR), including:
- reduced cost
- improved productivity and quality
- increased sales
- increased profits
- enhanced reputation
- improved employee recruitment and retention.
These are the arguments that must be used to persuade companies that it is in their own interests to work on CSR.
Once that’s done, though, how can green-inclined investors be persuaded to invest in companies that are currently not-very-green?
I suggest that the answer is explaining:
- that engaging in CSR activity results in enhanced financial performance for the company
- that improvements in CSR in currently poorly performing companies (in CSR terms) could achieve big results environmentally
- that investing in a company with a long way to go in CSR terms but which wishes to improve will therefore achieve big results environmentally (thus benefiting the world) - and, probably, financially as well (thus benefiting the investor).
Crucially, of course, the company must be persuaded into a CSR programme before this will work - but once it has agreed, getting the green investors on board will surely add momentum.
This post is part of Blog Action Day, in which bloggers around the world are discussing environmental issues.
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8 ways of revealing your shareholder base
October 12, 2007
Do you want to be seen as open and transparent?
People want to know who has money invested in your company, and you should explain this - though you don’t need to mention everyone!
I’ve found 8 different ways that companies have used to disclose and explain their shareholder structure.
This is usually done by one of the following four methods:
- Giving a list of the top 10 or 20 shareholders (by size of shareholding)
- Showing the structure of your shareholder base by size of shareholding
- Providing details of the shareholders by geography
- Giving details of the different categories of share (e.g. ordinary shares, or preference shares).
Indeed, the Investor Relations Society (UK) recommends providing:
- Shareholding analysis by size of holding, type of holding and geographical origin.
- Details of the percentage holdings of principal shareholders.
But what about telling us:
- The percentage share of the votes?
- The changes to the shareholder base over the last quarter - or several quarters?
- The proportion of retail investors to professional investors?
- The proportion of shares held by the directors or other named individuals (who are probably not the principal shareholders in a big company)?
Examples of shareholder analysis in corporate websites
- Prudential gives details of its share-ownership structure by size of shareholding and by geography. This lets us see which country the main shareholders are based in.
- Legal and General give details of their share-ownership structure by type of shareholder and by size of shareholding.
- Stora Enso tell us what percentage of the shares (and votes) that each type of shareholder has - and by what percentage that has changed over the last quarter. This is very interesting, and lets us see which type of shareholder is selling, and which buying.
- Stora Enso also name their top 20 shareholders, and give us this information over a period of several years - again, this lets us see the trends emerging.
- Scania have a tab-based display of this information on the same page: so, we are told the top 10 shareholders; the ownership structure; the concentration of shares and votes; and the countries the investors come from.
Are your shareholders primarily retail or professional investors? That’s interesting - why not tell me up front? Look back at the Legal and General example and the Stora Enso example … these companies let us know what type of investor is interested in their stock.
Some companies have complicated ownership structures. Perhaps there are complicated crossholdings. Explaining this is usually simplified by using a diagram (the example below is taken from the 2006 Bridge IR report available on the Reg/Regi US site)
What about the directors - how much stock do they hold? This information is usually available in the Corporate Governance section, or in the online report, but providing a link from the page that details the shareholder base would be illuminating, though very rarely done.
Signet do provide details of the percentage held by the directors as a group; of course, the bigger the company, the less significant each person’s holdings are. Smaller companies, such as Phoenix Solar, can clearly indicate the percentage held by each director.
As you can see, there are a variety of ways to explain to your visitors just who has a financial interest in your company. Which ways do you provide - and which have I missed?
Naming the insiders: Stora Enso
August 23, 2007
If appropriate, companies should have an insider trading policy, and this should be clearly communicated to everyone concerned. Then everybody knows what is expected.
Stora Enso provide their policy online, but also go one step further by listing those individuals who qualify as insiders - and to whom, therefore, the policy applies. I have also seen the ‘closed periods’ listed, during which these people may not trade in the company securities, but it isn’t there at the moment. Perhaps this information is only provided around those periods.
