Investor Forum Annual Review - event summary
The IR Society attended the Investor Forum’s Annual Review virtual event on 20th January, which focused on ‘purpose and how it can guide a company to create long-term sustainable value’. We heard from industry leaders, including the chair of BP and CEO of Fidelity International, about how social issues, like climate change, have become an increasingly important aspect of investor engagement with corporate boards. A clearly defined purpose can inform better decision-making and help to generate long-term sustainable profits. This year, the dialogue between companies and investors is likely to continue to focus on stakeholder engagement and the provision of measurable hard and soft indicators of corporate purpose and culture.
Click here to read the Investor Forum's 2020 Annual Review.
In his opening remarks Simon Fraser, chair of the Investor Forum, discussed the Forum’s focus on putting stewardship at heart of investment decision making. He highlighted that investors had mobilised over £140bn last year to help recapitalise companies during the crisis. Climate and social issues have now become part of investor engagement with boards in a way that had not been seen in the past. A clear purpose in its simplest form defines why a company exists and can help to inform board decisions.
Helge Lund, chair of BP and Novo Nordisk, then talked about how purpose had become increasingly important in most boardrooms and how the pandemic had helped to build trust and inspire employees whose companies had responded well to the crisis. Lund shared his corporate experiences, including how BP has embraced the opportunity to align its capabilities with the needs of society and has redefined its purpose to ‘reimagining energy for people and the planet’. He emphasised the importance of engagement with a wide range of stakeholders in this process, from the workforce to NGOs, and BP’s biggest opponents.
Anne Richards, CEO of Fidelity International, spoke of the differentiation between firms that do and do not have a clear purpose. Too often the focus has been on financial returns at the cost of other important factors, such as workforce exploitation. Company profits are likely to be more sustainable where there is a clear purpose, because employees will be better motivated, and customers will benefit from this. Richards highlighted a number of questions that investors should be asking of companies and demanding evidence to support their responses:
- How are your board discussions anchored around purpose?
- How often has purpose changed your decision?
- Can you articulate honestly the negative impact your business has on society?
- How do your staff really feel about your firm?
Before moving into break-out sessions Andy Griffiths, CEO of the Investor Forum, emphasised that investors and stakeholders must have confidence in corporate boards. Griffiths was delighted to see investors working with corporates last year to help strengthen balance sheets and felt that the quality of dialogue between the two parties had improved. He wrapped up by emphasising that purpose must be much more than a marketing statement. Social issues should be in the boardroom and at the heart of investment decision making.
Published 21 January, 2021