Assuming that corporate CSR and investment communities share the same objective -- excellence in corporate performance over the long-term -- why do they seem to have such a hard time communicating? The answer may lie in loaded language, overcommunication and misdirected messaging, according to industry insiders from CDP, UBS, Columbia University, Deloitte and others who spoke at Capital Link's recent CSR and IR Forum. More than 350 institutional investors, asset managers, and CSR professionals gathered at the Metropolitan Club in New York for a lively exchange of ideas among players who don't often share the same sandbox.
Capital Link President Nicolas Bornozis opened the well-attended event by posing the question, "Does CSR enable companies to have easier access to the capital and financial markets and to lower cost of capital?" Panelists answered with a qualified "yes" and then described factors which short-circuit the clear communication between companies and the investment world.
Semantic Short Circuits
There's disconnect between CSR reporters and investors because they often use different vocabularies, even while they're speaking about the same issues. Sometimes the words just get in the way.
Investors don't typically ask questions about "sustainability," said Erika Karp, managing director and head of global sector research for UBS Investment Bank. Rather, investment analysts and portfolio managers speak about issues such as "succession planning, regulatory compliance and energy efficiency," and yet every one of those issues is about sustainability, Karp said.
"Is it all a grand misunderstanding?" asked moderator Eric J. Hespenheide, global leader of Deloitte's Sustainability Audit and Enterprise Risk Services. "It sounds like analysts are actually interested in this but not getting through because of the language."
Companies with strong sustainability performance unintentionally may alienate investors by the terminology they use.
"Values investing, social investing, impact investing – these terms are problematic because they can be divisive," Karp said.
Speaking later in the day, Gary Buesser, a director at Lazard Asset Management, LLC, echoed Karp's point: "CSR professionals speak a very different language than analysts. Analysts are focused on issues such as income statements and cash flows. But in reality, any issue that affects a company's valuation is important."
Too Much Noise
Corporations are disclosing more nonfinancial performance data that ever before, but that actually can be part of the problem.
"Lots of CSR data is available today -- lots of bad data and irrelevant data," Karp said. Too much CSR data lacks materiality and relevance. Most CSR information provided by corporations is "irrelevant and essentially noise," she said.
Next page: The 5 steps to static-free CSR communications