John Gollifer, General Manager of the Middle East Investor Relations Association (MEIRA), believes that investor relations can play a major role amid Covid-19 spread crisis and afterwards. Argaam had the following Q&A with Gollifer.
Q1) Do you think COVID-19 presents serious challenges to IR practitioners and the IR community in general?
A) COVID-19 is undoubtedly presenting unprecedented challenges for IR officers as a result of the steep sell-off and continued volatility in capital markets. A key challenge that IR professionals are facing today is shaping the narrative while navigating widespread speculation amidst the advent of a bear market and global recession. Adding to this gloom and doom is the alarming speed at which much business around the world is shutting down, if temporarily, and the inevitable social impact. It is not a conducive environment for public companies to provide specific information or guidance on earnings forecasts given in many cases, we simply don’t know and may have to start again once matters are clearer.
IR officers can, nevertheless, focus on reiterating the business fundamentals that create shareholder value in the long-term while also being transparent about what the company can do in these testing times for all businesses. Above all, in times like this, when we can’t possibly have all the answers, keeping the communication channels open and being responsive can only help investor sentiment. We must learn and continue to listen to market feedback. The measures put in place today can only help instill confidence and trust among investors. From today, business needs to develop the investment story and create a new narrative based on what is already working and what has been learned to ensure that we have sustainable businesses beyond this dreadful time of COVID-19. Onwards and upwards, we need business to do just this!
Q2) What's your advice to listed companies and IR practitioners to protect the equity valuation during this crisis?
A) From a practical point of view, IR must continue and more so in uncertain times, key to success is being positive, proactive in your communication and maintaining transparency. Building and deploying a comprehensive toolkit will be critical to addressing investor concerns. Here are some considerations for public-listed companies and IR officers:
-With the reporting and AGM season underway, companies should review regulations prescribed by capital market authorities and their Commercial Companies Law on conducting electronic and possibly hybrid AGMs and EGMs. Some physical presence on the part of organisers, for example, is inevitable if you want to ensure that the whole process works for everyone, including your smaller shareholders. Now is the time to show them that your company cares and can address their concerns and questions too.
-Proactive releases and market disclosures distributed across all channels and platforms to demonstrate that management is actively addressing any issues and evaluating the impact on company performance will go a long way in a digital world where there is no excuse for not doubling-up on your communication efforts. Remember, you can be present and keep the market and other stakeholders well-informed. Let’s face it, it’s better coming from you rather than another source.
-IROs need to ensure that messaging remains consistent across all stakeholders and avoid selective disclosure of any new information, so don’t forget your regulatory obligations, including any statutory reporting requirements through official channels.
-Don’t forget to keep the company website up-to-date. It is likely to be the first-port-of-call for many enquiries. Accordingly, providing regular updates on the IR section during this difficult period is not just about being efficient and effective, it will also help to ensure that your company information is accurate and timely. At the same time, you lessen the risk of any speculative messages from other sources.
Q3. What underlying changes are taking place in the field of Investor Relations in the Middle East?
A) The investor relations function is one that is undergoing a profound transformation as a result of regional capital markets opening up and striving to attract international investors. It’s a competitive marketplace and at the same time, there are other changes afoot in market structure, regulation and technology, all of which mean that IR needs to respond professionally.
The past couple of years have witnessed a number of regional capital markets evolve from Frontier to Emerging Markets. A case in point is Saudi Arabia, the only market in the world where both MSCI and FTSE inclusions took place simultaneously within a 12-month timeframe. This was, of course, following the inclusion of the UAE in the indices a few years ago. Moreover, Kuwait is currently in the process of being upgraded to Emerging Market status. Overall, a more mature financial and capital market ecosystem is developing in GCC right now, and the inclusion in major international indices is a strong indication of that.
Against this backdrop, public-listed companies in the region are beginning to see the benefits of a well-resourced IR function that can play a key role in delivering value to investors and other stakeholders. International investors, including ESG-investors, are demanding greater transparency and expecting to see better recognition and integration of non-financial ESG factors that underscore the investment story and company valuation for the long-term. We need only think of today’s operating environment in which COVID-19 has suddenly emerged as a real risk factor that has to be accounted for in any company response to the market. It will certainly test the very best businesses and for those who haven’t considered all of ESG before, well, that day has surely arrived. It is inconceivable to imagine IR without ESG – this is a huge opportunity for companies and their IR teams to present a complete story for the future. Let’s grasp the opportunity to think and possibly rethink what we mean by sustainable business and how this investment story can be shared more broadly with all stakeholders.
Indeed, more stock exchanges and capital market regulators are signing up to the UNPRI (United Nations Principles for Responsible Investment). At the same time, it’s heartening to see our regional market operators advocating the importance of IR in promoting a healthy and robust capital market environment. A great example of this are the IR guidelines that already exist in GCC markets. More recently, MEIRA signed a MOU with the Securities and Commodities Authority (SCA) in the UAE to promote IR in listed companies, supported by the planned roll-out of joint-training initiatives that we expect to see in 2020.
Lastly, technology has, of course, come to the fore in a time when virtual meetings and digital IR can play a critical part in keeping our regional companies on the investor radar screen, wherever they are. The digital IR landscape of the future is offering us a more accessible, functional and engaging experience with our target audiences who expect companies to deliver, if not use, smart, mobile and cost-effective channels and platforms. It goes without saying that digital IR is an essential tool for companies to provide investors and stakeholders with timely information, a key ingredient in improving transparency and governance. In the context of the current operating environment, we would do well to remind ourselves what we
have learnt from the harrowing experience of confronting COVID-19 and surely consider the use of the other options available, from virtual meetings to AGM/EGM alternatives, now a permanent feature of our future-proof IR programmes.
Q4) What is the role of ESG and other non-financial disclosure in IR?
A) It is impossible to talk about IR today without discussing, or at least thinking about, ESG, which includes the integration of non-financial factors into the investment story. We are seeing a growing impact from various Environmental, Social, and Governance factors on investment. Climate change, diversity and inclusion, for example, highlight the importance of thinking more broadly in response to the needs of all our stakeholders, as well as critically, being important factors for the future success of all businesses. IR teams can play a key role in ensuring that management can effectively address the needs of all their stakeholders as part of this learning process.
Governance is perhaps the factor that IR professionals understand best, given the importance of operating correctly and behaving properly in regulated public markets. Taking into consideration our watchwords: disclosure, transparency and trust, interestingly for GCC markets, we can draw comparisons between existing methods of financing and Islamic Finance, which, for example, has parallels to ESG practices. It is no coincidence that the asset class continues to grow in the region and encouragement should be taken from the fact that GCC markets make up over half of the global industry in Islamic Finance. There is still much to share and learn in our markets.
However, ESG integration and how an organisation can adopt both financial and non-financial factors in its investment story remains a key consideration for IR and ESG investors. Over the next few years, consideration of ESG will no longer be an optional business practice. Organisations and their IR teams must realise the substantial benefit and competitive advantage of adopting ESG practices and measures in their operations, including driving engagement with investors who expect more transparency and disclosure of ESG factors in business. IR in the Middle East has a very exciting future and much to look forward to beyond where we are today. Let’s remain strong and committed to our growing IR roles
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