Companies must move beyond mere ESG, and show investors their sustainability and impact: Third Hemisphere

A comprehensive Environment, Social, and Governance (ESG) strategy is the bare minimum companies should have to engage investors these days, according to Third Hemisphere, with investors becoming more interested in sustainability and impact for long-term value returns. 

ESG — the acronym stands for environmental, social, and governance — has been mostly focused on screening companies as investments, largely by understanding how a business is affected by environmental and social issues, and whether a company has good governance in place to manage those risks and pressures.

Sustainability is a much broader idea, focusing on a company’s role in society, how it creates value by managing its environmental and social impacts (both positive and negative), and how its actions affect a wide range of stakeholders.

Impact then places a focus on what positive impacts a company can have on the world, such as making measurable progress towards the United Nations Sustainable Development Goals.

In 2023, ESG should be the bare minimum for companies, Third Hemisphere executive director Jeremy Liddle says. In fact, companies that want to stand out from the crowd need to go even further and focus on sustainability and impact.

Now’s the time to implement

Liddle says the time is right for companies to ride the wave of rising sentiment by communicating their sustainability and impact plans to investors, especially how they plan to reduce their environmental impact.

“Investors are looking to put their money into companies that can display more than the basic ESG metrics and that are instead aiming for sustainability and to make a positive impact in the world,” he said.

“Strategies around climate change and reducing carbon emissions must be authentic and, as asset allocators in particular are now increasing their portfolio allocation into carbon negative or climate positive companies, high profile.

“The timing has never been better for companies to consider how their communications strategy is supporting their capital raising plans by communicating their sustainability and impact metrics to leverage this growing trend.”

Sustainability focus is an IPO advantage

The need for a strong sustainability and impact communications campaign targeting capital markets is especially critical if a company is considering an IPO.

Liddle believes the IPO market is expected to pick back up again in the second half of the year and many companies will be looking for a way to attract capital markets support to go public

“Interest rates should stop rising over the next six months, which should mean there will be more capital coming into growth areas and the IPO market may start to open up again,” he said.

“Companies that are strong on sustainability and impact, and that can communicate all the good things they are doing for the world, are going to attract more capital faster.

“These companies will create a natural advantage for themselves and that’s where big chunks of capital will be going first.”

Tier-1 news media an effective channel

Third Hemisphere recommends companies look to a communications strategy around tier 1 news media – and investor-focused publications like Stockhead – as these are particularly effective channels through which these companies can communicate with the capital markets en masse.

This strategy  also provides greater credibility through third party validation and by carving a space as a thought leader in the sector.

“The aim is to reach large groups of investors and build a brand that is recognised as one of the top companies in your sector in the country,” Liddle said.

“Our client Gelion, for instance, is aiming to create grid scale batteries for energy storage so that we can transform the energy grid faster in Australia and all around the world. They are also creating more efficient battery technologies for electric vehicles or any sort of mobile application where you need a battery.

“By communicating these high-impact goals in the right media channels, including having the CEO readily available for media interviews, they are strengthening their relationships with the investors who are able to help make these goals become a reality.”

This article was developed in collaboration with Third Hemisphere, a specialist in technology and finance public relations (PR).

Third Hemisphere is a Stockhead advertiser at the time of publishing. 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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