The Big Picture

2023 Issuer & Investor

Relations Outlook

A look ahead to the key strategic trends and

opportunities expected to drive the Issuer
and Investor Relations industry through
2023 and beyond.

October 2022
The Big Picture: Issuer and Investor Relations

Table of Contents

Introduction 3

The Take 3

Institutional Investors drive capital flows 4

Investor outreach requires offensive and defensive strategies 5

Hybrid Investor Days offer unique value to both in-person

and virtual attendees 7

ESG and climate-related financial risk management

increasing in importance 8

Trends in shareholder activism 10

Further reading 11

About Issuer Solutions 11

About S&P Global Market Intelligence 11

Disclosures 12

Michael Miller, Executive Director, Issuer Solutions Qian Shin, Executive Director, Perception Analytics
Christopher Blake, Executive Director, Issuer Solutions Michael Taschner, Executive Director, ESG Advisory
William Moebius, Executive Director, Issuer Solutions Najy Nahkle, Director, Issuer Solutions
Preston Gelman, Executive Director, Perception Analytics Harold Garrity, Director, Issuer Solutions

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The Big Picture: Issuer and Investor Relations

Introduction
Michael Miller, Executive Director, Issuer Solutions

Global stock markets are down, fears of recession are on the rise and many other macro challenges are facing issuers. As a result,
Investor Relations (IR) teams are managing through uncertainty on several fronts as they plan for 2023. In many cases, significant
pressure from institutional selling and stock price volatility have driven a shake-up in top shareholder lists. As a result, many teams
recognize a need to revisit targeting efforts in a meaningful way.

While budgets for headcount and travel are being reduced, IR teams are being asked to do more than ever. As a result, teams are
looking for ways to optimize investor interactions and to balance in-person, virtual and hybrid interactions in a post-pandemic
world. All global issuers are focused on ensuring that they have a robust ESG story to tell and that they can reach the right investors
with that story. Finally, some corporates are concerned about the potential for shareholder activism given the recent downturns in
their stock price and a less rosy near-term outlook.

These challenges and more are on the minds of IR teams as they look to 2023.

The Take
Institutional selling is expected to continue to be a headwind for stocks if recessionary and inflationary fears remain top of mind
for investors. Therefore, IR teams will need to double down on their investor engagement efforts. Competition for capital in 2023
will be fierce, so these teams will need to be strategic about their targeting efforts, ensuring that they are updating models for
new guidance metrics as well as for their updated shareholder lists.

In addition, IR teams should ensure that they are maximizing return on their time and limited resources by balancing in-person
and hybrid events, including non-deal roadshows (NDRs), conferences and other small group and one-on-one meetings. Many
should consider hosting a hybrid Investor Day, which will enable them to meet with investors in-person and virtually to update
their strategic outlook and discuss business performance in the current challenging environment.

Best-in-class IR teams will have a robust and up-to-date ESG strategy. In addition to understanding what investors expect in
the future, these IR teams will benchmark their efforts against others and ensure that they are meeting with the right investors
and measuring their efforts effectively.

For IR teams with potential activists building a position in their stocks (or for those who suspect this might be an issue in the
future), there is a need to monitor ownership closely, communicate effectively, and ensure they have a strategy in place to deal
with activists.

As IR teams plan for 2023, there are many steps to be taken. The key to success is to have a robust plan in place, to execute
against that plan and to measure the effectiveness of investor outreach and all other IR efforts.

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The Big Picture: Issuer and Investor Relations

Institutional Investors drive capital flows

Christopher Blake, Executive Director, Issuer Solutions

Institutional investors have been a key source of selling activity in the market throughout 2022. This selling has often contributed
to market volatility, and in some instances the selling has been a reaction to that same volatility. Heading into 2022, the group
faced several headwinds including the shift in active versus passive investing and the increase in self-driven retail investing. These,
combined with the weakness in equities, have driven sustained aggressive selling from the group, both stemming from capital
withdrawals from individuals and a notably risk-averse approach to current conditions.

Meanwhile, retail investors have been relatively consistent buyers despite the downturn. Historically, groups within the retail
investment community have been more likely to employ “buy-the-dip” strategies and other high risk/reward activities. This
approach has kept retail investors as the largest source of net equity inflows throughout the year compared to institutions and
hedge funds.

Hedge funds have unsurprisingly been much less consistent in their positioning. A mixture of net buying and selling throughout the
year has led the group to be relatively flat from a year-to-date flows basis. However, despite having the smallest net change to total
equity investment, the group has seen the largest shifts in their sector level allocations compared to year-end 2021. The group has
shown increasing risk appetites as many are chasing gains that justify higher management fees.

We expect many of these capital flow trends to continue into year-end 2022 and the beginning of 2023, though recent data has
shown some shifts in retail investor activity. While still the top source of inflows YTD, retail has started selling in September
and October. Should this shift continue, the market may lose one of its more bullish sources of support. Meanwhile, outflows
from institutional investors do not show signs of slowing. The group also continues to own considerably more total equity assets
compared to the retail or hedge fund group, meaning there is enough capital to continue fueling aggressive selling. While the market
has seen occasional rallies in the face of institutional selling this year, we expect any sustained rally in the equity market will need to
see at least a slowing in the pace of institutional outflows.

Cumulative capital flows

100,000 Institutions Hedge funds Retail

50,000 15,263

0
Capital flows ($M)

-50,000 -3,073

-100,000

-150,000

-200,000

-250,000 -310,395
-300,000

-350,000
12/31/21 01/26/22 02/23/22 03/23/22 04/20/22 05/18/22 06/15/22 07/13/22 08/10/22 09/07/22 10/05/22
Week ended

Data compiled Oct. 12, 2022.

From Dec. 31, 2021, through Oct. 12, 2022.
Source: S&P Global Market Intelligence.
© 2022 S&P Global.

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The Big Picture: Issuer and Investor Relations

Investor outreach requires

offensive and defensive strategies
William Moebius, Executive Director, Issuer Solutions

As the volatility in the stock market pushes forward into the fourth quarter, Investor Relations Officers (IROs) are being forced to
reassess their 2023 goals regarding “investor engagement.” While the passive investment community reaped the benefit of a wave
of capital inflows during the past decade, driven by investor appetite for lower fee portfolios and a fully accommodative Federal
Reserve, active investors are regaining a foothold this year. With more flexibility in their respective portfolios to stockpile cash in
volatile times, the active community is now positioning for 2023, with a heavy focus on fundamentally sound companies led by
strong management teams.

A few key questions for all IROs to consider … “How do I strategically position the strengths of my company’s fundamental story to
attract the growing amount of cash the buy-side community has in their coffers? Equally, how do I set my engagement efforts apart
from my peers in a volatile stock picking environment?”

Executing on a consistent level of “return on engagement” (ROE) in 2023 will require more strategy than simply targeting “who
holds my peers and not us?” S&P Global’s data on peer targeting suggests 73% of shares owned in one specific company do not
own a single peer. The level of ownership in peers by an issuer’s shareholders – whether measured by count, value or percentage
of portfolio assets – suggests that peer ownership cannot
explain the majority of investor decisions. As such, IROs are
depending more and more on data-centric evidence to drive 2021 total shareholder return (%)
their institutional outreach efforts with “suitable” firms &
funds that closely align with the company’s fundamental 40
profile. Furthermore, IROs are looking to measure the impact
a formal targeting program may have on shareholder stability, 35
total shareholder-return and increased levels of institutional
30
commitment to the name. Based on the data, it is important
to understand the targeting methodology your company is 25
implementing as an IRO.
20
On this topic, a recent white paper from S&P’s Issuer Solutions
Targeting team concluded, “IR teams who partnered with S&P 15
on both Stock Surveillance and Investor Targeting outperformed
their peers and the broader market by 9% on average and 10
experienced 30% lower stock price volatility. These trends were
confirmed for various market cap groups and industries, as well 5
as for prior periods.”
0
The end of 2022 represents the optimal time for IROs to define Market Surveillance + Targeting
their go-forward goals and key performance indicators (KPIs). As clients
the macro environment continues to pressure the broader market, Source: S&P Global Market Intelligence.
viewing IR outreach through the respective lenses of Analytical © 2022 S&P Global Market Intelligence. All rights reserved.
Targeting (offense) and Shareholder Maintenance (defense) will
prove crucial in 2023.

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The Big Picture: Issuer and Investor Relations

On the topic of offense, a few key strategies to consider:

– In addition to North American outreach efforts, with a traditional focus on the larger hubs of New York, Boston and perhaps the
mid-Atlantic, how are you fortifying your efforts among Mid-Regional targets? Further, Toronto represents the fourth-largest
money center in North America and should be considered a target region.

– Internationally, with MiFID II pressuring IROs to adopt more of a “do-it-yourself model,” are you pacing ahead of the pack
regarding the frequency of international engagement and investor composition? What do your peer ownership benchmarks
suggest?

– How are IROs educating the next group of non-holding institutional targets ahead of the curve? Defining a group of 10-15 new
firms will leave the targeted investment community more fluent in the story, more comfortable with the management team, and
perhaps nimbler to make a decisive move.

– Looking inward at your shareholder base, with a specific focus on larger fund families, are there pockets of fund assets that have
not been targeted in recent years?

– Are we doing enough to complement our sell-side meeting recommendations with an unbiased, data-centric approach
(suitability scoring & purchasing power) that supports alternative names?

– Similarly, are we taking a data-centric approach to targeting that enables us to identify generalist pools of capital?

On the topic of defense (Shareholder Maintenance), a few key strategies to consider:

– As a company’s fundamental story evolves, due to macroeconomic pressures, are your existing shareholders still a suitable
investment based on their own average portfolio characteristics?

– Has your cash allocation changed over time? How will that affect income/yield shareholders?

– Are there company-specific metrics that are now outliers to existing investors?

– Are there fundamental weaknesses in the story that may leave you prey to activist investors? Are you prepared?

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The Big Picture: Issuer and Investor Relations

Hybrid Investor Days offer unique value

to both in-person and virtual attendees
Preston Gelman, Executive Director, Perception Analytics; Qian Shin, Executive Director, Perception Analytics

The corporate access landscape continues to rapidly evolve as

companies and investors learn to navigate through the challenges
“It is definitely more interesting to be able
associated with the global pandemic. It is more important than ever for
issuers to find meaningful forums to engage with their stakeholders, to see things like factories, R&D centers or
and an effective way to achieve this objective is by hosting an Investor products being used. The best events also
Day. Over the past few years, market appetite for these events has provide the opportunity to meet individual
transformed from a preference for in-person events, to an acceptance business heads and a variety of people below
of fully virtual events, to where we sit currently, where most investors
and analysts expect and prefer that companies provide a hybrid the very top levels of management. If it is an
experience. event where everybody just sits in a hotel
conference hall, I do not see the point as
To host a successful hybrid Investor Day, it is critical to present credible
such events work just as well over video.”
and interesting insights into the business, provide ample opportunities
for access to the breadth and depth of the management team, and have
clear and defined key takeaways that support the long-term strategic Analyst, UK investment manager (>$9B EAUM)
view and financial model. In speaking with investors about their
expectations for hybrid Investor Days, several key themes emerge:
“The biggest thing I appreciate is when I don’t
– In-person modules – Provide unique opportunities for in-person
attendees to experience products, facilities, and internal processes need to pose the question, so just addressing
and gain a deeper understanding of the nuances of the day-to-day the top-of-mind things that investors may
business. have right off the get-go in any prepared
– Technology – Keep the event succinct and ensure that the message
remarks. Obviously, people have very specific
is not drowned out by miscues, glitches, and other technology detailed questions, but some of these top-of-
issues. mind things can be addressed at the onset.”
– Management engagement – Organize interactive sessions (product
Portfolio manager, North America investment
demos, breakout sessions, roundtable discussions, and one-on-one
meetings) before, during and after the event.
manager (>$100M EAUM)

– Proactive agenda – Gain control of the narrative by ensuring that

prepared remarks directly address the market’s priorities and “The quality of the slides that companies
concerns.
use during virtual events can make all the
– Prioritize Q&A – Provide plenty of time for Q&A and ensure that difference. I religiously print slides out and
various members of management actively participate. write notes on them. You can tell a lot about a
company by how much thought they put into
– Supportive materials – Provide supportive information and data
through an interactive slide deck available prior to, during, and after their presentation deck.”
the event.
Portfolio manager, North America investment
manager (>$280B EAUM)

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The Big Picture: Issuer and Investor Relations

ESG and climate-related financial risk

management increasing in importance
Michael Taschner, Executive Director, Issuer Solutions

The consideration of climate-related financial risks in risk management is of particular importance for financial intermediaries as at
least half of them are exposed to climate-related financial risks through the investments they hold (cf. Battiston et al., 2017, p. 3f).

According to the latest S&P Global Sustainable1 research, over 90% of the world’s largest companies will have at least one asset
financially exposed to climate risks such as wildfires or floods by the 2050s. And more than one-third of those companies will see
at least one asset lose 20% or more of its due to the impact of the changing climate. The impact to the “real” economy is therefore
significant and needs to be managed and properly communicated. The overlapping remit of the responsibilities to anticipate
investors’ expectations as well as streamlining the right information internally is represented in the Investor Relations departments
being very intensively supported by Chief Sustainability Officers as well as Chief Risk Officers (CROs) and CFOs.

Green funds have a Paris alignment problem

Broad fund universe

3°C 2°C 1.5°C

S&P Global In that broad And about
Sustainable1 fund universe, 11% of funds are
About
analyzed nearly we found that aligned with the
1 in 3 funds
12,000 ETFs and more than half of warming scenario
are aligned with
mutual funds with the funds are "well below" 2°C
a 2°C warming
market value aligned with a called for in the
scenario.
of more than 3°C warming Paris Agreement.
$20 trillion. scenario.

Green funds

Within that broad fund universe, Only a slightly higher

S&P Global Sustainable1 identified 2 out of 3 of About 4 in 10 percentage of green funds,
more than 300 funds with market these green green funds 12%, are aligned with the
value of more than $350 billion that funds are on align with a 2°C "well below" 2°C warming
have green language in the fund track to limit warming scenario, compared to the
name or fund description. warming to 3°C. scenario. broad universe of funds.

Climate funds

Within the green fund universe, we

also identified a subset of 51
climate-focused funds with more 2 out of 3 A similar proportion 5 of the 51 climate
than $30 billion in market value climate funds of climate funds, funds, or slightly less
using a more targeted list of are on track to about 4 in 10, than 10%, are aligned
keywords related specifically to limit warming currently align with the "well below"
climate, net zero and carbon. to 3°C. with 2°C. 2°C warming scenario.

Data as of April 19, 2022.

Analysis uses S&P Global Trucost Paris Alignment data to assess the difference between a company's projected pathway
for Scope 1 and Scope 2 greenhouse gas emissions and the required pathway to reach alignment with three different goals
from 2012 to 2025. The most ambitious is a goal of limiting warming to "well below" 2°C, or 1.5°C. The second is a goal of
limiting warming to 2°C. The third and least ambitious is a goal of limiting warming to 3°C.
Sources: S&P Global Trucost; S&P Global Sustainable1

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The Big Picture: Issuer and Investor Relations

One-third of market value in equity funds is not aligned with a 3°C scenario
Broad fund universe Green funds Climate funds

$119B $6B
$7.4T on a trajectory on a trajectory
on a trajectory to overshoot to overshoot
to overshoot 3°C warming 3°C warming
3°C warming
3°

3°

3°
$24B
on track
to limit
warming
$240B to 3°C 2°
$13.3T on track 2°
on track to limit
to limit warming
$142B $15B
on track
warming to 3°C on track
to limit
to 3°C to limit
warming
warming
$4.7T to 2°C
to 2°C
on track
2° to limit
warming
to 2°C
$31B
$1.4T on track $534M
on track to limit on track
to limit warming to limit
warming 1.5° to 1.5°C warming
1.5° to 1.5°C to 1.5°C
1.5°

Data as of April 19, 2022.

Analysis uses S&P Global Trucost Paris Alignment data to assess the difference between a company's projected pathway for Scope 1 and Scope 2 greenhouse gas
emissions and the required pathway to reach alignment with three different goals from 2012 to 2025. The most ambitious is a goal of limiting warming to "well below"
2°C, or 1.5°C. The second is a goal of limiting warming to 2°C. The third and least ambitious is a goal of limiting warming to 3°C.
Broad fund universe represents the full universe of 11,780 funds in this analysis. Green funds represent the 334 funds identified as using green language.
Design credit: Zain Ullah; Cat Weeks
Sources: S&P Global Trucost; S&P Global Sustainable1

Sustainability reporting such as Global Reporting Initiative (GRI) or Carbon Disclosure Project (CDP) reporting has a long tradition
and is not a new trend. However, traditionally, reporting focuses on what impacts the reporting company’s business activities
have on the environment and the society consequently. Climate-Related Financial Risk Reporting, as proposed by the Taskforce
on Climate-related Financial Disclosures (TCFD), on the other hand, focuses on identifying the financial impact of the environment
on the reporting company, which is a material change in the perspective of both the issuing corporates as well as the investors (cf.
Unerman et al., 2018, S. 514f).

Speaking in capital market terms, 2022 was a very active and volatile year. ESG as such and the Management of Climate-Related
Financial Risks experienced a massive push and rise in terms of importance from both issuers and capital markets participants.
Even though global sentiment varies by region, the direction has been mutually agreed by the market. This year brought different
accelerators such as the European Regulations of the Sustainability Taxonomy and the Sustainable Finance Disclosure Regulation,
which went live. And many others are anticipated in coming years. In the U.S., rules have been brought forward to require all
SEC-regulated companies to actively manage Climate-Related Financial Risks, following the TCFD standard. The U.K. introduced
mandatory TCFD rules for major market players and Switzerland is expected to do the same soon – just to mention a few out of a
significant number globally. And finally geopolitical forces such as the war in Ukraine and the aftermath of COVID-19 accelerated the
sensitivity of supply chain risks.

All these different forces have been anticipated by large institutional investors who are starting to deal with this kind of information
either by integrating it in the risk management and valuation models or by rejecting and fighting against the new standards. Both
reactions heighten the topic’s importance.

The requirement for active Climate-Related Financial Risk Management will accelerate significantly in 2023 and beyond as market
efficiencies increasingly price in this information. Moreover, the push from institutional investors will be reinforced to have a solid
TCFD framework in place, which applies end-to-end Scenario Analysis and ESG Analytics. This is all aimed at: (a) being in a position
to understand material risks, (b) quantifying them, (c) mitigating them, and (d) integrating it in a net-zero strategy, which is in line
with the targets defined in the Paris Agreement on climate change.

The coming years will be characterized significantly by integrating ESG matters in existing business and risk management
strategies.

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The Big Picture: Issuer and Investor Relations

Trends in shareholder activism

Harold Garrity, Director, Issuer Solutions; Najy Nahkle, Director, Issuer Solutions

Current trends in shareholder activism

While global investor activist activity was depressed for most of 2020 and 2021 compared to pre-pandemic levels where it seems
activist investors preferred to operate more behind the scenes versus loud public demands, activism has come back with a
vengeance this year. Our data shows that the first half of this year was record-breaking for investor activism, and fiscal 2022 is on
track to finish with the highest-ever yearly total of investor activist campaigns. This trend has emerged on the back of increased
market volatility and a challenging macro and investing environment.

In terms of what activist investors are calling for this year, demands have shown an increased focus on strategy, operations
and capital allocation policies, while calls for M&A remain prevalent. ESG activism is another trend we have seen continue to
meaningfully increase this year. Corporate governance has been the most common theme so far, but we have seen an increase in
both Environmental and Social campaigns as well.

Regarding which investors are pushing for change, activity is coming from all directions, making it essential for corporates to
understand that any one of their shareholders has the potential to “act like an activist” in their own way. While the well-established
players with numerous campaigns to their names continue to dominate the headlines, we are seeing increased activity from the
more occasional activists as well as first-time activists and some newly-founded activists.

Overall, in speaking with management and IR teams across our Issuer Solutions client base, shareholder activism is a major
challenge many companies have faced this year.

Expectations for shareholder activism in 2023

We expect shareholder activism to continue to play a role at
an elevated level in 2023. As interest rates continue to rise Investor activism campaigns by type:
and market volatility remains in focus, we anticipate activist ESG vs. non-ESG
investors will look for opportunities in underperforming
Non ESG ESG
sectors like Technology and Consumer Discretionary.

With inflation at a 40-year high, consumers are likely to

continue spending less on discretionary items, which could
continue to weigh on the sector, causing a spike in M&A and
further bringing into question capital allocation strategies.
Meanwhile, the Technology sector is more susceptible to 651
rising rates as these companies typically are more dependent 491 585
582
on borrowing money to drive growth.
356
With interest rates likely to remain elevated in 2023, we
expect the Technology sector to continue to underperform,
which could present some attractive targets for activist 243 253
investors. Lastly, ESG-related activism is also likely to remain 204 169 192
in focus as ESG-focused activist investors continue to
pressure companies on key issues including board structure 2018 2019 2020 2021 H1 2022
and environmental matters.
Data as of Jul. 1, 2022.
Source: S&P Global Market Intelligence.
© 2022 S&P Global Market Intelligence. All rights reserved.

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The Big Picture: Issuer and Investor Relations

Further reading
US stocks suffer worst first half in 52 years

Retail investors and hedge funds help push market higher

Institutional selling accelerates to highest levels in 2022 on inflation fears

Institutional selling crosses $300B while hedge funds bet on recovery

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Disclosures
Copyright © 2022 by S&P Global Market Intelligence, a division of S&P Global Inc.

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