When forming perceptions and making investment decisions about a company, do investors really care about anything more than black-and-white financial results? For a long time, it was largely believed that company communications should solely focus on dollar amounts and percentages. However, while numbers always have and will continue to be important, they are only part of the equation, according to the ICR and PRWeek 2022 Taking Stock of Communications survey.
Nearly three-quarters of survey respondents — a mix of investors and communications pros — believe that at least 20% of a company’s valuation is impacted by non-financial factors. So what, exactly, should companies consider communicating beyond financial results? Below, we explore what the survey revealed about the non-financial factors that investors care about.
Management Credibility
For many investors, it’s the management team running the business that is the most important factor. The survey identified six potential non-financial factors that could impact the investor perception of a company’s value, and “perceived credibility of management team” ranked highest, with 83.7% of respondents citing it.
That’s because the management team’s credibility, trust, and track record have a direct impact on the company’s financials and KPIs. And, in industries where many different companies may boast similar financials, investors are increasingly betting on the management teams and their proven abilities to execute on their strategies.Quality Communications
When it comes to communications, investment professionals value quality over quantity. That is, in part, because companies are expected to communicate about an increasingly wide array of non-financial topics, such as ESG. The sheer amount of information can be overwhelming, so corporate communicators must 1) make it easy for investors to find the information they’re looking for, and 2) present it in a transparent and credible way. If you can do that, there is much less need for frequent communication with investors.
Social Media
More than half of the survey respondents — 53.7% — reported that social media has a material impact on investment decisions. However, between the two groups surveyed, a higher percentage of investors versus communications pros feel that way (65.7% versus 48.9%), suggesting the latter may not give social media enough focus.
Essentially, there’s little difference today between corporations getting their news out through social media and through a news outlet. Companies can amplify their messaging — including information like quarterly earnings — by posting on a platform like LinkedIn or Twitter. Social media also serves as a two-way mode of communication, so shareholders can observe the way companies engage with other audiences.
ESG
Over the past few years, environmental, social, and governance (ESG) factors have become increasingly important to businesses’ long-term health. Two-thirds of survey respondents (66.7%) believe more today than they did two years ago that a company’s ESG performance impacts business decisions. Historically, governance issues have been the most important to investors; however, growing interest in issues like climate change, talent management, and diversity, equity, and inclusion (DE+I) have elevated the attention of the “E” and “S.”
For any company to grow and prosper, it must attract and maintain attention from investors. Today, that requires providing financial results as well as insight into non-financial factors. For a deeper look into what influences investors’ decision-making and the right strategies to grow those relationships over time, download the eBook, “Taking Stock of Communications.”
