Best practices for the future: new ESG Guidelines for listed companies

Euronext reiterates its commitment to encourage the incorporation of environmental, social and governance (ESG) factors into investment decision-making. This is a major step to make finance more sustainable, in order to ensure better allocation and channelling of capital towards sustainable and transitioning assets.

As part of our strategy 'Let's Grow Together 2022', which has at its heart a focus on sustainable initiatives, we are pleased to present the Euronext ESG Reporting Guidelines for our issuers on the best practices to adopt in the future. 

These guidelines have been created to help listed companies in their interactions with investors and the wider ESG community, to help them understand how to address ESG issues as a key component of investor relations, as well as the main principles to consider when preparing an ESG report.

We hope these guidelines will inspire your journey toward a more sustainable economy!

Download the guide

SUMMARY

1. WHAT IS ESG AND WHO IS THIS GUIDANCE FOR?
2. WHY REPORT ON ESG CONSIDERATIONS?
   1. SUPPORTING CORPORATE REPUTATION AND  STRATEGY 
   2. ADDRESSING ESG ISSUES AS KEY COMPONENT OF INVESTOR RELATIONS
      1. IDENTIFYING AND UNDERSTANDING INVESTORS’ ESG INFORMATION NEEDS 
      2. ESG A COMPASS FOR RISK MITIGATION
   3. ALIGN YOUR STRATEGY WITH REGULATORY REQUIREMENTS
3. GUIDING PRINCIPLES OF REPORT PREPARATION
   1. RESPONSIBILITY AND OVERSIGHT OF THE RECORD 
   2. RELEVANCE AND MATERIALITY
4. ESG REPORTING PROCESS 
   1. MATERIALITY ANALYSIS: IDENTIFICATION AND PRIORITISATION
      1. IDENTIFYING STAKEHOLDERS AND MAPPING THEIR INTERESTS 
      2. IDENTIFYING THE RELEVANT THEMES FOR THE COMPANY (MATERIALITY) 
      3. PRIORITISATION
   2. IMPLEMENTATION AND OPERATIONAL MANAGEMENT 
   3. DRAFTING AND PRESENTATION
      1. QUALITY OF THE INFORMATION 
      2. FORMAT OF THE PRESENTATION 
      3. MAKING YOUR ESG INFORMATION ACCESSIBLE
   4. REPORTING AS A CONTINUOUS DIALOGUE 
   5. ASSESSING & ASSURING
5. USING CAPITAL MARKETS TO IMPLEMENT ESG
   1. THE REGULATORY LANDSCAPE OF GREEN BONDS 
   2. EQUITY FINANCING FOR YOUR TRANSITION
6. EURONEXT AND ITS ROLE IN SUSTAINABILITY
7. APPENDIX
   1. KEY ESG REPORTING REGULATIONS
   2. REFERENCES TO EXISTING STANDARDS 
   3. GUIDANCE FOR ISSUERS IN PREPARING THEIR REPORT 
   4. OBJECTIVES FOR REPORTING ON ESG

Get the year off to a good start and catch the latest market insights from the Euronext Corporate Services team to support your journey on the capital markets. This edition’s market insights are all about investor relations, from shareholder identification to communication.

Getting to know the shareholder: a tale of two stories

There is no doubt that European SMEs hold many talents. They even have a certain genius for understanding their markets, their customers and the solutions that can give them an edge.

However, such companies often struggle to comprehend their shareholders’ views – and in return they might feel that shareholders often misunderstand the outlook, reasoning and strategy of the company’s management.

The result is puzzlement, frustration and at times downright anger. A symptom of this situation is the rise of votes against Board recommendations, which could impact companies’ strategic execution and valuation. In any case, it creates an unnecessary instability around critical (and highly visible) topics.

This issue has been brought forward by the new version of the EU Shareholder Rights Directive, or SRD II. It is already semi-operational, having been transposed in several European countries already, but will only come fully into force in September 2020. The Directive enhances involvement of shareholders in corporate governance and gives shareholders the right to vote on management remuneration – an increasingly common flashpoint. It also presents a wonderful opportunity for listed companies, by easing the identification of their shareholders and encouraging them to participate more actively in the long term sustainability plans of companies.

The need for ownership analysis, proactive communication and rationalised targeting as well as the desire for more dialogue, magnified by SRD II, explains the growth in the number of clients served by Euronext’s Advisory and IR Solutions team. It now caters to about 80 listed companies, on Euronext platforms and other exchanges.

Fine grains and big pictures

To better understand and engage with investors, Euronext’s “Advisory and IR solutions” teams can provide both granular and big-picture analysis of shareholders’ needs and desires, depending on what the client needs at any particular time including shareholder analysis, high touch advisory and market intelligence, investor benchmarking and targeting in a CRM tool (IR.Manager).

An example of fine-grained analysis: in 2018, a customer needed shareholders to approve a takeover deal, including the necessary financing. The team identified the larger shareholders, and looked at their voting histories and past engagement with the client to sort them into two groups: those likely to wave through the deal, and those that might be wary. Advisory and IR Solutions pinpointed the top five shareholders and defined key messages for management to focus their attention on: they had not met company management in the past year, did not enjoy a close relationship with management and might prove reluctant to agree to the plan.

Communication is key

Getting to know your shareholders also involves strong communication engagement with the market. As a listed company, the ultimate aim is to build a stock market “brand’ that appeals to investors. This brand becomes a key asset throughout the company’s growth, helping through disruption and tough times, but also serving as a starting point for any new appeal to investors. A compelling equity story helps financial communications teams relay a clear picture of a company’s business, competitive environment and strategy.

Among roadshows, press releases and investors gatherings, webcast services are an effective tool to transmit and communicate your messages. Webcasting is a proven distinctive solution which is already used by various international companies such as Engie, Kering or Illiad in France, Telenet or Degroof Petercam in Belgium and KLM Royal Dutch Airlines in the Netherlands. They all trust Company Webcast, a market leader for webinar and webcast of financials results in Belgium, France and the Netherlands, to assist them in reaching out to their investors in an efficient manner.

Ultimately, better communication between management and shareholders will reduce shareholders’ reliance on proxy advisers. Who needs a professional intermediary to tell them which way to vote, if the conversation is flowing without one?

Visit Euronext Corporate Services for more information.

In June 2019, Euronext completed the acquisition of the Norwegian Stock Exchange, gaining a strong central exchange in the Nordic region with a unique and competitive strategic positioning in energy, shipping and seafood industries.

Oslo Børs has 300 listed companies and 2,230 listed bonds and proudly stands as the premier exchange for  oil service companies in Europe and holds the title of global leading listing venue for the seafood and shipping sectors in the world Now being part of Euronext, the combined entities bring together a wide and diverse community of close to 1,500 listed companies, home to a range of firms from fast-growing small and midcaps to international blue chips. The group welcome order flow from over 6,000 local and international institutional investors from the United States, the United Kingdom and continental Europe.

On another note, Euronext Corporate Services announced a partnership with the Norwegian market leader on streaming quarterly presentations for companies listed on Oslo Børs, anchoring furthermore the inclusion of the Nordic exchange in the Euronext family.

Euronext continues to extend in the Nordic region as in early December, it announced its binding agreement to buy a majority of Nord Pool Group’s share capital and voting rights. Nord Pool runs a leading physical power market in Europe, operating from its headquarters in Oslo and offices in Helsinki, Stockholm, Tallinn, Berlin and London. The deal strengthens Euronext’s commodities franchise and  is expected to close in the first quarter of 2020 and will be governed by a Shareholders' Agreement.

                                                                                                             Oslo Bors Euronext

In early November, Euronext announced the creation of a new EURONEXT GREEN Bonds offering across its six market locations (Amsterdam, Brussels, Dublin, Lisbon, Oslo and Paris). The Euronext Group initiative went live with over 60 participating issuers consenting to inclusion of their securities on EURONEXT GREEN Bonds.

EURONEXT GREEN Bonds is the first initiative of the Exchange’s new three-year strategic plan ‘Let’s Grow Together 2022’. It is designed to encourage and promote more sustainable investment in Europe by offering issuers a range of opportunities to list bonds to finance their environmental and sustainability projects.

EURONEXT GREEN Bonds is a community of green bond issuers where eligible green bonds listed on all Euronext locations are consolidated into one highly visible platform. This allows issuers to showcase their ESG credentials and provides investors with a transparent discovery process to access sustainable investments.

In order to benefit from the green bonds offering, companies should list or have their green bond listed on a Euronext market, be aligned with recognisable industry standards such as ICMA Green Bond Principles or the Climate Bond Initiative Taxonomy, and should have an appropriate external review performed either by an Approved Verifier under the Climate Bonds Standards or by an independent third party[1].

Euronext is home to more than 250 green bonds from over 110 issuers across the globe including sovereigns, supranational issuers, government-backed and local government entities, financial institutions, corporates and pure play issuers.

For more details, please visit the EURONEXT GREEN Bonds area of our website, which also contains the Factsheet, process document, the key support document (Green Bond Declaration Form) and of course the list of green bond issuers who have already consented to their inclusion in the EURONEXT GREEN Bonds Offering.

Please do not hesitate to contact us should you wish to register your Green Bonds.

[1] https://www.climatebonds.net/certification/approved-verifiers

At the occasion of the launch of the 2019/2020 Euronext TechShare programme in Rotterdam in September, Euronext had the opportunity to interview the CEO of one of Europe’s largest biotech companies: Galapagos’s Onno van de Stolpe.

Galapagos specialises in the discovery and development of small molecule medicines with novel modes of action, seeking to develop a portfolio of clinical-stage breakthrough therapies to revolutionise existing treatment paradigms. Their public ambition is to become a global leading biopharmaceutical company, focused on the discovery, development and commercialisation of novel medicines that will improve people’s lives.

When the company first launched in 1999, it was as a joint venture between Crucell and Tibotec, looking for strategic alliances and partnerships to assist its growth and promote its core mission to potential investors. Within the next 20 years, it grew exponentially, to employ over 600 and boast a market capitalisation in excess of €10 billion.

In this exclusive interview, van de Stolpe shares the landmarks and stages of Galapagos’ impressive evolution in the past 20 years.    

Secondary markets received a lot of attention in 2019. Read on to catch a few of the trends that characterised the second half of the year.

The high number of private placements made at the end of 2019, especially in the Brussels, Amsterdam and Oslo markets, indicates an increase in liquidity and visibility for the companies concerned. A few highlights can be made both on the SME and the large-cap fronts: Vivoryon (a precision intervention company focused on bringing first-in-class therapies to patients suffering from age-related diseases) made a strategic private placement of €41.8 million; and Kendrion (which develops, manufactures and markets worldwide high-quality electromagnetic and mechatronic solutions for industrial and automotive application) of €28.5 million, both through Euronext Amsterdam.

Brussels enjoyed some life sciences-oriented activity this past year with private placements and global offerings made by several notable companies. Some highlights: Argenx, a clinical-stage biotechnology company, raised €535 million through two separate private placements; Bone Therapeutics, a biotech developing innovative cell therapies for orthopaedic and bone-related illnesses, successfully raised €8.5 million; and Celyad, a triple-listed biotech focused on the development of CAR-T cell therapies, closed an €18.5 million global offering.

Dublin was not left behind! With strong private placements in the second half of the year from companies such as Irish Residential Properties REIT, a key player in the property rental scene, which raised over €134.15 million over the summer, and Amryt Pharma, a biotechnology firm committed to delivering safe, effective and innovative medicines that treat extremely rare and life-threatening diseases, which closed its private placement with €53.7 million raised.

France also saw Valbiotis, a young company specialised in the research & development of scientific innovation for preventing and combating metabolic diseases that had listed on the Euronext Growth market in 2017, raise nearly €7 million in the summer of 2019 through its current markets in Europe and northern America.

And one final interesting and noteworthy placement was that of Galapagos of €960 million following an equity investment by Gilead Sciences, furthering the strategic partnership between the two companies.

Intrigued by this med-tech giant? Why don’t you read on to the next article, all about Galapagos!