Buy-Side Hosted Conferences and Carbon Data
Week Ending 28 June

Summertime and quiet period…a great time for introspection and strategic thinking, before the tactical demands of the quarter end kick in next week. Downtime is proven to help you take a fresh look at problems you’ve only approached from the same angle day after day. Make sure to block out your calendar and schedule some time dedicated to nothing…and see what it brings you.

So, with that…this is The Autocorrect’s new definition of summer madness. Here’s the latest news in the IR world:

Buy Side

- According to this Wall Street Journal article on some of the top buy-side managers deciding to host their own mixers with corporate America, Wall Street may have to give Hitch a call to bring back the romance between bankers and investors. The article covers five investors, controlling $7T in assets, which are banding together to host their first conference in Boston during the spring of 2020, featuring exclusively one-on-one meetings organized between C-suite and buy-side analysts. Coming off years of asset outflows to passive index and ETF shops, it’s unsurprising that the active investment community is looking to both control costs and their interactions in a more proactive fashion. Technology and the access to information is allowing for far more direct conduits between corporates and the buy-side than ever before, and this trend is only likely to amp up. Will this lead to competing conferences, with musical acts, champagne fountains and overflowing buffet tables? What’s going to be the future of bringing together the top executives with the top buy-side managers, and what role will the sell-side play? Time will tell. (Ari Davies)

- The WSJ published an article reporting that $1.7 billion investment firm Adamas Partners LLC is shutting down. Known as “an absolute return fund-of-funds manager”, Adamas was a way for investors to get access to the hottest hedge funds when it first opened its doors in the early 2000s. The Boston-based firm may be small compared to the largest fund-of-fund investors, but its most notable hedge fund investments have included Baupost Group LLC, Farallon Capital and Lone Pine Capital, LLC. People familiar with the investment said that Baupost’s returns have trailed the S&P 500 over the past couple of years, and also happened to be Adamas’s largest play.

This follows a number of shutdowns from both fund of funds and hedge funds, as the loss of assets to passive managers and asset owner’s aversion to high fees has led many firms to close up shop and return capital. The count of fund of funds has nearly halved since the financial crisis, from 2,462 such funds in 2007 to 1,321 as of the first quarter of this year, according to researcher HFR Inc. Passive investment is the genie that’s not going back into Aladdin’s bottle, and its long-term impact on funding for the hedge fund community can’t be understated. (Meghan McLain)

IR Best Practices 

- Again, in one of those few times outside of conference or earnings season when IROs can sit down and think about refreshing the company’s investment story, we’d suggest spending a few minutes of Independence Day week on a thought exercise to ponder future disruption in your business based on technology. IHS Markit’s technology research team has published Digital Orbit, a briefing series on the key technologies that are on the cusp of broad adoption (5G, IoT, Video Everywhere, etc.), and this week Josh Bulita, senior principal analyst in the technologies team, proposes the question of how each of these technologies could disrupt each type of business. For example, certain industries are vulnerable to disruption of organizational structures, while others could face disruption to the ecosystem of value chains, based on greater access to information.

Bulita’s blog post applies this frame into the consumer industry, with feedback from a Key Influencer Survey suggesting consumer providers face the greatest risks in organizational disruption. However, any investor with a sufficiently long-term investment horizon covering any industry is thinking about the next disruption each of your businesses will face…this might be a useful frame to prepare you for investors’ next set of queries.

ESG

- SSGA (State Street Global Advisors) has a sufficient position in most shareholder bases to warrant consideration whenever it publishes a statement on engaging with companies. The latest research from SSGA’s stewardship team (Rakhi Kumar and Michael Younis, in this case) points out the weaknesses the firm is seeing in climate disclosures from companies, and may be a sneak preview of the types of questions you’ll receive from the firm on climate disclosures either in engagement season 2019 or proxy season 2020. SSGA publicly supports usage of the TCFD (Task Force on Climate-Related Financial Disclosures) framework for climate reporting, and in this case uses disclosures from major oil & gas and utilities companies to illustrate the gaps between what it’s looking for and existing disclosure, including highlighting a few particular “Bad Boys.” Kumar and Younis point out that a) most firms are only reporting short-term goals for GHG emissions reductions, b) carbon price assumptions have drastically differing methodologies, and c) most companies are not reporting the opportunities the firm sees relative to climate change, even if they’re reporting the risks. This piece is a useful read for your sustainability team as well – even if you don’t face a shareholder proposal, SSGA’s vote can mean the difference on your next proxy between a clean vote for your board and one that brings up question marks.

- On a related topic – hopefully most of the IR community is becoming familiar with the definitions of carbon emissions and the split between the treatment of scope 1 (direct emissions), scope 2 (indirect emissions from purchased energy), and scope 3 (indirect emissions from other activities), because the investment community now has far better access to review carbon emissions across portfolios. Here’s a study from researchers at Columbia University and Imperial College of London that delves not just into emissions and the relation to stock returns, but also to how institutional investors have broadly integrated scope 1/2/3 emissions into portfolios. The research team shows that investors do appear to be broadly screening out companies based on scope 1 and 2 emissions. Prior to 2015 without solid definitions in place, scope 3 emissions reporting was more of a Wild Wild West of inconsistent or missing data, but since a sharp increase in reporting in 2015 the researchers do show the broad investment community starting to take it into account.

Questions? Comments? Life got flip-turned upside down? Reach out to your IHS Markit team, or brian.matt@ihsmarkit.com.