The strategic importance of IR has seen a steady rise, with more than 77 percent of industry players affirming that the strategic significance of IR has increased over the past year. An equal percentage report an increased demand in their IR responsibilities.
This is according to the latest IR survey published in May 2024 by the London Stock Exchange Group (LSEG) in partnership with Equitory. The survey, conducted online at the end of 2022, gathered 136 responses, of which 71 percent were from publicly listed companies and the remainder from pre or post-IPO businesses.
Nearly one third of respondents note that the importance of IR grew significantly over the previous 12 months, especially at smaller firms. The research finds that the top three drivers behind the increasing importance of IR over the previous year are macroeconomic conditions, market liquidity and geopolitical factors.
Economic conditions have a significant impact on IR strategies, with 53 percent of participants highlighting it as the top factor. Market liquidity is cited by 41 percent of respondents, primarily by small-cap firms, while 39 percent point to geopolitical issues as a significant influence.
On the geopolitical front, and in line with the LSEG research findings, IR Magazine’s recent ‘A geopolitics playbook for IROs’ reports on the critical geopolitical factors impacting publicly listed companies. In this survey, IR Magazine asked IROs to rank various geopolitical events from most to least critical for their company over the next 12 months, with one being the most impactful and 10 the least.
Inflation emerges as the top issue, with an average ranking of 3.4 and chosen as the most critical by 14 percent of respondents. This is unsurprising, the report notes, given inflation’s direct effect on operating costs and purchasing power, contributing to a higher-interest-rate environment that impacts business growth and consumer spending. Following inflation are central bank policies and energy prices and availability, exacerbated by geopolitical tensions like Russia’s invasion of Ukraine.
IR’s vital importance beyond uncertainty
Scott Schmitz, senior vice president of IR at NYSE-listed marketing technology firm Zeta Global, says IR as a function is important not only in volatile markets but also in stable conditions. ‘In times of economic uncertainty and market volatility, investors look at data points that confirm or deny prevailing market perceptions. It is the responsibility of IR to interpret and explain these data points to provide clarity,’ he tells IR Magazine.
‘In my opinion, however, the value of IR goes beyond periods of economic uncertainty; it is equally critical in stable market conditions. Effective IR can bridge the gap by crafting a compelling story highlighting a company’s strengths and opportunities.’
Explaining how current challenging market dynamics have impacted Zeta Global’s strategy, Schmitz says it’s all about backing up words with numbers and instilling confidence in the investor base. ‘At the moment, the software sector is under pressure, but our company’s results have remained steady and, in some cases, even accelerated,’ he says.
‘This presents a complex backdrop, as it prompts skepticism among investors who wonder how we can execute so effectively amid broader industry challenges. To address these concerns, we carefully identify key catalysts that drive our success and provide robust, quantifiable data that gives investors’ confidence in our current performance and outlook.’
Beyond geopolitical factors, technological advancements are also reshaping the IR landscape. The LSEG survey indicates 41 percent of firms have invested in social media, video and website content, with nearly nine in 10 respondents noting they plan to continue to do so in the future.
As the digitalization of IR accelerates, 29 percent of firms are also adopting new technologies for investor engagement, but only 15 percent of companies are leveraging AI on this front, though the report notes a higher adoption of AI tools for shareholder engagement in the US (36 percent).
The real value of IR
LSEG’s report finds that while the IR profession continues to prove its value, fewer respondents – 84 percent compared with 92 percent the previous year – feel IR receives the recognition it deserves as a function.
Schmitz disagrees with this data point. ‘I have not seen a change in the value of IR or its recognition,’ he says. ‘As the primary interface with the investment community, nurturing and growing relationships with investors and the wider investment community is critical at all times, and that is what IR does.’
He advises peers to remain strategic and stay on top of changing market dynamics: ‘Key questions IR teams need to consider include: what are our competitors doing? Where is the industry headed? How are we positioned in this evolving landscape? Addressing these questions helps ensure that IR efforts remain relevant, proactive and forward-looking.’
