The investors asking your company sustainability questions are the same ones making allocation decisions. Most IR teams treat those questions as a compliance exercise handled by another department. That disconnect has a measurable cost, and the companies paying it don't know they are.

The Handoff Problem

In most large companies, sustainability disclosure follows a predictable workflow. The sustainability team produces the report. Investor relations packages it alongside financial disclosures. The two functions operate in parallel but rarely in concert. IR treats sustainability content as a deliverable to be forwarded, not a narrative to be owned.

This creates a specific failure mode. The sustainability report says one thing. The earnings call says another. The investor presentation mentions sustainability in passing, if at all. And the investor who asked a sustainability question during the last roadshow gets an answer that sounds like it was prepared by a different company than the one that published the annual report.

FactSet tracked this silence in real time. Only 29 S&P 500 companies cited "ESG" on Q4 2023 earnings calls, the lowest number since Q2 2019. That's down from a peak of 155 in Q4 2021. The decline happened in nine of ten consecutive quarters (FactSet, 2024). On the most important venue IR professionals have for communicating their company's story to capital markets, sustainability has gone quiet. Not because it stopped mattering to investors. Because IR teams stopped talking about it.

Meanwhile, nearly 99% of S&P 500 companies now publish sustainability reports (G&A Institute, 2024). The data is being produced. It's being filed. It's sitting in PDFs that nobody connects to the investor narrative. The volume of sustainability disclosure has never been higher. The strategic coherence of that disclosure has arguably never been lower.

The Audience Misunderstanding

The most consequential mistake IR teams make about sustainability is misidentifying the audience. There's a persistent assumption that sustainability questions come from a specialised subset of investors, a niche sustainability constituency that operates separately from the analysts and portfolio managers making buy-sell-hold decisions. This assumption is wrong, and the evidence against it is overwhelming.

Stanford and MSCI surveyed 47 of the world's largest institutional investors in 2024. Nearly half hold more than $250 billion in assets. These investors use ESG primarily to reduce portfolio volatility and tail risk. They are more likely to drop a company with poor sustainability characteristics than to reward one with strong ones (Stanford GSB / MSCI, 2024). This is risk management. These are allocation decisions. The same investors asking about your carbon transition plan are the ones deciding whether to increase or decrease their position.

PwC's 2024 Global Investor Survey confirmed the pattern across a broader base: more than 70% of investors say the companies they invest in should incorporate sustainability directly into business strategy. The top characteristic they look for in sustainability reporting is relevance to the company's business model. Not comprehensiveness. Not compliance. Relevance (PwC, 2024).

Amel-Zadeh and Serafeim's landmark survey of 652 institutional investors found that 63% use ESG information because they consider it financially material to investment performance. ESG information is perceived primarily as information about risk rather than competitive positioning. Investor engagement with sustainability is fundamentally about financial exposure, not values alignment (Amel-Zadeh & Serafeim, 2018).

When IR teams treat sustainability as a separate track for a separate audience, they create a gap in their most important narrative. The investors receiving the financial story and the investors who care about sustainability performance are, overwhelmingly, the same people.

The Narrative Gap and Its Cost

The consequence of the handoff model is a narrative gap: a disconnect between how a company talks about its financial performance and how it talks about its sustainability performance. This gap is expensive. And it's getting more expensive as the tools for measuring it improve.

BCG analysed approximately 47,000 sustainability-related announcements from the world's 1,000 largest public companies between 2015 and 2022. Only 20% of companies saw a positive market reaction to 75% or more of their sustainability announcements. Nearly a third saw half or more of their announcements destroy value. The single most valuable element in a sustainability communication was articulation of value creation potential, which delivered twice the positive market impact of any other business case element (BCG, 2023). The market rewards companies that connect sustainability to financial performance. It punishes those that don't.

Edelman surveyed 700 institutional investors managing approximately $6.75 trillion in assets and found that 82% believe companies frequently overstate or exaggerate their sustainability progress. In the US, the figure is 86%. Seventy-two percent do not believe companies will achieve their stated sustainability commitments. And 87% predict more litigation as a result of companies breaking those promises (Edelman, 2021). This is the audience IR teams face every quarter. These investors haven't become less interested in sustainability. They've become less tolerant of poor sustainability communication.

The EY 2024 Global Institutional Investor Survey quantified what these investors want from companies. Eighty percent say both the materiality and comparability of sustainability reporting need improvement. Eighty-eight percent have increased their use of sustainability information over the past year. And they explicitly state that companies provide so much information it is "almost impossible for investors to discern which factors are truly material to the business" (EY, 2024). The problem is too much unfocused disclosure that hasn’t been connected to specific financial outcomes. Investors want to see which sustainability factors affect the company’s cost of capital, revenue, and risk profile. Most IR teams can’t make that connection because they don’t have factor-level data linking sustainability performance to stock alpha.

Why the Circular Problem Persists

NYU Stern and MIT Sloan researchers identified what they call the "circular problem" in sustainability and investor relations. CEOs say analysts don't ask about ESG. Analysts say that if CEOs aren't providing ESG information, it must not be material. Both sides wait for the other to move first. The sustainability data sits in a separate report, processed through a separate channel, discussed by a separate team (Eckerle et al., 2021).

This problem is structural. Companies track sustainability's financial effects and financial performance in completely separate systems. They report on financials in earnings calls and sustainability in separate reports. The two bodies of information never converge in the venue that matters most to capital markets. When sustainability data is presented separately from financial data, it signals to analysts that the company itself doesn't consider it financially relevant. The data becomes "soft" by presentation, regardless of its actual rigour.

Nasdaq's 5th Annual IR Issuer Pulse Survey reveals the organisational reality underneath. ESG has been the most significant additional responsibility for IR professionals four years running, with 35% reporting a heavier focus. But only 22% say ESG and sustainability leaders actually join investor engagement efforts (Nasdaq, 2024). The work has landed on IR's desk. The expertise to do it well has not followed.

The result is a function that has been asked to communicate sustainability performance to investors without the data fluency to connect it to financial outcomes, without the sustainability expertise to field technical questions, and without the organisational mandate to integrate the two narratives. Ninety-six percent of finance leaders report problems with the nonfinancial data they receive (EY, 2024). Only 12% of IR departments agree with their ESG rating agency's assessment of their company (Schiemann & Günther, 2025). The people who own the investor narrative don’t trust the sustainability data. The people who own the sustainability data don’t participate in the investor narrative. And neither group has access to the external benchmarks that would show which sustainability factors investors and rating agencies actually weight in the sector. The gap in between is where capital allocation decisions are being made.

What a Corrected Model Looks Like

The companies that manage sustainability disclosure effectively don't treat it as a handoff. They treat it as a core component of the investor narrative, subject to the same standards of materiality, rigour, and strategic framing that apply to every other element of financial communication.

This starts with materiality alignment. The top characteristic investors look for in sustainability reporting is relevance to the business model (PwC, 2024). Seventy-seven percent of stewardship specialists at institutions managing $47 trillion in assets focus on sustainability matters with clear financial implications (Georgeson, 2024). Companies that structure their sustainability narrative around the specific factors investors and rating agencies weight in their sector produce a coherent signal. Companies that report broadly across dozens of sustainability topics produce noise. The difference requires knowing, at the market consensus level, which factors drive value in your industry.

It requires integration into the primary investor channels. The earnings call is the most important venue for communicating a company's story to capital markets. Sustainability performance that is financially relevant to the business model belongs there, framed in the language of risk, cost, revenue, and competitive positioning. Segregating it to a separate report tells the market you consider it separate from your business. If the sustainability data can be connected to revenue growth, cost reduction, risk mitigation, or capital efficiency, it should be presented in those terms, in the same room, by the same people.

It demands data governance at IR-level quality. Companies whose IR teams cannot substantiate sustainability claims to the same standard they substantiate financial claims are accumulating risk. EY found that 85% of investors believe greenwashing is a greater problem than five years ago (EY, 2024). PwC found that 73% demand sustainability assurance comparable to a financial audit (PwC, 2024). The bar for what counts as credible sustainability communication has risen to the level of financial disclosure. IR teams that can't meet it are creating exposure, not managing it.

And it means the IR function has to own the sustainability narrative. Not forward it. Not host it. Own it. The research is clear: higher investor relations quality is positively associated with enhanced ESG ratings (Schiemann & Günther, 2025). IR activities help the market accurately capture sustainability information. When IR treats sustainability as someone else's content, the market reads sustainability performance as less credible, less material, and less connected to the investment thesis.

The Question for the Next Board Meeting

The investors who care most about your sustainability performance are not a separate constituency. They are your largest shareholders, and they're using sustainability information as a risk filter that directly affects how much capital they allocate to your company. Stanford's survey found that investors are more likely to drop a company with poor sustainability characteristics than to reward one with strong ones (Stanford GSB / MSCI, 2024). The downside of getting this wrong exceeds the upside of getting it right.

Your IR team is the interface between your company and the capital markets. If that team treats sustainability as a compliance handoff rather than a strategic narrative, you're sending a signal every quarter: that you don't consider sustainability financially relevant to your own business. The investors listening to your earnings call have already decided that it is. The gap between those two positions is where your cost of capital, your valuation multiple, and your long-term shareholder base are being determined.

References

• Amel-Zadeh, A. & Serafeim, G. (2018). "Why and How Investors Use ESG Information." Financial Analysts Journal, Vol. 74, No. 3.
• BCG (2023). "Investors Want to Know Your Sustainability Business Case."
• Eckerle, K., Tomlinson, B. & Whelan, T. (2020). "ESG and the Earnings Call." NYU Stern Center for Sustainable Business / CECP.
• Eckerle, K., Tomlinson, B. & Whelan, T. (2021). "How to Bring ESG Into the Quarterly Earnings Call." MIT Sloan Management Review, Vol. 62, No. 4.
• Edelman (2021). "Trust Barometer Special Report: Institutional Investors."
• EY (2024). "Global Institutional Investor Survey."
• FactSet (2024). "Lowest Number of S&P 500 Companies Citing 'ESG' on Earnings Calls Since Q2 2019."
• G&A Institute (2024). "Sustainability Reporting in Focus."
• Georgeson (2024). "Global Institutional Investor Survey."
• Larcker, D., Seru, A. & Tayan, B. (2024). "2024 Institutional Investor Survey on Sustainability." Stanford Graduate School of Business / MSCI.
• Nasdaq (2024). "5th Annual Global IR Issuer Pulse Survey."
• PwC (2024). "Global Investor Survey."
• Schiemann, F. & Günther, E. (2025). "Do Good and Talk About It: The Impact of Investor Relations Quality on ESG Ratings." Finance Research Letters, Vol. 75.