SINK OR SWIM? FLOATING ON A PUBLIC MARKET IN THE AGE OF ESG - MAY 17, 2021 // CARUM BASRA AND ETHAN SPIBEY
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SINK OR SWIM? FLOATING ON A PUBLIC MARKET IN THE AGE OF ESG MAY 17, 2021 // CARUM BASRA AND ETHAN SPIBEY
PURPOSE UNION PAGE | 02
May 17, 2021
SINK OR SWIM?
FLOATING ON A PUBLIC
MARKET IN THE AGE OF
ESG
Traditionally, companies seeking to list on a stock
market have followed a narrow process to
determine their “value” on the basis of turnover,
assets and profitability. But times are changing,
and so are the metrics used to assess a company’s
valuation. Today, assessing the value of a company
is a far more holistic calculation taking into
account social and environmental values.
With ever-heightening consumer expectations,
how we define value in society is increasingly
influencing value in the market, particularly as a
new crop of socially conscious investors emerge.
As organisations prepare to float - whether they
succeed depends on how effectively they can
burnish their social and environmental credentials.
Avoiding a sputtering start to life as a public
company means these credentials need to be on
display and backed up with meaningful action.
Purpose is no longer a “nice to have” piece of PR,
it’s business-critical.
Take Deliveroo, characterised by one of the
bankers involved in the process as the “worst IPO
in London's history”. The company’s pre-float
prospectus was free of statements of
environmental, social and governance principles,
instead offering a cold-hard calculation on the
profitability of their model.
PAGE | 03 PURPOSE UNION
Rather than applaud a company profiting from a Research undertaken for this years' Purpose Pulse
gig-economy model, several investors cited the indicates that six in ten (61%) Millennials and Gen
takeaway delivery firm’s poor record on workers Z say a brand having a clear social purpose
rights as a reason for its lacklustre performance beyond making profit is important to them when
running up to its listing. In the days that followed, deciding who to buy from or otherwise support.
social and moral questions plagued a beleaguered
listing and came to characterise what was less of a It’s not only consumers but also younger, purpose-
float and more of a sink. led CEOs and founders who are changing what it
means to be a successful business. These
The takeaway firm’s disappointing IPO, however, business leaders are reaping the rewards of
did represent a move towards a more open form innovation, heightened levels of trust amongst
of raising equity; more than 70,000 Deliveroo consumers, employee loyalty and crucially,
customers invested in the firm through what it unlocking new sources of investment. We have
described as a ‘Community Share Offer’. seen European institutional investors channelling
Technology has made such retail IPOs far easier more capital into purpose-driven companies with
and widened the base of investors to include London becoming a top global hub for impact tech
practically anyone with some spare cash and a investments.
smartphone. This shift means that IPOs are no
longer the exclusive domain of professional This is all to say that when it comes to IPOs,
institutional investors. companies will need to think carefully about what
becoming “public” really means, reflecting
Like Deliveroo, BrewDog via its ‘Equity for Punks’ heightened stakeholder expectations and broader,
has sought its customer’s investment, though has socially-minded audiences. In practice, there are
done so in the run-up to a hotly anticipated IPO. In four key steps that companies must take to both
a recent crowdfunding round, the Scottish brewer avoid disappointment and realise the benefits of
raised £1.2m in just 48 hours. Unlike Deliveroo presenting a clear articulation of their social
however, the Punk IPA maker has put ESG factors purpose to the world.
at the very core of their brand, stating clearly that
“[s]ustainability and looking after our planet is at Firstly, a compelling organisational narrative
the core of what we do and with your help, we should foreground people and purpose,
want to go further.” highlighting that these factors are the animating
force for achieving sustainable profits over the
Crowdfunding and more accessible retail share long term. Investors will increasingly want to see
offers have opened up capital markets to a new this on the first page of the prospectus, not in the
generation of investors. These younger retail annex. And they will look for proof points to show
investors bring their values with them to the how this purpose has been delivered in the past
market in the same way they do when it comes to and will continue to be in the future.
purchasing decisions.
"It’s not only consumers but also younger, purpose-led CEOs and
founders who are changing what it means to be a successful
business."
PAGE | 04 PURPOSE UNION
Secondly, companies must bring employees along Organisations must engender trust from both
with them. Empowering internal audiences and within their walls and from the communities they
aligning them with a purpose-led mission means seek to serve. Embracing and realising the benefits
listening and engaging frequently. This remains of genuine stakeholder capitalism unlocks the
the case even when looking to float despite the potential for people from diverse perspectives to
strict guidelines about what you can and cannot hold boards to account and keep them true to
say during the IPO process. This is particularly the their stated purpose.
case when attractive employee stock options have
become de rigueur across start-ups. Building trust Values as a way to realise value - the rules for a
and transparency with employees is the best way successful IPO have been rewritten in a new age of
to develop a compelling and convincing purpose-driven business.
organisational narrative for which internal
audiences will ultimately become champions. The Carum Basra is Director at Purpose Union
pandemic has necessitated a move away from the with strong experience across ESG, financial
staid investor roadshows of old but new critical communications and public affairs. Carum
audiences through the IPO process should also joined Purpose Union from the Institute of
play a part in this re-consideration. Directors (IoD) where he was Senior Policy
Advisor. There, he established the IoD Centre
Thirdly, business leaders are no longer the remote for Corporate Governance which brings
inaccessible figureheads they once were, together researchers and business to address
ensconced in corner offices. Consumers, issues including sustainability, stakeholder-
employees, and investors increasingly expect oriented governance, and emerging tech.
corporates to speak out on a range of social
issues. As outlined above, these groups are no Ethan Spibey is a passionate campaigner
longer neatly delineated but overlap with one across a range of equality issues and has
another. CEOs and members of the board must be extensive experience working with charities,
able and prepared to use a range of online and government and corporates. Most recently,
digital platforms to speak out on the values their he led government relations and public
organisation holds, moving from avoidance to affairs at one of London's fastest growing
making a proactive position on key social issues. FinTechs. Ethan is the founder of the
Leaders and spokespeople need to be persuasive campaign group, FreedomToDonate which
speakers during critical moments during the IPO seeks to represent all those who are
process including both investor and retail currently excluded from donating blood.
roadshows. They need to be able to communicate
and convince stakeholders of their narrative as a Purpose Union helps leaders to use keynote
purposeful company. speeches, media interviews, panels and other
public appearances to drive social impact and
Finally, once the process has concluded and a build their reputations.
company finds itself on the bourse, the principles
of transparency and accountability must continue Contact carum.basra@purposeunion.com to
to apply both internally and externally. find out more.
"Consumers, employees, and investors increasingly expect
corporates to speak out on a range of social issues."
You can also read
