Sell the Sizzle Communicating environmental, social, and governance issues to institutional investors

Purpose - The purpose of this paper is to explore the role of knowledge transfer in the communication of environment, social, governance (ESG) factors between companies and institutional investors, when they attempt to reach a full appreciation and mutual understanding. Design/methodology/approach - Empirical data were gathered through in-depth semi-structured interviews with six European institutional investors. Archival material was used to triangulate the findings. Findings - Based on the interviews it was evident that ESG is only one consideration in the investment process and that there are several approaches toward integrating ESG. Furthermore, the investors viewed ESG within a financial framework suggesting that this financial framework is part of their vocational cultural professional mental models. Finally, the results indicate that investors attempt to reach a mutual understanding of ESG by carrying out an active dialogue with target companies. Practical implications - The study indicates that companies should discuss/approach? ESG issues from a financial perspective. The findings also suggest that companies should emphasize the role of dialogue when communicating with investors in order to develop a mutual understanding of the company's ESG performance. Finally, by proactively discussing ESG with investors, companies will not only play a role in developing the knowledge base of capital markets regarding ESG, but this will also offer an opportunity for companies to explicate their own communication agenda. Originality/value - The paper develops a framework for communicating ESG between companies and institutional investors. The framework depicts the diverging mental models of the two parties.