Frankfurt Notes – ESG and Perception Studies

Perception studies play a similar role in IR work as materiality analyses in modern ESG work. Basically, the aim is to determine the perception of the company by relevant capital market participants in order to identify potential weaknesses before they become critical for the company. In the IR context, there may already be a need for action if investors are unclear about the meaningfulness of the company’s ESG strategy or – as we often find in our analyses – are not even aware of it.

In the context of materiality analyses, we speak of “double materiality”, i.e. the influence of the company on ESG factors and, conversely, the influence of ESG factors on the company. A classic example of the latter is the shortage of skilled labour, but it also includes the consequences of climate change. A company that is dependent on wood as a resource may be affected by an increase in forest fires and has to document how it deals with this risk.

For capital market-oriented companies, the integration of ESG issues into a perception study also makes sense because a perception study is aimed at a very specific group of participants.  It can provide information on how important various ESG issues are considered to be on the capital market or which ESG ratings are regarded as particularly relevant. It helps to map the perception of a company’s own level of ambition (also in comparison to competitors) and to define a meaningful level of ambition in the first place. In contrast to the materiality analysis, the focus is therefore less on identifying all material topics and more on having the company’s current and announced ESG activities assessed by capital market participants.


The importance of the individual ESG elements varies from sector to sector. The “E” (environmental) dimension often carries particular weight in sectors with a pronounced environmental impact, such as energy, automotive and agriculture. Companies operating in these sectors are scrutinised particularly closely for their sustainability efforts. Here too, the compilation and interpretation of a study is crucial: If one only surveys existing shareholders, results may show low appreciation of environmental issues; potential investors may see this quite differently, which is why uninvested funds, for example, are also part of a well-compiled analysis.

The “S” (social) dimension is perceived as lagging behind the other two dimensions. This applies to the vast majority of industries and is also repeatedly reflected in the studies we conduct. It will be interesting to see how this dimension develops, for example in the context of accelerating demographic change and the shortage of labour.

Our experience shows that many investors, even those who are generally less enthusiastic about ESG, look closely at the “G”, i.e. the governance issues. With Anglo-Saxon investors in particular, we repeatedly find that governance parameters can be criterions for excluding an investment.

Investors see strong governance structures as protection against financial irregularities and unethical practices. Above all, however, they see this as a signal that the interests of the capital market and the free float are being adequately taken into account. The independence of a competently staffed Supervisory Board, long-term and performance-related remuneration for the Management Board, the principle of “one share, one vote” and transparent reporting are key indicators that we consider to be paramount. Companies with good governance structures are generally perceived as lower-risk investments.

Conclusions and recommendations for action

Materiality analyses and perception studies complement each other. So if you not only want to identify issues, but also assess strategies and their implementation, there is no way around a perception study. It is advisable to integrate ESG elements into the perception study and ideally also include potential investors who do not (or no longer) invest in the company. This not only tells you why someone is investing in the company, but also what is stopping them from doing so.

As part of our perception studies, we have found that even participants who do not consider ESG issues to be particularly important comment intensively on “G” issues. This applies in particular to Anglo-Saxon investors. For example, topics such as the independence of the supervisory board or transparent reporting are very important to investors. For companies, this means that it is important to comply with governance standards and make improvements clear.

The extent to which investors address “E” issues and the ambitions they expect from companies varies from sector to sector. ESG-critical investors also take a closer look at the latest where sustainability aspects are recognisably determining long-term business success. As a general rule, every company should demonstrate that it is aware of certain risks (keyword: materiality analysis) and clearly communicate how it intends to deal with risks.

Contact us if you would like to have your ESG activities evaluated by a well-planned perception study. We will be happy to support you in formulating a solid ESG strategy that meets the requirements of potential investors and contributes to your long-term business success.