Governance Research Digest – May 2012
A report by Eurosif, based on research by Ethix SRI Advisors, describes the key environmental, social and governance issues facing the sector and their importance in investment decisions. These include trust and freedom of expression issues as well as privacy and intellectual property, environmental and content diversity issues.
- Investors are aware that the media sector faces specific risks particularly relating to trust and ethics which can have very significant financial impacts, as seen in the UK’s phone hacking case.
- Authors recommend that publishers are more transparent about the reliability of their sources, adhere to accepted ethical standards and distinguish more clearly, fact and opinion.
- By enhancing trust, publications grow their audience and advertising revenue, which appeals to investors.
- Alma Media, a new case-study in the report, is experimenting with several imaginative techniques to build trust with its readers.
- The media sector is going through huge changes driven by new technologies, the convergence of the media sector with the technology and communications sectors, and the need for companies to radically transform their business models as growing number of consumers expect to access content anywhere anytime, without charge.
- What this means is that companies need to be acutely aware that their business risk profile may be changing dramatically: software companies may be sued for breaches of copyright law, telecommunications companies may find that their overall footprint increases as they partner with traditional print media companies, all companies will be under pressure to properly manage personal data and information.
- From an investment perspective, it is very difficult to assess the investment implications of ESG issues at a sectoral level.
- Instead analysts will need to analyse these issues at the individual company level and frequently at the level of individual business lines.
- Moreover, this analysis is not static; the rate of change in the sector means that, now more than ever, investors need to look forward and try and understand how the company and the sector as a whole are changing.