Timely Tips to Help Healthcare Companies Build & Maintain Investor Trust in a Time of Economic Uncertainty
November 28, 2022
Sophia Rose, Senior Account Executive, and Anthony Feldman, Vice President, Financial Communications, Edelman Smithfield
Amidst increasing concerns about inflation, rising interest rates and labor costs, healthcare CEOs must be prepared to strategically communicate operational and financial performance amid market uncertainty. With market uncertainty testing investor confidence, healthcare executives have a timely opportunity to communicate with current and prospective investors in ways that can build – or potentially erode – trust and credibility.
Our 2022 Edelman Trust Barometer Special Report: Healthcare Institutional Investors, a study of 225 investors across three markets, provides some timely and applicable insights to help healthcare companies better communicate during today’s complex market environment. The report looked at growth drivers, priority focus areas for investors, where investors source information, and what investors need to know in order to develop trust in a company before making or recommending an investment.
Chief among the findings are two telling results:
- 68% of investors think healthcare companies have historically communicated poorly with the Street, and
- 61% of investors believe healthcare companies are unprepared to effectively communicate effectively with them.
As healthcare companies report financial and operational progress in the midst of a trying economy, and with the uncertainty of the road ahead, our study provides some illuminating and timely learnings that can help guide companies to better communicate with the Street.
- First, articulate your company’s operational and financial performance across multiple channels. Our study revealed that 78% of investors will not invest in a healthcare company if it does not provide sufficient operational and/or performance information. It also indicated that investors rely on multiple sources when making or recommending an investment - a healthcare company’s website (48%), investment portfolio (44%), ESG report (37%) and its investor relations website (37%). While all public healthcare companies are required to report operational and financial performance, not all are effective at how and where they communicate. Employing a multi-channel communications approach meets investors where they seek information, ensuring they receive the information needed to make informed investment decisions through the channels they use most.
- Second, board leadership, in addition to the CEO, should be visible communicators of your company’s investment thesis, strategy and performance. One of the most interesting findings from our study is that 82% of investors need to trust a company’s board of directors before making an investment decision, which is nearly as high as the 87% of investors who said they need to trust a CEO before making or recommending an investment decision. These statistics reveal how important leadership communications and visibility are to developing and maintaining investor confidence.
- And Third, consider a proactive (versus reactive) approach to ESG issues, and if and when it makes sense to convey a purpose-driven mandate through investor communications. Our study showed that 81% of investors believed healthcare companies with strong ESG performance deserve a premium valuation and 76% believed those companies are more resilient in a crisis. It also revealed that a majority of investors will not invest in a healthcare company if it does not have sufficient ESG mandates. As the healthcare narrative on COVID-19 matures, we suggest companies revisit their ESG strategies as investors look for clearly outlined programs, measurable commitments and updates on progress against them.
As fears of a global recession and geopolitical fissures continue to erode the investor confidence and goodwill healthcare companies benefited from during the COVID-19 pandemic, the need to ensure that healthcare companies are clearly and consistently communicating – and through the appropriate channels – to build and maintain investor trust has never been more critical or timely. While healthcare has traditionally proven itself as a strategic investment in both good and challenging economies, we hope the insights above and, equally, the insights from our 2022 Edelman Trust Barometer Special Report: Healthcare Institutional Investors, will help healthcare companies better communicate to the Street – enabling them to both build and maintain investor trust.