The current state of the industry demonstrates how essential investor relations are to the success of public companies.

Investor relations and forward-looking statements don't always go hand in hand, but preparing for what lies ahead is crucial. In past years, the investment community experienced a record-breaking 1,035 initial public offerings (IPOs), but 2023 will bring new opportunities and challenges. The US Federal Reserve is hovered to raise rates, environmental, social, and governance (ESG) issues are pressing, and there is a hiring frenzy for investor relations officers (IROs).

An increase in interest rates

A pandemic in 2020 caused governments around the world to artificially lower interest rates to combat an impending recession; rates are expected to rise in March at the Federal Reserve, and overnight rates have increased at the Bank of Canada.

Share prices may become more volatile for publicly traded companies, resulting in higher capital costs.

Most active investors consider volatility a good thing, especially when they take a dynamic approach. This allows investors to enter and exit positions more favorably, providing a better chance to create alpha. Additionally, IROs should use this opportunity to take a more proactive approach with current and prospective investors.

Market volatility requires investor relations (IRIR) teams to reach out to investors, listen to their concerns, and build strong relationships with them.

'Hybrid events' are the new norm.

Following the pandemic, a hybrid model is emerging for investor engagement and events, including roadshows, investor days, annual general meetings (AGMs), and conferences.

Investor relations will not disappear anytime soon, thanks to digital technology. With fewer restrictions on budget and bandwidth, companies can reach out to a broader pool of investors and benefit from higher executive attendance in virtual meetings. The industry must balance in-person and digital activities as it moves towards a hybrid future.

The sophistication of IROs is increasing.

Investor relations officers' roles continue to evolve, and our clients are increasingly looking for individuals who have a mix of communication, capital markets, and soft skills. The IRO role now requires relationship and community management skills, sales, attention to detail, and analytical abilities. There is increasing demand for skilled IROs in all these areas, in addition to greater expectations of IROs to advise and inform management and the board. The time has come for enterprising IROs to shift from tactical contributors to strategic advisors.

A decrease in IPOs and SPACs

The number of public companies has increased over the past two years. The low-interest rate environment and a high number of private companies seeking to go public, combined with favorable market conditions, created a record-breaking year for initial public offerings (IPOs) and special-purpose acquisition companies (SPACs).

2023 is a different year. Many recent IPOs have underperformed in the last two years. Any interest rate hike will continue to put downward pressure on them, especially on tech stocks with high valuations yet to reach profitability. Many companies considering an IPO or a SPAC deal will wait and see rather than rush into it.

Access to funding may become more difficult due to the influx of new businesses over the past two years. An effective strategy for raising capital and attracting long-term investors this year is proactive investor outreach, communication, and shareholder monitoring.

ESG Is Here To Stay

ESG and climate disclosure are not passing trends. Governments aren't moving quickly enough to deal with climate change, but investors are still very concerned about it. UNUN Principles for Responsible Investment (PRI) report says it isn't just BlackRock.

In making equity investments, most investors and asset owners who signed up for the PRI two years ago took environmental, social, and governance factors into account. PRI has over 4,800 signatories, including asset owners, investment managers, and service providers.

Globally, investors actively seek out and invest in sustainable businesses, and the pot for companies with sustainable practices is growing yearly. With a clear strategy and plan, it's time to start tackling ESG disclosure.

Even though it's impossible to predict what this year's remaining months will bring, it's safe to say investor relations professionals will have their fair share of challenges and opportunities. Investor relations have never been more vital to a public company's success than now, based on the industry's current state. ESG, economic volatility, and new expectations from IROs will likely shape the road ahead.