Despite the challenges, DR activity has reached a level of “business as usual.” We are especially pleased to note that our teams continued to deliver seamlessly. Virtual meetings and digital signatures became a norm, and we believe some of these efficiencies will last even as market conditions change. While the desire for face-to-face discussions will return in some areas when first establishing relationships, many routine activities are likely to keep a strong virtual element.
COVID-19 also raised new questions. Market participants may well think more carefully about attending certain equities conferences or other large-scale sell-side events. The cost and effort of travel may seem less justified going forward. We also observed that Investor Relations (IR) teams started looking at big-picture topics such as ESG, disclosure and transparency. These questions will influence their agenda this year and beyond.
But in the big picture, DR transactions found their footing. The resiliency of the market shows the durability of investor interest in global growth and global companies’ desire for capital.
Broad interest in environmental, social and governance (ESG) investment considerations has already had an impact in the world of Depositary Receipts. In 2020, the impacts of COVID-19 helped bring social impact to the fore. Environmental impact will likely see a high level of attention in 2021.
While ESG disclosure frameworks and relevant regulations are still evolving, investor demand for sustainability in their investments in 2021 will likely push issuers in the U.S. and Europe to increase ESG disclosure while enhancing the quality of such disclosure. This demand places the onus on IR teams to address expectations for clear, meaningful and quantifiable information as they fold ESG into their interactions with investors. We think sustainability will become an increasingly integral part of IR planning and communication with investors. Progress toward good data and consensus on metrics will be a major force to watch this year. As these trends unfold, we expect companies to find new ways to quantify the impact of ESG initiatives while also reporting on their material efforts to reduce environmental footprint and increase workforce diversity and equity with linkage to both risk and opportunity to their business. We also expect to see companies making clearer and more-specific statements around social injustice stances.
It also remains important to highlight the governance component of ESG, even if environment and social impact get more media attention. Questions about decision making, transparency, crisis management, and board oversight and independence continue to be an important part of investor criteria when looking at issuers domiciled outside their market. Governance practices and governance risks remain top of mind.
COVID-19 has increased investor attention on health and health care innovations. That trend will continue in 2021. Small, innovative companies looking to raise capital via IPOs outside their domestic market find a high degree of potential interest. Depositary Receipt programs help facilitate that access both from an issuance and governance perspective. The 56 Biotech & Pharma offerings in 2020, raising $6.39B, underscore that trend.2
Within Biotech & Pharma, investors typically have deep sector expertise. In turn, issuers need support to connect with those investors pre-IPO and via ongoing Investor Relations activity. It is about building a bridge between the science and the finance.
Top Domiciles with Biotech & Pharma IPOs in the U.S.
Top Indications for Biotech & Pharma IPOs in the U.S.
Source: BNY Mellon Biotech Landscape Study 2020
Various turbulence factors aside, Chinese companies have continued to list in the U.S. at an extremely strong pace. In 2020 there were a total of 26 U.S. IPOs of Chinese companies, raising $11.8 billion in capital.2 It was the busiest year on record for U.S. IPOs by Chinese companies. We are very pleased that BNY Mellon as depositary bank supported more APAC-based client IPOs (ranked by volume and by proceeds raised) than any other depositary bank.2 With China showing signs of recovery from the economic impacts of COVID-19, U.S. investor interest has been keen.
We also expect to see continued progress in Investor Relations as Chinese companies become more adept at meeting the expectations of U.S. investors, with ESG quickly becoming a key part of the conversation. Adoption of the virtual environment, spurred initially by COVID-19, has brought notable efficiencies to investor targeting and outreach as well.
1 IHS Markit, institutional filings as of December 31, 2020
2 Based on publicly available information from BNY Mellon, JP Morgan, Citibank and Deutsche Bank as depositary banks. Data as of December 31, 2020
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