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ESG and impact investing

 

What’s next?

Communicators have an enormous role to play in helping companies communicate with investors around responsibility, and this month FleishmanHillard Fishburn hosted the PRCA’s Investment Sector Group for its ‘The Future of ESG & Impact Investing’ event.

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The evening – which brought together leading investors, policy experts and communications professionals from S&P Trucost, Barclays, Diageo and the PRI – saw lively and engaging discussion about the future development of ESG investing.

By William Muir | Senior Account Manager | Corporate

Making returns responsible
The growing role of environmental, social and governance (or ESG) criteria has rightly been one of the most popular conversations surrounding investment in recent years. Investors are now not only holding corporates to account over ESG issues, but are also using their influence to improve corporate behaviour from the boardroom down.

For many years ESG was unfairly perceived by some investors as afterthought at best and a marketing gimmick at worst. However, what became apparent during the session is how the criteria, along with broader purposeful business issues, are now at the forefront of both corporates’ and investors’ minds. A growing number of institutional investors appreciate that showing impact on ESG factors is not just an important pillar of corporate citizenship, but is a vital part of risk management. High profile examples of poor governance like the Volkswagen emissions scandal cost investors billions, making them painfully aware of how damaging bad behaviour can be to their returns. 

Investors are therefore more attuned to ESG criteria than they have ever been, and another interesting takeaway from the session was the impact this is having on financial communications. The panel provided excellent insight into how they tell their ESG story, with large corporates now having a heavyweight ESG reporting function. 

The bigger picture
Savvy investors understand that as consumers increasingly show support for purposeful business with their feet (or rather their wallets), those who get it right will be a good long-term investment. This, the panel suggested, means that purposeful business campaigns are more important than ever – and that investors are paying greater attention to consumer trust, reputation and ESG performance.

The panel pointed out that this trend will accelerate as millennials become ascendant in terms of both wealth and spending power. This change won’t just be affected through millennial spending power, however. Millennials are twice as likely to invest in funds that target specific ESG outcomes, and the panel agreed that values-driven millennials are transforming the retail investment market. With the great intergenerational wealth transfer still looming on the horizon, the retail market has yet to feel the full force of this demographic shift. The panel also agreed that millennial investors will force a change in behaviour among older investors, advisers, and institutions.

We are all investors
With so many corporates rightly shouting about their ESG activities, communicators must articulate their company or clients’ credentials as compellingly as possible. The panel agreed that for ESG activity to really stand out it needs to be impactful, brand-relevant, and deal with genuine issues. One of the more innovative campaigns the panel discussed was Smirnoff’s ‘Labels are for bottles not people’ campaign, which saw the brand engage with issues affecting the LGBTQ+ community through the lens of its focus on nightlife.

At first glance it might seem like campaigns like this, which can appear consumer-led, might not resonate with would-be investors. However, the consensus was that this couldn’t be further from the truth. Effective purposeful business campaigns become part of a corporate’s DNA and will work for all audiences that they’re trying to reach –  irrespective of whether they’re buying stocks or buying spirits.