Survey of Institutional Investors Reveals Challenges & Expectations for Companies in Building Trust
The 2017 Edelman Trust Barometer Special Report: Institutional Investors, a survey of global institutional investors’ views of public companies, highlights emerging risks and opportunities for companies to build and maintain trust with the financial community. The inaugural Special Report, whose respondents represent firms collectively managing over $1 trillion in assets, reveals that roughly half of institutional investors think that most companies do not acknowledge the risks to their business from the current political climate, reflecting broader concerns raised in the Trust Barometer Global Report 2017.
The report surveyed more than 100 investors in 14 countries, and is a supplement to the Edelman Trust Barometer launched annually in January at the World Economic Forum.
“For the first time, we can show that investors put trust at the front of the line when choosing stocks,” said Richard Edelman, CEO of Edelman. “This new research shows that investors and the public alike are looking to business to fill the void left by the implosion of trust in government by taking a stand on the issues of our day.”
Key Highlights of the Special Report include:
Companies expected to take a public stand on social issues
The survey found that 76 percent of investors believe that companies have an urgent obligation to take a public stand on one or more social issues to ensure the global business environment remains healthy and robust. Among the issues most frequently selected by investors were education reform/training, environmental issues, and free trade.
Investors care about how companies treat employees, customers
87 percent of respondents say that customer service satisfaction affects trust, and one-third say that a poor relationship between a company’s leadership and employees hurts their trust in a company. Additionally, 69 percent say that prioritizing employee commitment builds trust in a company.
Investors view themselves as agents of change; companies unprepared
Nearly half of investors believe that their firm’s actions can play a meaningful role in influencing a company’s corporate governance. Additionally, 87 percent of institutional investors say that they would support a reputable activist investor if they believe change is necessary at a portfolio company. 80 percent, meanwhile, agree that most companies are not prepared to handle shareholder activist campaigns.
Trust drives valuation and investment decisions
The Special Report reveals that trust drives the valuation of public companies. According to survey results, “Trust in the Company” is the top driver of investment decisions (82 percent), followed by ethical standards (76 percent), current valuation versus peers (75 percent), product R&D/Innovation (74 percent), and historical financial performance (70 percent). Additionally, 94 percent of respondents say that trustworthy companies deserve larger premiums than those considered untrustworthy.
Communicating to build trust
Effective communications are essential for building trust. 93 percent of investors say that keeping investors consistently well informed is necessary to earn their trust, and nearly all say that they trust companies that have a clear strategy more than those that do not.
In addition, how companies communicate their strategy matters. 79 percent of respondents would like to see more qualitative, forward looking disclosures when evaluating an investment, and 68 percent say that providing long-term guidance or financial performance helps build their trust in a company. 59 percent report that they trust a company that provides forward-looking guidance but misses occasionally more than they trust a company that provides no forward-looking information.
“This first-of-its-kind research offers new insights into how companies can prioritize certain actions and institute new behaviors to build trust with investors, thereby enhancing valuation,” said Lex Suvanto, Global Managing Director of Edelman Financial Communications. “Companies must promote themselves inside-out to win trust while upgrading the fundamentals of their communications to the street. At the same time, investors view themselves as agents of change and will take action if companies fail to do so on their own.”
Edelman 2017 Trust Barometer Special Report: Institutional Investors is based on an online quantitative survey of 101 institutional investors in 14 countries. Participants included portfolio managers (52 percent), chief investment officers (24 percent), financial analysts (13 percent), and directors of research (5 percent). Respondents represent firms which manage assets ranging from less than $500 million to more than $50 billion USD. Investor data was provided by Ipreo, a leading global provider of financial services technology, data and analytics. Data Fieldwork was conducted by Edelman Intelligence between June 20 – July 18, 2017.
About Edelman’s Financial Communications expertise
Edelman Financial Communications & Capital Markets is a boutique strategic consultancy with the reach and resources of a leading global communications marketing firm. We advise public and private companies on strategic and capital markets communications to help effectively position them with the financial community during transformative events as well as during the normal course of business.
Clients choose to work with us because of our specialized and experienced financial communications team, our ability to provide the full range of Edelman’s services (such as digital and social media, public affairs and employee engagement) as well as our ability to access Edelman’s global network with more than 65 offices around the world.
Edelman is a leading global communications marketing firm that partners with many of the world’s largest and emerging businesses and organizations, helping them evolve, promote and protect their brands and reputations. Edelman was awarded the Grand Prix Cannes Lion for PR in 2014; six Cannes Lions in 2015; and the Grand Prix in the Titanium category in 2016. The firm was named “2016 Global Agency of the Year” by the Holmes Report, and one of Advertising Age’s “Agencies to Watch” in 2014. In 2015, Edelman was among Glassdoor’s “Best Places to Work” for the fourth time. Edelman owns specialty firms Edelman Intelligence (research) and United Entertainment Group (entertainment, sports, experiential), a joint venture with United Talent Agency.
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