Survey of Institutional Investors Reveals Urgent Need for Public Companies to Address Societal Issues to Build Trust
Companies should expect activism from all investors as 87 percent of respondents agree their firms are more interested in taking an activist approach to investing
65 percent of investors report that maintaining a healthy corporate culture and enforcing a corporate code of conduct at all levels of the company has a great deal of impact on trust
The Edelman Trust Barometer Special Report: Institutional Investors reveals new criteria for evaluating investments as well as insights on what drives institutional investor trust in companies. The second annual special report finds that investment criteria are evolving to target areas beyond financial metrics, with a strong focus on corporate culture, Environmental, Social and Governance (ESG) investing, and companies’ roles within broader society.
“A new set of investment criteria is emerging as investors take into account longer-term considerations for what drives company valuation,” said Lex Suvanto, Global Managing Director, Financial Communications & Capital Markets at Edelman. “Environmental and Social considerations are now as important as Governance, and the health of a company’s corporate culture is becoming a meaningful investment factor. In addition, investors expect companies to take a stand on social issues that are important to maintaining a healthy business environment.”
The research surveyed more than 500 chief investment officers, portfolio managers, and buy-side analysts in five countries (U.S., Canada, UK, Germany and Japan), representing firms that collectively manage over $4.5 trillion in assets. The report is a supplement to the Edelman Trust Barometer launched annually in January at the World Economic Forum.
Key highlights of the Edelman Trust Barometer Special Report: Institutional Investors include:
Investor ESG focus is now pervasive
89 percent of respondents say their firm has changed its voting and/or engagement policy to be more attentive to ESG risks, and 63 percent report that this change has taken place in the past year.
Environmental and Social practices matter as much as Governance
Around the world, respondents strongly agree that Environmental and Social practices are as important as Governance when it comes to investment criteria.
Companies should expect all investors to be activists
87 percent of institutional investors say their firms are more interested in taking an activist approach to investing and 92 percent will support a reputable activist investor if they believe change is necessary at a company in which they invest or they recommend investing.
Corporate culture is now an investment criterion
Investors now recognize the impact that healthy culture and engaged employees have on corporate performance. 65 percent of investors say that maintaining a healthy company culture and enforcing a corporate code of conduct at all levels of the company have a great deal of impact on their trust.
Nearly all investors believe companies have an urgent obligation to take a stand on societal issues
98 percent of investors think public companies are urgently obligated to address one or more societal issues, with cybersecurity, income inequality, and workplace diversity being top priorities. Investors are relying on corporations to address issues that are shaping the business and political environments.
The political climate is changing investment strategies
88 percent of institutional investors agree that the current political climate is changing their firm’s investment strategy, and 89 percent of investors also agree that trade risks are changing their firm’s investment strategies. In addition, 85 percent of investors agree most companies do not fully acknowledge the new risks to their business from the political climate.
Management does not fully control the company’s narrative
While a company’s CFO is ranked as the most credible source of information, a wide spectrum of voices both internally and externally, including business/financial academics and experts as well as regulatory agencies, are also viewed as highly credible sources of information.
The reputation of a Board of Directors directly impacts investor trust
94 percent of investors agree they must trust a company’s Board of Directors before making or recommending an investment. 92 percent of investors say access to the Board of Directors is important when considering an investment and 95 percent say an engaged and effective Board is important.
Digital is utilized to inform the investor decision process
98 percent of investors use social platforms, such as LinkedIn and Twitter, to inform investment decisions on a weekly basis. 86 percent of investors say they consult a company or an executive’s social media channels when evaluating a current or prospective investment.
Having a long-term outlook is critical to trust
96 percent of investors agree providing long-term guidance on financial performance impacts trust.
Investors believe the bear market is looming
Nearly half of investors believe that the bull market will come to an end in the next year and 81 percent believe it will come to an end in the next two years.
The Edelman Trust Barometer Special Report: Institutional Investors is based on an online quantitative survey of 500 institutional investors in the U.S., Canada, UK, Germany and Japan. Participants included portfolio managers (39 percent), chief investment officers (29 percent), financial analysts (26 percent), directors of research (4 percent) and ESG analysts (1 percent). Respondents represent firms which manage assets ranging from less than $500 million to more than $50 billion USD. Data Fieldwork was conducted by Edelman Intelligence between September 9 – October 22, 2018.
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. Among its many honors, the firm was awarded the Cannes Lions Grand Prix for PR, named one of 2018 “Agencies to Watch” by Advertising Age and “Global Agency of the Year” by both the Holmes Report and PRWeek, and cited five times by Glassdoor as one of the “Best Places to Work.” Edelman owns specialty firms Edelman Intelligence (research) and United Entertainment Group (entertainment, sports, lifestyle).
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