Edelman’s fifth annual Trust Barometer Special Report: Institutional Investors identifies pivotal issues shaping global investment criteria and outlines the ways in which companies can build trust with the investment community.
The research reveals new investor expectations on ESG, climate change, shareholder activism, employee activism and the meme stock phenomenon. Among other insights, the findings show that investors now subject ESG to the same scrutiny as operational and financial considerations. However, investors are skeptical of ESG disclosures and commitments. Further, eighty-seven percent of respondents anticipate more litigation as a result of companies not delivering on ESG promises. Also, according to the survey, investors believe in the empowered employee, identifying employee activism as an indicator of a healthy workplace culture.
“Investor priorities and expectations are changing rapidly and companies that do not keep up will struggle to win trust,” said Lex Suvanto, managing partner and CEO of Edelman Financial Communications. “Our research reveals that investors do not trust company ESG disclosures and they do not trust companies to deliver on ESG promises. At the same time, investors now see employee activism as a sign of a healthy corporate culture. These are disruptive forces across the investment community that corporate boards and leaders must embrace to ensure competitive cost of capital and fair valuations.”
Notable highlights from the U.S. results of the Edelman Trust Barometer Special Report: Institutional Investors include:
Building ESG trust with investors is an uphill battle — Eighty-six percent of U.S. investors believe that companies frequently overstate or exaggerate their ESG progress when disclosing results, and seventy-two percent of investors globally don’t believe companies will achieve their ESG commitments. Investors agree that companies that excel in ESG merit a premium.
Investors expect a rise in ESG-related litigation — Ninety-four percent of U.S. investors anticipate more litigation as a result of companies not delivering on ESG promises.
Investors are pushing for climate action — Ninety-four percent of U.S. investors expect companies to establish and communicate a Net Zero plan — however, ninety-two percent are concerned companies are not effectively executing on these pledges.
Investors believe that employee activism signals a healthy workplace culture — Eighty-six percent of U.S. investors say a workplace culture that fosters employee empowerment is important for building trust. Seventy-four percent of global investors believe employee activism is indicative of a healthy workplace culture.
Investors hold the Board accountable for company culture — Seventy-one percent of U.S. investors think it is important for the Board of Directors to be held accountable for maintaining a positive company culture.
Investors interested in taking an activist approach to investing — Ninety-five percent of U.S. investors are interested in taking an activist approach to investing, and seventy-four percent indicate they would take aggressive activist measures. Ninety-four percent of U.S. investors proactively approach activists with ideas for effecting change.
Environment and board structure are top activist issues — Over seventy-five percent of U.S. investors are likely to engage in shareholder activism on eco efficiency of a company’s operations, environmental impact of supply chain, and greenhouse emissions. Eighty-one percent are likely to engage on board structure.
Retail investors are emerging as the next disruptor — Eighty-seven percent of U.S investors agree that conversations taking place within online communities influence investment decisions — and eighty-nine percent believe ‘Meme Stocks’ represent a targeted attack against institutional investors.
The Edelman Trust Barometer Special Report: Institutional Investors is a supplement to the Edelman Trust Barometer, which is released annually at the World Economic Forum each January. This year’s report surveyed 700 institutional investors, including financial analysts, chief investment officers and portfolio managers across seven markets (U.S., Canada, U.K., Germany, the Netherlands, the Middle East and Japan).