Diana Marszalek 30 Nov 2018 // 10:35AM GMT
NEW YORK — Much like consumers, institutional investors are increasingly putting their trust in companies that step up around issues in addition to making money, according to a new Edelman report.
The second annual Edelman Trust Barometer Special Report: Institutional Investors found institutional investors are more often favoring companies that focus on corporate culture, environmental, social and governance (ESG) investing and their roles within broader society.
89% of respondents said their firms are weighing ESG factors in particular more heavily than they used to, with 63% reporting the change taking place over the last year; A majority said environmental and social practices are importance as governance when it comes to whether or not to invest.
“A new set of investment criteria is emerging as investors take into account longer-term considerations for what drives company valuation,” said Lex Suvanto, Edelman’s global managing director, financial communications & capital markets. “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.”
Other findings include:
• 65% of respondents 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
• 87% of respondents strongly agree their firms are more interested in taking an activist approach to investing
• 98% of respondents think public companies are urgently obligated to address one or more societal issues, with cybersecurity, income inequality, and workplace diversity being top priorities
• 88% of respondents strongly agree that the current political climate is changing their firm’s investment strategy
• 94% of respondents strongly agree they must trust a company’s board of directors before making or recommending an investment
The research is based on a survey of more than 500 chief investment officers, portfolio managers and buy-side analysts in five countries (US, Canada, UK, Germany and Japan), representing firms that collectively manage more than $4.5 trillion in assets.
The report is a supplement to the Edelman Trust Barometer launched annually in January. It also echoes findings of the Earned Brand Study Edelman released in October, which found 64% of global consumers are belief-driven buyers, a significant lift from the 50% who last year reported making purchasing decisions based on brands’ stands on societal issues.