The past year has been a particularly challenging one for sustainability and ‘ESG’ investing. It is inevitable that an element of fatigue starts to set in when a topic has dominated the conversation for so long, but the strength of the backlash in some corners has taken many by surprise.
At its heart, sustainable investing is about putting money to work in a way which does minimal damage to the planet, has some measurable benefit and delivers an investment return. When done with authority, integrity and genuine adherence to the overarching principes; ESG, responsible or sustainable investing is pretty difficult to argue against. That hasn’t stopped many people from trying, however.
White Marble’s Benjie Elston, Head of Sustainability, shares the top five trends he believes investment marketers should keep an eye on in 2024.
1. The growing reporting burden – How to appropriately assess regulatory requirements vs investor expectations, build frameworks and resource efficiently and cost-effectively
This is not a new trend but the continuation of a theme. In 2023 we had many conversations around the number of ‘voluntary’ reporting commitments to which asset and wealth managers are signed up to. Considerable time and effort are needed for companies to produce comprehensive and tailored responses to the various bodies – from the UN PRI to the Financial Reporting Council’s UK Stewardship Code, and everything in between.
This summer, we undertook our second major sustainability research project, which was focused on stewardship reporting. We surveyed and interviewed a wide range of current signatories to the UK Stewardship Code to better understand how the final report is ultimately used, where the challenges lie and how firms are addressing them. You can read the executive summary of the report here.
We are delighted White Marble’s track record of 100% success in helping firms gain or retain signatory status to the UK Stewardship Code remains intact. Each project offers us further insight into the processes, policies and practices our clients are implementing.
2. Language and taxonomies – The nuance and consequences of words such as sustainability, stewardship and fiduciary duty at corporate, portfolio and holding levels
With the proliferation of regulatory standards across the globe, firms with a global presence will continue to grapple with the challenges of maintaining consistent messaging and language across the board while also meeting regional requirements and standards. Add to this the ongoing politicisation of terms and concepts such as ESG and climate change, particularly in the US, and marketers are faced with an unenviable task in 2024.
At White Marble, we are continuing to ensure we are up to date on existing and emerging regulatory standards and voluntary codes – from TCFD to the recent SDR in the UK. We look to a wide range of sources and research, including propriety investor research, to help clients understand what matters to their audience and speak the language they appreciate.
3. Culture at a corporate and portfolio level – The drive for efficiency and competitive advantage, while finding data to successfully enhance and support socially-focused investments and their commercial viability
At a corporate level, culture is increasingly being seen as an area where asset managers can look to differentiate themselves. Asset owners are also more frequently seeking evidence of a culture of collaboration as part of their due diligence. Add to this the fact firms are feeling increased pressure to evidence diversity, equity and (crucially) inclusion at a deeper level, and the emphasis on measuring and articulating corporate culture is likely to remain high.
At the portfolio level, with the wide proliferation of climate change and environmentally oriented products now available, social impact is viewed by many as the next frontier for sustainable and impact investors. Questions are being raised about how best to measure and demonstrate said impact.
These trends have provided the impetus for the consolidation of White Marble’s culture proposition. Led by an internal working group in collaboration with academics and thought leaders we’ve been bringing a range of options to clients to measure corporate culture and collaboration. These projects bring tangible, shareable results that are useful for benchmarking, maintaining and improving internal cultures. They can also provide evidence of consistency (or a lack of consistency) across internal and external experiences of your culture and help asset managers strengthen their responses to due diligence questions and reporting requirements (such as FRC UK Stewardship Code Principle 1).
4. The rapidly evolving brand puzzle – Developing messaging and articulating a value proposition which can authentically resonate across audiences and geographies
As with reporting requirements and voluntary standards, marketers in the wealth and asset management space continue to face the challenge of juggling the need for centralised, consistent brand messaging with the application of regional nuances and preferences.
In terms of what this means from a sustainability perspective, we have seen a renewed focus on product or strategy level ESG/sustainability articulation and away from overarching corporate level language that applies to (or attempts to cover) the entire raison d’etre of the business.
Sustainability messaging is being presented more as a spectrum, built around a consistent core that can be dialled up or down to suit the needs of the audience in question. Firms are seeking messaging toolkits to equip marketers and salespeople in the field to adapt to their clients’ needs and preferences without muddying the overarching brand message.
5. Validity of Net Zero targets and the associated landscape – Choosing the right model and the potential risks associated with making strong public commitments
Gone are the days when simply having a statement on Net Zero and a vague target was sufficient to meet investor demands. A better educated and greenwashing-wary audience are now more discerning and demanding of the targets set, and of the evidence they’d like to see to demonstrate a path towards it. In general, where Net Zero targets are appropriate, interim goals and progress updates are best practice and are being adopted by leaders in the space.
Communication, both internal and external, around Net Zero policies and targets has never been more important in this context. In much the same vein as the earlier points on culture and brand, we are continuing to work with clients on defining, measuring and monitoring, and articulating firms’ commitments in these areas in a landscape where many are cautious of strong statements that could alienate certain segments of their audience, or prove difficult to live up to in the long run.
If you’d like to talk to the White Marble sustainability team about any of these areas, get in touch now