The continuing shift to investing based on environmental, social, and governance (ESG) criteria is a once-in-a-generation event that is transforming the investment industry. With this transformation comes the potential creation of new winners and losers.
Over the past year, our interactions with clients have consistently and visibly shifted towards sustainability-related topics. Asset and wealth managers clearly understand the urgent need to take action but often struggle to envisage exactly how to go about it. Many questions remain unanswered:
- What type of investment manager do we want to be?
- How can we demonstrate our ESG credentials?
- How can we articulate messaging around sustainability that is consistent, original, and true to our corporate values?
- Do we need to upskill our marketing team, or shall we rely on the investment teams for ESG-related topics?
- Should we prioritise sustainability expertise over performance in our messaging?
This in turn made us ask ourselves some questions too:
- What is driving investors’ views and decisions?
- What is the impact of greenwashing on how clients view us, and the industry in general?
- How do different investor segments perceive the asset managers they deal with every day?
- Are there recurring (quantitative and qualitative) factors that separate ESG leaders from laggards in our industry?
- Most importantly, what does it mean for us as marketers?
To find out what this does mean for marketers, in June 2021 we surveyed a broad cross-section of investors and stakeholders in the UK investment landscape. This included independent financial advisers, wealth managers, discretionary fund managers, pension trustees, independent trustees, consultants and a small number of financial journalists and commentators. These professionals work closely with asset managers every day and have a first-hand view of how the industry is evolving amid a blizzard of product launches.
Their insights provided a fascinating picture of a transforming industry and indicate what the future might hold for both leaders and laggards. Whilst quantitative data was collected, the research also aimed to collect qualitative observations and opinions. This gave our respondents scope to go into more detail about topics that matter to them – such as the realities of the ESG transition, which fund groups are genuinely leading the way (and why), and the impact of greenwashing.
One of the priorities for our research was to establish which groups are perceived as sustainability leaders from among the multitude of voices in this space. Another aim was to dive much deeper; to identify the factors behind perceived success in this area of investing and uncover what those who are deemed as less successful can do to improve.
Below is a summary of the main findings:
- Stay true
Fund buyers and influencers are seeking sustainability messaging set at the board level and
deployed in a transparent and authentic matter. Investors want providers with a strong fiduciary culture and a clear purpose and vision.
- Numbers, not noise
Fund selectors are taking an evidence-based approach, looking at performance and proof of ESG integration. Most marketing is seen as undifferentiated while awards and media coverage have little impact.
- Greenwashing is still a problem
Fund buyers are very aware that some managers will overstate their expertise or the sustainability of their funds. Outside agencies are seen as an answer to this.
- Solutions, please
Model portfolios and other portfolio solutions are of particular interest, rather than traditional fund structures.
- Stay focused
Institutional and retail investors are at different points in their sustainability journeys and are prioritising different things. This needs to be reflected in messaging and tactical approaches.
We also asked our respondents to grade a provided list of asset managers on key themes:
– Reputation for sustainability
– Investment performance
– Credible and authentic strategy
– Quality of investment approach
– Quality of content and marketing
Typically, we noticed that many of the names mentioned as leaders were active in the field long before today’s ESG boom. Their long history is seen as a sign that they have fully integrated processes that
have been tried and tested across a range of market conditions.
Nevertheless, innovation is still prized and noticed. It is clear there is plenty of opportunity for fresh names and new thinking with firms identified as leaders by our respondents usually hailed for tackling challenges in new and innovative ways.
The scores for overall reputation for sustainability were nearly mirrored by those awarded for investment performance, in all three groups (retail, institutional and media), both at the top and bottom of the scale.
Rising to the challenge
When asked to rate the quality of asset managers’ content and marketing, respondents gave slightly lower scores across the board. This was a clear warning sign for us, as there appears to be a mismatch between the quality of the performance and investment approach to sustainability, and the marketing messaging.
Does it mean that marketing is not (yet) up to the challenge of articulating a powerful message around sustainability whether that is about a brand purpose, a company’s strengths and capabilities, or benefits for investors?
Every case, every team, and every story is different. Each one needs to be considered and studied separately and with an open mind free from bias and misconceptions. However, we feel that it is worth highlighting a number of clear messages:
- The role of the marketer is evolving, and fast. There has been a radical shift away from a one-way communication from marketers to customers to a conversation between the two. Customers (investors) are not just listening quietly but – especially when the topics are related to such emotional values like the environment, diversity, equitable opportunities – are questioning, engaging, clicking, liking. Marketing alignment with a customer’s social values is fundamental to a successful customer journey.
- Investors expect providers to demonstrate clear purpose and vision, along with evidence of fiduciary culture.
- The criteria that investors look for vary within wholesale and institutional segments, and across corporate-process-product levels.
- Sustainability messaging is a great opportunity, but not without its risks. If a company is perceived as overstating their sustainability expertise, the road to regain investors’ confidence and trust will be long and tortuous. However, the answer is not to stay put and wait for perfection.
- Sustainability is a journey and communicating your company’s progress, no matter how small, will reinforce investors’ trust and engagement. Showing leadership means building messages about your journey, based on facts and evidence, with transparency and humility.
At White Marble, we understand the industry’s dynamics and trends, and help firms shape the strategic future of their business with sustainability in mind.
We support our clients to think about sustainability in an authentic and original way that suits their brand and values without compromising credibility.
If you would like to find out more about our investor research or our sustainability practice, please contact us on [email protected]