The prevailing sentiment among heads of marketing regarding sustainability and ESG appears to be nervousness. However, doing nothing is not an option.
As we enter 2023, sustainable investing is likely to be front of mind for many investment marketing teams. Across the world, the new year will usher in a range of new and enhanced regulations relating to sustainable investing. These range from the SDR (Sustainable Disclosure Regulation) categorisation announced in the UK in the autumn of last year to the anticipated SEC reporting and naming requirements, as well as incoming SFDR Level II disclosures in Europe.
Both the UK SDR and the US SEC regulations introduce a variation on the language used by the EU SFDR, which has been the blueprint for the naming and marketing of sustainable investment products over the last couple of years.
Firms with a global presence need to ensure that they are both maintaining the consistency of their messaging for audiences across different regions and audiences, while adapting to the language and terminology used by their respective clients.
Different models of regional and centralised marketing teams present advantages and disadvantages in dealing with this challenge. Regional teams may tend to have more bandwidth to keep apace of evolving terminology and what messaging lands well with their local clients. Conversely, centralised teams have greater ability to control all aspects of messaging and therefore ensure consistency across all client touchpoints.
Incoming SFDR Level II disclosures have already prompted a wave of downgrading of funds from Article 8 to Article 9, driving managers to review how their products align with the enhanced regulation. From a marketing perspective this has the potential to pose significant challenges – how should these changes be conveyed to clients and prospects without appearing to have been a response to greenwashing?
Those brands that lead the field in marketing sustainable investing have some common characteristics that set them up well to adapt to these challenges and control the narrative around their products. Leaders in sustainable investing have, as a general rule, sought to articulate and demonstrate how frameworks such as SFDR are integrated into their investment processes rather than treating them as separate ‘classifications’ to be applied independently. Such an approach should have minimised the extent to which they may now need to reclassify products, but should this still be the case they have a stronger and more authentic rationale to share with investors.
At a time when the motivation behind prior decisions regarding SFDR classification are likely to be under scrutiny, transparency and authenticity are more important than ever. In order to address investor concerns, firms need to proactively demonstrate how the changes in classification are in keeping with both their investment policy and their interpretation and integration of SFDR. Digestible, audience-appropriate communication with investors as to what these changes mean for them is essential to riding out this period of change.
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