Riding the Wave of SRI and ESG Investment Marketing
ESG investing measures the sustainability and ethical impact of an investment in a company or business. Environmental, social and corporate governance (ESG) investment strategies have been around for over four decades, but its popularity has skyrocketed in recent years. ESG investing takes into account factors such as climate change, diversity and executive compensation amongst other investment criteria. Investors are concerned with ESG issues for a myriad of reasons- from managing investment risks to reputation- but it is clear that this trend is not going anywhere. After a survey of 2,000 investment managers, the CFA institute has set plans for its 2017 curriculum to include additional focus on ESG issues—which makes specific ESG investment marketing strategies a must.
While more managers are utilizing ESG in their investments, many are falling short on properly capitalizing the opportunities it offers. Along with benefiting the environment, “green” finance will create jobs and strengthen local communities. Furthermore, these investment opportunities are incredibly diverse- from clean energy to water technologies- and according to InvestmentNews, ESG principles can actually deliver “superior, risk-adjusted performance over the long term.”
Firms and companies that commit to the social and governance factors of ESG work to ensure that they are recruiting and retaining diverse and hardworking talent. They promote wellness and a positive work environment, learning and development, and provide recognition and rewards for their employees. They commit to board effectiveness and implement sound governance practices. According to The Wall Street Journal, ‘the returns of the 100 Best Companies to Work for in America beat their peers by 2.3 to 3.8 percentage points a year from 1984 to 2011.’
In terms of ESG investment target marketing, millennials dominate the conversation. While pensions and large firms like General Motors were the initial proponents of ESG investing, millennials, soon-to-be the largest investor demographic, are rapidly pushing the ESG platform. Deloitte’s Millennial Survey found that 87% of millennials believe that ‘success of a business should be measured in terms of more than just its financial performance” among other ideas that align with ESG investing.
Large institutions are espousing ESG including Goldman Sachs and the world’s largest asset manager, BlackRock. CEO Larry Fink sent a letter to fellow executives in S&P 500 companies and European counterparts to focus on long-term goals and generate sustainable returns. He continues that, “Over the long-term, environmental, social and governance (ESG) issues… have real and quantifiable financial impacts.”
Managers can build a strong and compelling story behind why they engage in ESG investing and use that as a tool to find and connect with like-minded investors. By building a brand and reputation around being a socially-responsible investment firm through ESG investment marketing strategies and tactics, managers can both belay the mistrust inherent in much of the financial world and create a strong driver for brand engagement and loyalty.
ESG investment criteria is something that investors are clearly and actively searching for, which is a great chance to drive interest and differentiate your investment offerings.
1 Deloitte, 2016, Millenials Want Business to Shift its Purpose
2 Bloomberg, 2016, The CFA Exam is Going Green
3 Business Insider, 2016, Here is the letter the world’s largest investor BlackRock CEO Larry Fink, just sent to CEOs everywhere