86% of investors report that their firm would consider investing with a company receiving a lower rate of return if the company addresses sustainable or impact investing considerations.
Not surprisingly, investors believe that building trust is important to marketplace success, including enhancing employee attraction and retention, growing customer and market share, increasing company value, and minimizing regulatory oversight.
The study also finds that ESG practices reinforce trust, including maintaining a healthy corporate culture and diversity within the leadership team. Correspondingly:
- 61% of investors report they have increased investment allocation to companies that excel on ESG factors;
- 57% said they vote more often for board candidates that they believe will increase the company’s focus on ESG;
- 53% vote their shares to support ESG-related policy initiatives; and
- 52% said linking executive compensation to ESG targets positively impacts trust in the company, with 21% of those indicating it has a great deal of positive impact.
HR implications: 74% of investors report that companies with activist employees are less attractive investments, believing that companies are ill-prepared for employee activism and in fact are "partially responsible" for employee activism because they overemphasize shareholder returns at the expense of other stakeholders.
Important caveats: The survey questions don’t appear to differentiate between the investors’ funds or operations that are geared specifically to ESG investing and those focused on other investing objectives. Further, of the 610 investors surveyed over six countries, only 104 are US-based.
Nonetheless, the report, a preview of the larger 2020 Edelman Trust Barometer, confirms that ESG will continue to be important to investors and that company education efforts should be focused on enhancing investor understanding of Board and senior management oversight of these issues.
