December 06, 2019
Calling it “a wake-up call for corporate leaders,” a new Edelman report has found that 84% of institutional investors believe that “maximizing shareholder returns can no longer be the primary goal of the corporation" and more than half agree that “ESG initiatives lead to a favorable impact on company growth.”
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:
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.