ESG is not fit for purpose

The recent Financial Services Forum posed the following question: ‘Is ESG still fit for purpose?’ By the end of the morning, the overarching consensus seemed to be “no”. 

That is not to say ESG is not fit for purpose from an investment perspective – rather from a marketing one.  

The reason for this is actually quite simple – ‘ESG’ as an acronym, as a concept, is too abstract.  

Last year, White Marble undertook a research project for a global asset manager, with one very simple and seemingly obvious point emerging – people, investors, don’t really care about ‘ESG’. They don’t really know what it means or how to apply it to their investment decisions. At worst they think of it as just another jargony term thrown around by asset managers to justify increasing fees.  

What they do care about, deeply and passionately, are issues. They care about the increasing rate of drought, and associated flood risks. They care about pollution, especially in the areas where their children play. They care about the spate of wildfires we have witnessed across the globe in the last few years. They care about these issues, at both a global and local level. To me, this is the antidote to the growing concern that ‘ESG’ is not fit for purpose. 

As my co-panelist Graham Precey (Instinctif Partners) rightly pointed out, marketing is responsible for making the intangible, tangible. And ESG is a textbook example of intangible. We need to talk to investors, our end clients, about the things they care about. Our goal as marketers is to bring that concept to life and move it closer to the investor. 

Yes, in these uncertain times investors are often preoccupied by issues such as the increased cost of food and energy, but they also care about broader, longer term ecological and social issues. There is a growing understanding that short-term pain points are linked to long-term challenges.  

Asset managers need to get in front of this audience and understand what they care about in order to deliver solutions. This means doing proprietary research and good old-fashioned market research. Businesses cannot rely on third-party surveys; as they can be manipulated to produce the results favored by the commissioner.  

Focus groups and interviews allow for genuine, unbiased insights that can be really meaningful. And we can be sure that these conversations will also provide fertile ground for marketing to tell authentic stories and paint engaging pictures for our audience. What better starting point than to begin with the very issues we know they care about? 

Early in the day, Richard Benton (Personal Group) made the excellent point that sustainability is often too abstract for many people to understand how they can take meaningful action in their everyday lives. He advocated that asset and wealth managers need to dive deeper into the constituent parts, surface specific stories and opportunities, and show investors tangible examples of what is needed to, for example, facilitate the transition to a more sustainable economy. There are hundreds, if not thousands, of investment analysts in London alone who could likely reel off a list of such examples at the drop of a hat. But as an industry we are not always very good at surfacing those stories from a marketing perspective.  

Marketing is distinct in that it straddles most, if not all, business functions, and we can certainly do more to encourage cooperation and help teams engage with the wealth of knowledge and insight that exists at the heart of every asset manager.   

That is all very good and well, but in order for these stories to land and have impact we need to marry them with insight into what our clients are interested in. Which brings me back to my earlier point – the need for asset managers to talk to their end-clients. 

There was much discussion on the day about the challenge of standing out in a sea of sameness, itself a much overused turn of phrase among marketers in our industry. By bringing together an understanding of end-client interest and surfacing insights into how key challenges can be addressed, we stand a far greater chance of producing campaigns and marketing activities that are differentiated and maybe even inspiring. If our goal is to inspire end-investors to invest more sustainably (depending on the firm’s purpose) then demonstrating impact, and potential impact, is absolutely essential.  

This all sounds quite straightforward, and in many ways it is, but engaging with those audiences and surfacing those investment stories requires asset managers and their marketing teams to commit significant time and resources, not to mention possessing a deep understanding of the issues, sensitivities and regulations surrounding sustainability. 

Get in touch with White Marble if you would like to discuss how we can help support and guide you on this journey.  

Thank you to the Financial Services Forum for organising last week’s event, and Schroders for hosting us. Thank you also to all the other panelists, and the audience, who contributed to an engaging and thoughtful conversation.