Investors hate difficult choices. Should there be a chance to get market-beating rates of return or using sustainable practices? The easiest answer to this problem, to paraphrase an American taco advert turned internet meme, is to stay “Why not both?”
This is the promise of ESG investing. Those letters stand for environmental, social and governance and they have been a catch-all term for investing that seeks to balance profit motive with the impact of that investing. It’s a popular approach. A McKinsey study last year found that nearly one-quarter of the $88 trillion in assets under management globally are managed according to ESG principles.
With such a large and growing market, it is unsurprising that each week sees the launch of new strategies and funds to attract retail and institutional investors. With the market maturing, just launching an ESG strategy is no guarantee of bringing in meaningful amounts of assets. Competition means that firms need to think about unique challenges and opportunities when creating a marketing strategy for an ESG fund.
Here are five considerations for ESG marketing.
Be transparent about your investment mandate: ESG investing means lots of different things to different people. To some, it is the latest trend in the industry and a handy way to court millennial investors. To others it is a vital means to support important social and environmental causes around the world. With the market becoming increasingly crowded, focus on standing out by being transparent about your investment mandate and upfront about the qualifying criteria for each investment. Too often funds are marketed as ESG which lack the underlying credentials to warrant the label. Don’t blend in with the crowd, or worse still, fall fowl of the regulator.
Build bridges to ambassadors. Sustainability inspires passion. There are advocates, consultants and interest groups not normally concerned with investing that can help raise awareness for new types of investments. Consider partnerships with these organizations. These can be reciprocal – co-marketing or co-hosting events or more technical in nature. Groups can give a “seal of approval” to strategies, and even be persuaded to participate in joint interviews. Don’t be afraid to reach out.
Reach different journalists. Successful media relations programs target media that read by potential investors. Some take too narrow of a view of this and believe that only articles in the asset management press (or from asset management reporters at large organizations) are of any value. That’s far from the case. Writers specializing in clean energy, sustainable investment and even philanthropy can be interested in ESG investing. Target customers read these publications. While asset management reporters can tell part of the story, frequently other journalists might be able to write about underlying investments better.
Get certified. As interest in sustainable investing has increased, so have organizations providing training and governance. From individual training courses to company-wide retreats, employees can get educated on the principles behind ESG investing. Once these courses have been completed they can be used in marketing and communications activities.
Follow trends, but be prepared for blowback. One of the trickiest things about ESG investing is the sometimes mercurial definition of the term. As societal concerns shift, new types of restrictions might appear on investing. Witness the rise of funds divesting from companies that sell firearms after a string of recent shoots in the United States. Companies should listen to investors for suggests on new products to offer and advertise new ones that come out. That said, any move can invite criticism online or in forums. If a change is core the value of an organization, make it and embrace it, but only after careful consideration.
In a time where the asset management industry is heading towards both greater consolidation and specialization, ESG investing represents an incredible opportunity for business. But saying one does “ESG investing” isn’t a surefire ticket to business. Only those that stand out will reap the prize.
Jon Schubin is a vice president in Cognito’s New York office