3 Ways to Make an Impact With Your ESG Marketing

May 21, 2019 | Financial Advisor Marketing, Institutional Asset Management

Is ESG investing a passing fad or the new normal? A recent Financial Communications Society panel moderated by WFC’s Scott Wentworth discussed the question—and, in the process, explored several approaches to marketing sustainability-focused products.

Environmental, social, and governance (ESG) investing has taken the financial world by storm in recent years. Also known as socially responsible investing (SRI) or sustainable investing, assets in the category now account for roughly $12 trillion of the roughly $46 trillion in assets under management in the United States.

But is this increased focus on the long-term impact of non-financial factors a passing fad—or does it represent a new normal?

On May 14 the Financial Communications Society hosted a panel discussion in San Francisco for West Coast members to address this question. Scott Wentworth, CEO of Wentworth Financial Communications, served as moderator of the panel, which comprised three sustainability-focused investment professionals:

  • Erin Saade, director, global iShares product marketing, BlackRock
  • Lily Bowles, impact research and portfolio management, Swell Investing
  • Francisco Martinez, product manager, impact solutions, Bank of the West

The panel discussed the forces driving the increased interest in ESG investing and quickly concluded that sustainability is far from being a near-term trend. “ESG integration represents a fundamental shift in the way investors view the forces that will affect the sustainability of a company’s ability to generate profits over the long term,” Wentworth said.Scott Wentworth leads the FCS panel on ESG investing

The panel also explained how their firms are developing a range of solutions that allow investors to align their values with their portfolios and/or use ESG integration to bolster risk-adjusted returns. Marketing sustainability-focused investment strategies or products requires a different approach than marketing traditional services.

Here are three distinct marketing approaches for ESG, according to the panelists.

Embrace ESG as Part of Your Fiduciary Duty

One of the roadblocks to fully embracing ESG investing often cited by asset managers is concern that emphasizing non-financial factors may conflict with a manager’s fiduciary duty to clients. But the panel agreed that thinking more holistically about all of the forces that could affect a company’s long-term performance—regardless of whether they show up directly on the next quarter’s income statement or balance sheet—aligns with investors’ interests.

This is a point that asset managers can emphasize in marketing their ESG strategies. “This is what you should be doing with your money if you want better returns over the long term,” said Swell’s Bowles.

Employer-sponsored retirement plans, including 401(k) plans, represent an enormous source of assets. Many plan sponsors have been reluctant to add sustainability-focused funds to their investment lineup or additional information about existing funds’ ESG ratings out of fear that doing so could violate their fiduciary duties. But as sustainability becomes a higher priority for workers, especially younger ones, adding ESG investment options and information can encourage employees to save more for retirement.

Tell Stories About How ESG Connects to Every-Day Actions

People take small actions in their everyday lives to reduce their carbon footprint and promote sustainability more broadly. They bring re-useable bags when they grocery shop. They use re-fillable water bottles instead of buying plastic ones. And they purchase from brands whose treatment of workers and charitable endeavors align with the shopper’s personal values.

So, why can’t people act the same way when it comes to investing?

The truth is that sustainability-focused investment tools that are available today allow people to do this. But it’s up to marketers to help investors understand how.

BlackRock’s Saade said that marketers should use humanizing stories to connect the benefits of socially responsible investing to how people apply their values in their everyday actions. In addition to making the messaging more compelling and emotionally resonant, using human stories will make the benefits of sustainable investing more tangible—and thus easier for investors to grasp.

Emphasize Returns—and Urgency

Many investors operate under the outdated assumption that to improve the sustainability of their portfolio, they would need to sacrifice some degree of returns. Not only is this misguided mindset detrimental to the adoption of ESG investing, it’s harmful to portfolio performance, according to a growing field of research.

Sustainable business practices have proven to be good for a company’s bottom line and its shareholders, according to sources such as Morningstar, Deutsche Asset Management and Hamburg University, and George Serafeim of Harvard Business School.

Emphasizing that investors can indeed “do well by doing good” is vital for today’s financial marketers, according to Bank of the West’s Martinez. It’s an important psychological barrier to overcome, especially as older investors tend to remember the days when less sophisticated, purely exclusionary-based approaches to responsible investing often hurt investors’ returns.

Perhaps most important, Martinez said marketers should express urgency when it comes to ESG, SRI, and other impact investing strategies and products. Climate change, after all, is one of the world’s most pressing challenges.

Financial marketers should emphasize the role that investors can play in addressing this challenge, Martinez said. Positioning sustainability at the center of how people save and invest for their financial futures can pay dividends for generations to come.  

Recap of June 2018 FCS Chicago ESG Panel

About the Author Scott -About AuthorScott Wentworth is the founder and head writer of Wentworth Financial Communications. He has served as a ghostwriter for portfolio managers, investment bankers, attorneys, and other thought leaders across the financial services industry. It took all the willpower he could muster to not include "Who You Gonna Call?" in the title of this blog post.