OUR THINKING/ARTICLE

Stand out from the crowd in ESG

Rob Mitchell

In the financial sector, the rise of ESG, purpose and sustainability continues. Assets in sustainable investment products are expected to outnumber mainstream assets by 2025 in Europe, comprising 57% of the European fund sector. Companies across the financial sector are racing to set ambitious net zero targets and embrace ESG practices. At the same time, regulatory and reporting requirements are tightening.

Focusing on sustainability and ESG provides a much-needed boost to the reputation and perception of financial institutions (FIs) as valued contributors to society. We have hopefully come a long way from the description of a bank as a “vampire squid, wrapped around the face of humanity”. Banks, asset managers and insurers now want to be part of the solution, not the problem, and they are making progress in communicating this message.

Stand out in ESG (but stand up to scrutiny)

But this presents new challenges for FIs seeking a distinctive positioning that resonates with a diverse group of stakeholders. With so many FIs’ content and thought leadership clustering around these themes, it is increasingly hard to stand out.

Then there is the risk of greenwashing. It is not enough to just communicate ESG credentials – if they do not stand up to intense scrutiny from NGOs and other stakeholders, the positioning could backfire. There are numerous examples of FIs being called out for failing to live up to their messaging.

Most FIs are at a relatively early stage of using thought leadership to express their purpose and sustainability credentials, and the quality of the output is mixed. Too often, sustainability content feels generic and box-ticking, rather than expressing something distinctive or unique about the business.

In a recent speech for the World Federation of Advertisers, marketing professor Mark Ritson argued that purpose and sustainability communications need to pass the ‘three Cs’ test of market positioning. They must be:

  • What the Customer wants
  • Something the Company can deliver
  • Better or different from the Competition.

According to Ritson, too many companies’ positioning does not deliver on the three Cs.

Put your ESG thought leadership to the test

The pressure is mounting on these companies. Purpose, ESG and sustainability are increasingly central to the messaging narrative, so they need to make sure their output stands up to these tests.

What do Ritson’s three Cs mean for thought leadership?

Is it what the Customer wants?

Give the audience something they can’t get elsewhere. This could be advice on how to embed ESG investing or lending principles, or it could be fresh thinking that adds to the conversation.

Many FIs still don’t do this: they are either adopting a box-ticking, cautious approach, focusing on standardised activities and outputs such as sustainability reports, or they communicate their own achievements instead of thinking about what will genuinely help the audience.

Lombard Odier is a good example of an FI that is thinking differently about its sustainability messaging. Its positioning around the CLIC (Circular, Lean, Inclusive and Clean) economy presents a refreshing new perspective on sustainability. It argues that the global economy needs to migrate to CLIC from its current WILD (Wasteful, Idle, Lopsided, Dirty) model. The content is memorable, uses diverse formats and combines robust data with strong storytelling.

A very different approach comes from CFA Institute. Their report Climate Change Analysis in the Investment Process provides an in-depth, practical model designed to enhance investors’ decision-making. This has genuine value – and is something that audiences need as investment in ESG funds ramps up.

Is it something the Company can deliver?

FIs can be cautious about their ESG content because they know they can be called out if they fail to deliver on their commitments.

It is a difficult balance to strike, and FIs must tread carefully: bold statements get noticed but they are risky. Numerous FIs have fallen foul of this, highlighting their commitment to ESG while still investing in fossil fuels, for instance, or urging companies to do more on diversity while still having a board that is almost entirely male.

Specialist asset manager Hermes is a good example of a company that delivers on its content. It publishes extensive thought leadership on different aspects of sustainability, but also has clear statistics to back up its own track record on ESG and stewardship.

Can we do it better or different from the Competition?

The reality is that distinctiveness, which is a vital quality of any thought leadership campaign, is difficult to achieve.

You can easily tell whether your content is distinctive. If you cover up the logo, would the audience know that it comes from your organisation? Or would they struggle to tell it apart from other companies’ content?

Too many companies are converging around similar ESG messages. In a recent article in Harvard Business Review, George Serafeim cites research from 4,000 companies across sectors which shows that ESG practices have converged between 2012 and 2019. “Firms are increasingly engaging in the same sorts of sustainability and governance activities,” he says. “And thus failing to differentiate themselves strategically.”

So find a message that is hard to imitate and stands for something concrete. In recent years, asset manager BlackRock has been a good example of this. CEO Larry Fink’s annual letters to shareholders garner huge amounts of coverage; the latest said that BlackRock would push companies to commit to achieving net zero emissions by 2050, and suggested that it would drop companies from its actively managed funds if they fail to do so. These are bold commitments that pose risks if BlackRock fails to deliver on them, but they are certainly distinctive.

If you would like help to ensure that your content passes the three Cs test and genuinely stands out, please get in touch.

 

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About the author: Rob Mitchell

Rob leads Longitude’s strategic planning and sets the overall vision and priorities for the business. He manages the board-level relationship with Longitude’s parent company, the Financial Times group, and also oversees Longitude’s finances, people management and administration.

Prior to co-founding Longitude in 2011, Rob was an independent writer and editor. Between 2007 and 2010, he was a managing editor at the Economist Intelligence Unit and prior to that he was an editor at the Financial Times, where he was responsible for the newspaper’s sponsored reports, including the Mastering Management series.

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