Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

2017 Edelman Trust Barometer Special Report: Institutional Investors

1,402 views

Published on

The 2017 Edelman Trust Barometer Special Report: Institutional Investors, a survey of institutional investors who invest in global equities highlights emerging business risks and opportunities for companies, their boards, and management to build and maintain trust with the financial community.

The inaugural report reveals that roughly half of institutional investors think that most companies do not acknowledge the risks to their business from the current political climate, reflecting broader concerns raised in the Trust Barometer Global Report 2017.

Published in: Investor Relations
  • Be the first to comment

2017 Edelman Trust Barometer Special Report: Institutional Investors

  1. 1. 2017 Edelman Trust Barometer Special Report: Institutional Investors New Challenges and Expectations for Public Companies
  2. 2. Age % Under 25 1 % 25 - 34 18 % 35 - 44 17 % 45 - 54 23 % 55 - 64 28 % 65+ 14 % 2 Gender % Male 92 % Female 8 % Job Titles % Portfolio managers 52 % Chief investment officers 24 % Financial analysts 13 % Directors of research 5 % Country Breakdown % United States 59 % Canada 12 % United Kingdom 7 % Other 22 % Primary Investment Style % Value 36% GARP 23% Growth 12% Qualitative/Index 10% Hedge 3% Industry-specific 3% Activist 1% Other 11% Prefer not to answer 2% Organization’s Assets Under Management (USD) % Less than $500 million 38 % $500 million – less than $1 billion 8 % $1 billion – less than $10 billion 32 % $10 billion – less than $50 billion 8 % $50 billion USD or more 13 % 101 respondents total All fieldwork was conducted between June 20th and July 18th, 2017, in partnership with IPREO All respondents invest in MSCI Global Index Online survey in 14 countries Methodology 2017 Edelman Trust Barometer Special Report: Institutional Investors 14-country global data margin of error: Institutional Investors +/-9.75% (N=101)
  3. 3. Global Trust is in Decline
  4. 4. 55 53 48 42 53 52 43 41 Global Trust is in Crisis Source: 2017 Edelman Trust Barometer Q11-620. Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a nine-point scale, where one means that you “do not trust them at all” and nine means that you “trust them a great deal.” (Top 4 Box, Trust) General Population, 28-country global total. 4 Percent of the general population who trust the four institutions of government, business, media and NGOs, 2016 vs. 2017 Business MediaNGOs Government Business is on the brink of distrust (50-59) Neutral Trusted Distrusted -2 -1 -5 -1 20172016 (60-100) (1-49)
  5. 5. New Challenges for Public Companies Are You Prepared?
  6. 6. Institutional Investors Are Worried 6 Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q1. Looking back at the economic and political climate over the past 12 months, how would you describe the current investing environment? (Top 2 Box) Q2. Looking ahead at the next 12 months, what is your outlook on where the investing environment is heading, considering the economic and political climate? (Top 2 Box) NeutralNegative Positive Negative/Neutral outlook up 18 points 39 30 34 24 28 47 Looking back at the economic and political climate over the past 12 months, how would you describe the current investing environment? Looking ahead at the next 12 months, what is your outlook on where the investing environment is heading, considering the economic and political climate? 54% Negative/Neutral 72% Negative/Neutral
  7. 7. Companies Seen as Unprepared for New Risks from Political Climate Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q15: Below is a list of statements about the current political and business climate in which publicly traded companies operate. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) 7 Nearly 1in2 investors agree that most companies do not fully acknowledge the new risks to their business from the current political climate 79% of investors agree that a country’s current political climate impacts in which companies my firm invests New Risks Impact
  8. 8. Low Trust in Watchdogs 8 Percent of investors who see these people as credible sources of information about a company Rating agency representative 28 % Government official 19 % Financial/business journalist 17 % Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q1a. Below is a list of institutions. For each one, please indicate how much you trust that institution to do what is right using a 9-point scale where 1 means that you “do not trust them at all” and 9 means that you “trust them a great deal.” (Top 4 Box, Trust) Q9: Below is a list of people. In general, when forming an opinion of a company, if you heard information about a company from each person, how credible would the information be--not credible at all, somewhat credible, very credible, or extremely credible? (Top 2 Box, Credible) Only 28% of institutional investors trust government or media
  9. 9. 28% agree ESG Low in Importance, But One in Three More Attentive Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q8: Please indicate the extent to which you disagree or agree with the following statements. (Top 2 Box, Agree) 9 35% agree my firm has changed its voting and/or engagement policy to be more attentive to ESG risks ESG risk management is an important factor when considering a company to invest in or recommend doing so Investment Factor Voting Policy
  10. 10. Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q8: Please indicate the extent to which you disagree or agree with the following statements. (Top 2 Box, Agree) Q15: Below is a list of statements about the current political and business climate in which publicly traded companies operate. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) Investors View Themselves as Agents of Change 10 Percent who agree with each statement 87%I will support a reputable activist investor if I believe change is necessary at a company I invest in or recommend doing so 80%most companies are not prepared to handle activists’ campaigns targeted at them 49%I believe my firm’s actions can have a meaningful role in influencing a company’s corporate governance
  11. 11. New Expectations for Building Trust with Institutional Investors Upgrade Fundamentals Address New Considerations
  12. 12. Companies Expected to Take a Public Stand on Social Issues Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q14: The following is a list of societal issues that are currently the focus of concern and debate in many countries. These issues may cause the creation of new governmental rules, laws and policies that have implications for how businesses operate. Please select the issues you feel companies have an urgent obligation to take a public stand on to ensure the global business environment remains healthy and robust. Showing percent selected. 12 Issues companies have an urgent obligation to take a public stand on to ensure the global business environment remains healthy and robust 76% say you should address one or more of these issues Education reform/training Environmental issues Free trade Automation of workforce Income inequality Gender issues Workplace diversity Immigration Globalization Outsourcing Most selected Least selected Address New Considerations
  13. 13. Board of Directors’ Reputation Matters Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q4: Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) Q3: How important are each of the following when considering a company to invest in (or recommend doing so)? For each one, please indicate how important it is using a 9-point scale where 1 means “not at all important” and 9 means “most important.” (Top 4 Box, Important) Q5. How much does each of the following impact your trust of a company that you are/may consider investing or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) 13 66%must trust a company’s Board of Directors before making or recommending an investment 65% agree an engaged and effective Board is important when considering a company to invest in 62% say frequent Board or management turnover impacts trust of a company Address New Considerations
  14. 14. 14 Investors Care About How You Treat Employees 69%say prioritizing employee commitment to the company impacts trust of a company 1out of 3rank “poor relationship with company employees” as a negative impact on trust Address New Considerations Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) Q6: Please rank the following in terms of what most impacts your trust of a company that you are/may consider investing in or recommending. Please rank the following with 1 being most impactful to 7 being least impactful. (Bottom 4, Ranking)
  15. 15. 15 Customer Satisfaction Plays a Major Role 87%say a company’s customer service satisfaction impacts trust of a company Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) What actions can a company’s management team take to earn your trust? “Focus on the customer – retaining clients, gaining clients and delighting clients...” - CIO, mutual fund, $500 million USD AUM Declining customer service and product quality have the biggest negative impact on trust Address New Considerations
  16. 16. Highlight Innovation to Show You Are Ahead of Disruption 16 86%say the reputation of innovation impacts trust of a company 75%say product R&D and innovation are a driver of investing decisions What actions can a company’s management team take to earn your trust? “Be fearful of being disrupted and continuously seek ways to innovate...” - CIO, mutual fund, $500 million USD AUM Address New Considerations Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) Q3: How important are each of the following when considering a company to invest in (or recommend doing so)? For each one, please indicate how important it is using a 9-point scale where 1 means “not at all important” and 9 means “most important.” (Top 4, Importance)
  17. 17. 17 Shareholders Demand Equal Say Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) 77%say providing equal voting rights to shareholders impacts trust of a company Address New Considerations
  18. 18. Upgrade Fundamentals Keep Investors Consistently Well-Informed Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Disagree) Q7. What actions can a company’s management team take to earn your trust? Please be as detailed and specific as possible. (Open-end response) 18 What actions can a company’s management team take to earn your trust? “Clear and frequent communication on strategy, targets to meet and how they will and how they have delivered on the stated goals.” - Portfolio manager, mutual fund, $50 billion USD AUM 93% say that keeping investors consistently well-informed impacts trust agree that current disclosure requirements are not doing enough to maintain my trust 58%
  19. 19. Recognize There is No Trust Without a Clear Strategy Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) Q13: Please indicate to what extent you agree or disagree with the following statements. (Top 2 Box, Agree) Q7. What actions can a company’s management team take to earn your trust? Please be as detailed and specific as possible. (Open-end response) 19 What actions can a company’s management team take to earn your trust? “Clarity in strategy and purpose, adopting a true long-term perspective that is articulated to all stakeholder[s]…” - CIO, institutional asset manager, between $10 and $50 billion USD AUM 99% agree I trust companies that have a clear strategy more than those that do not Clear Strategy 79% say I would like to see more use of qualitative, forward- looking disclosures when evaluating an investment Forward-Looking Upgrade Fundamentals
  20. 20. Focus on the Longer-Term Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Disagree) Q5: How much does each of the following impact your trust of a company that you are/may consider investing in or recommending? For each one, please indicate the level of impact using a 9-point scale where 1 means “no impact on trust” and 9 means “a great deal of impact on trust.” (Top 4 Box, Impacts) Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) 20 59% agree I trust a company that provides forward-looking guidance but misses occasionally more than I trust a company that provides no forward- looking information 86% agree companies that focus on short-term results do not benefit my investment strategy say providing long-term guidance on financial performance impacts trust 68% Upgrade Fundamentals
  21. 21. 57 59 6970 74 Keep in Mind that Credibility is Not Exclusive to the C-Suite 21 Percent who would find company information from each spokesperson credible Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q9. Below is a list of people. In general, when forming an opinion of a company, if you heard information about a company from each person, how credible would the information be – not credible at all, somewhat credible, very credible, or extremely credible? (Top 2 Box, Credible) A technical expert within the company (e.g. engineer, scientist) C-Suite Independent Lead Director of a company A regular employee of the company (within compliance regulations) A business/financial academic or expert on that company’s industry issues Upgrade Fundamentals
  22. 22. Trust Drives Valuation
  23. 23. Trust Drives Valuation Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q3. How important are each of the following when considering a company to invest in (or recommend doing so)? For each one, please indicate how important it is using a 9-point scale where 1 means “not at all important” and 9 means “most important.” (Top 4 Box, Important) Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 Box, Agree) 23 agree that they must trust a company’s management before making or recommending an investment 87% say “my trust in the company” is important when considering a company to invest in 82% 94% agree trustworthy companies deserve a larger premium 76% say ethical standards are important when considering a company to invest in
  24. 24. “Trust in the Company” Most Important Driver of Investment Decisions Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q3. How important are each of the following when considering a company to invest in (or recommend doing so)? For each one, please indicate how important it is using a 9-point scale where 1 means “not at all important” and 9 means “most important.” (Top 4 Box, Important) 24 Percent who find each company attribute important when making investing decisions 70 70 74 75 76 82 Ability to meet financial guidance Historical financial performance Product R&D/Innovation Current valuation versus peer companies Ethical standards My trust in the company Only 34% cite stock performance as an important consideration
  25. 25. Investors Take Action Based on Trust Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q10: Thinking back over the past 12 months, have you taken or recommended taking any of the following actions in your job in relation to companies that you trust? Q11: Still thinking about the past 12 months, have you taken any of the following actions in your job in relation to companies that you do not trust? 25 Percent who have taken each action in the last 12 months in relation to companies they distrusted and trusted 77 60 53 50 39 32 Behaviors for Distrusted Companies Behaviors for Trusted Companies Did not invest in stock Underweighted these companies’ stocks Criticized them Persuaded others to sell their stock Voted against the Board of Directors Supported an activist investor Invested in stocks or increased my position Praised them to a peer Persuaded others to invest Voted in favor of the Board of Directors Voted in favor of management Supported a merger 73 71 41 37 37 23
  26. 26. Key Takeaways: New Challenges and Expectations in Building Trust with Institutional Investors
  27. 27. Source: 2017 Edelman Trust Barometer. Q732. What can businesses do that would cause the most damage to your trust in a better future? (Please select up to five.) General Population, 28-country global total, question asked of half the sample. 27 1. Trust is a key factor in investment decisions 2. The trust landscape is shifting, creating new challenges 3. Companies must promote inside- out to win trust 4. Upgrading IR fundamentals can win trust 5. Investors view themselves as agents of change when companies fail to act Key Takeaways
  28. 28. Expectations for Building Trust Take a Stand on Public Issues Board Reputation Matters Prioritize Your Employees Improve Customer Satisfaction Stay Ahead of Disruption Provide Equal Say Ensure Clear Strategy Focus on the Longer-Term Keep Investors Well-Informed Go Beyond Requirements Use a Broader Bench New Considerations Upgrade Fundamentals New Risks from Political Climate Investors as Agents of Change Negative Outlook ESG Emerging Low Trust in Watchdogs New Challenges Trust Drives Valuation and Investment Decisions 28
  29. 29. Thank You
  30. 30. Appendix
  31. 31. Informed Public 9 years in 20+ markets Represents 13% of total global population 500 respondents in U.S. and China; 200 in all other countries Must meet 4 criteria: Ages 25-64 College educated In top 25% of household income per age group in each country Report significant media consumption and engagement in business news General Online Population 6 years in 25+ markets Ages 18+ 1,150 respondents per country All slides show General Online Population unless otherwise noted 2017 Edelman Trust Barometer Methodology 28-country global data margin of error: General Population +/-0.6% (N=32,200), Informed Public +/- 1.2% (N=6,200), Mass Population +/- 0.6% (26,000+). Country- specific data margin of error: General Population +/- 2.9 ( N=1,150), Informed Public +/- 6.9% (N = min 200, varies by country), China and U.S. +/- 4.4% (N=500), Mass Population +/- 3.0 to 3.6 (N =min 740, varies by country), half sample Global General Online Population +/- 0.8 (N=16,100). 31 17 years of data 33,000+ respondents total All fieldwork was conducted between October 13th and November 16th, 2016 Online Survey in 28 Countries Mass Population All population not including Informed Public Represents 87% of total global population
  32. 32. Why Edelman Studied Institutional Investor Trust 32 Edelman has long studied trust – trust in modern society, trust in the four institutions of business (economic well-being), government (national security and public policy), media (information and knowledge) and NGOs (social causes and issues). Earlier in 2017, Edelman Trust Barometer showed that trust is in crisis around the world, with the general population’s trust in all four key institutions declining broadly. This trust crisis demands a new operating model for organizations by which they listen to all stakeholders. Key takeaways included serious implications for business to do more to earn and maintain trust, including listening to customers, treating employees well and offering high quality products and services. In a time when the stakes for business are ever-higher, by expanding our research of Trust to include an institutional investors’ view of public companies, Edelman is seeking to offer insights into how companies can prioritize certain actions and institute behaviors that build rather than destroy trust, thereby ultimately creating value for the organization and its stakeholders. The Trust-Building Attributes Each year, we ask respondents to rate the importance of a series of attributes in building trust in a company, and how well companies are performing against them. These can be grouped into five clusters: Integrity, Engagement, Products, Purpose and Operations. These original 16 trust-building attributes are shown on the next slide. In 2017, we explored additional dimensions to building trust in a company. These new dimensions fall into five areas, shown on the following slide: Employee Engagement, Diversity, Citizenship, Leadership and Relationship-Building.
  33. 33. Drivers of Trust Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q3. How important are each of the following when considering a company to invest in (or recommend doing so)? For each one, please indicate how important it is using a 9-point scale where 1 means “not at all important” and 9 means “most important.” (Showing Top 4 Box) 33 Percent who find each company attribute important when making investing decisions My trust in the company 82 % Ethical standards 76 % Current valuation versus peer companies 75 % Product R&D/Innovation 74 % Ability to meet financial guidance 70 % Historical financial performance 70 % An engaged and effective Board of Directors 65 % Industry reputation 56 % Access to management 50 % Appropriate executive compensation 46 % Providing forward-looking financial guidance 45 % Board of Directors’ composition 37 % Stock performance 34 % ESG (environmental, social, governance) risk management 28 % CSB (corporate social responsibility) initiatives 19 % Access to the Board of Directors 18 % Anti-takeover provisions 14 %
  34. 34. Trust in Public Companies is Easily Lost Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q6: Please rank the following in terms of what most impacts your trust of a company that you are/may consider investing in or recommending. Please rank the following with 1 being most impactful to 7 being least impactful. Showing percentage who ranked each statement first, second, or third. 34 Percent who ranked each statement in the top 3 of impacting trust 85 63 51 49 32 11 9 Declining product quality and customer service Poor shareholder communications and disclosures Mishandling company crises Poor corporate governance Poor relationship with company employees Weak corporate sustainability practices Poor environmental stewardship
  35. 35. Sources of Information 35 Percent who agree with each statement 50% the way most companies share information for IR purposes is outdated 65% I would like to see more visual ways of sharing information 49% I regularly read information published on a company’s digital and social media channels, website, and/or corporate blogs 29% I regularly consult a company’s social media Source: 2017 Edelman Trust Barometer Special Report: Institutional Investors Q13: Please indicate to what extent you agree or disagree with the following statements. (Top 2; Agreement)
  36. 36. 36 Contact Us Lex Suvanto Global Managing Director, Financial Communications & Capital Markets Lex.Suvanto@edelman.com Ted McHugh Senior Vice President, Financial Communications & Capital Markets Ted.McHugh@Edelman.com Julia Sahin Senior Account Supervisor, Financial Communications & Capital Markets Julia.Sahin@edelman.com To learn more about us, visit: www.EdelmanFinComms.com

×