A day in the #VestedLife with Jenny Dellupo

6:30 a.m.: I wake up a bit earlier than usual today because I’m attending a breakfast briefing with  Financial News. I flick through the headlines, feed my cat O’Connor, get ready and start walking to London Bridge.

8:00 a.m.: I meet another Vestie at the event where we grab some breakfast and chat to the other attendees before the briefing begins. Making new connections is part of our job but these events are also a great way to meet professionals from the industry. 

10:00 a.m.: I get to my desk and start making my way through my emails. I go on Qwoted, our tech platform that connects journalists looking for insights and experts ready to comment, to scan for comment opportunities for my clients, and send relevant ones across. I then make my first lemon juice and hot water of the day before getting back to my client work.

12:30 p.m.: After following up with some journalists for an upcoming client launch and pitching another client’s latest research paper to broadcast producers, it’s time for lunch. I warm up my homemade pasta bake and sit on the sofas to eat with some of the team.

4 p.m.: This afternoon I’m writing a comment on fintechs and taking a couple of client calls. At 4 p.m., it’s time for my afternoon snack or, as we call it in French, my “goûter.” I go for a few M&Ms from the Vested snack bar, a cookie and another cup of lemon juice. I jump on a call with the team in New York to go over the priority actions for one of our clients that spans UK and US markets before contacting a journalist in France for an exclusive interview on SFTR. 

6 p.m.: It’s time to wrap up and head to my gym in Tower Hill where I do anti-gravity aerial yoga, suspended in the air by a hammock.

8 p.m.: After the gym, I walk home and call my mother in France to catch up on things at home. When I get back to my flat, I find my cat waiting for his second food pouch of the day, so I feed him and cook myself a meal too. Once we’re fed, I settle in front of the TV to watch The Politician with my flatmate.

11:30 p.m.: I do a final check of my phone before turning off the light and rest before another full day at Vested.

Check out other days in the lives of our employees!
A day in the #VestedLife with Kris Lam
A day in the #VestedLife with Millie Graham: Caffeine and katsu fanatic
Binna Kim: Powering Through Money20/20 Like a Boss

What About These New Financial Ventures From Google and Facebook?

My article last month took up China’s efforts with digital money and banking.  I confess that I enjoyed mocking some of the tech media for suggesting that Beijing’s new digital yuan or central bank digital currency (CBDC) had somehow stolen a march on the United States and the West in general.  Far from “leapfrogging” the West, as some suggested, China’s effort looked more like catch up for the digital arrangements long since developed by private actors around western currencies. As if to confirm this perspective, Google and Facebook recently announced deals in digital money and payments facilities that enrich the dollar’s already existing and extensive digital arrangements.  

Google says that it will offer checking.  The arrangements will include partners Citibank and a small credit union at Stanford University, which evidently has historical links to many Google employees.  Citibank will, of course, provide all the technical and operational support. Google will effectively market the digital checking arrangements under its name. Facebook aims to enter the payments services world.  This venture, which by the way is entirely separate from Facebook’s Calibra Wallet and Libra network, also has partners, mostly credit card companies who had walked away from Libra but seem committed to providing the technological and operations platform for Facebook’s payments offering.

These arrangements build on an immense complex of networks, systems, and applications that have over time almost completely digitized the use of money in this country and the developed world generally.  They add yet another layer onto the layers and layers of digitization that have already occurred in this country, Japan, Europe, and a few other paces and certainly have nothing that needs to fear China’s digital yuan.  Quite the contrary to some media claims, it is China that is playing catchup. But if these and other tech-associated financial arrangements have long since outstripped China’s digital plans, it is fair to ask, what is it that the parties to these two new ventures hope to gain from them.  Of course, no one, either at Facebook or Google or their more conventional but still technologically advanced partners has made such a statement, it nonetheless seems clear that the profit propositions involved have less to do with pushing back frontiers – of technology or finance – and more to do with enhancing the way each partner has long made money.

For Citibank and the credit card companies involved respectively with Google and Facebook, the arrangements allow them to leverage their already existing facilities with a new range of customers that they might not otherwise have acquired.  The mystique of technology and the connection to one of the leading firms carrying that mystique promises to bring in people who otherwise would never have graced a Citibank or MasterCard account application, even those fully digitized. Since Citibank and the credit card partners have already largely incurred the costs of the necessary technological and operational infrastructure – checking in one instance, payments in another – the market expansion promised in these prospective ventures speak to almost pure profit.  In this, Citibank could be described a stealing a digital march on JP Morgan, which uses many more brick and mortar branches in gathering customers.

This leverage, no doubt, was exactly why Goldman Sachs has already partnered with Apple to run the tech giant’s new credit card.  Given such motivation, it does seem strange that Goldman objected so strenuously to Apple’s marketing claims that the card was “designed by Apple, not a bank.”  The claim, of course, is nonsense. The Apple card works just like other cards, and with Goldman behind it is supported in conventional ways. If Goldman’s complaint got to the truth, it nonetheless worked against its interests in partnering with Apple in the first place.  It wanted the tech mystique and so should have happily taken a back seat. In the Google and Facebook deals, no one has suggested downplaying the identities of the partners, and indeed Google promises to place Citibank prominently on the venture’s marketing materials. But given the purposes of Citibank and Facebook’s credit card partners, they, too, should happily take a back seat to the tech face selling their capabilities.

As for Google and Facebook, their profit proposition has long been advertising and salable data.  Especially the latter is the motivation here. The arrangements surrounding these partnerships promise a proverbial goldmine.  Knowing to whom people are making payments, whether in checks, wire transfers, or credit cards, is something for which vendors will pay handsomely.  To be sure, both Google and Facebook separately have assured all – including regulatory bodies – that they will scrupulously protect the privacy of their customers.  No doubt, given the history, some will voice skepticism about whether these firms will do that. But they do not need to violate people’s privacy to glean a treasure trove of salable materials on developing buying trends, for instance, regionally, by zip code, or even by neighborhood.  And this valuable array of information concerns only the most obvious sources of salable data.  

Simply because everyone’s interest rests on long-established avenues for profits, that is no reason to dismiss these ventures and others like them as falling short of technology’s promise.  The fact that these firms have a reason to work together offers promise in itself, if not an especially well defined one. Much economic research, in both academia and especially at the Federal Reserve Board, suggests that such collaborations, just by exposing different players to technologies and alternative perspectives often result in applications that neither party envisioned when they first began to work together.  These ventures, whether between Google and Citibank, Apple and Goldman, Facebook and credit card platforms, hint, even if it cannot guarantee, that new and more revolutionary ways of moving money and wealth will emerge, even if those next steps cannot be characterized as revolutionary.

More from our Chief Economist:
A digital Yuan?
Ex-Fed President advises Fed to self-destruct
Robots: Love them or loathe them?

2020: What’s your vision?

A little over a year ago, our UK CEO wrote a piece on the communications trends capturing our attention and imagination. At Vested, we like to be ahead of the curve, whilst maintaining a firm grasp on the best of the past and present too. It seems that last year’s blog was pretty popular and as we’ve just entered 2020 and a new decade, here’s our view on what’s going to have an impact for financial marketers and their audiences as we enter the roaring twenties!

Know your customer(s)

For us, the importance of some things never changes. Audiences are one of those unmoving things and our focus is always on reaching the right audiences and motivating them. Being audience-centric isn’t a trend that’s going to change – it’s a foundation of what we do. But, that said, we can’t ignore the fact that what excites audiences and gets their attention does change. Know Your Customer (KYC) is now embedded within the financial services industry but as a basic principle, it has much to offer to comms and marketing professionals too. We can’t build strategies and identify the opportunities until we have a clear idea of who we’re trying to reach, what they think, what influences them and how they make decisions. Whether you have 20 or 2020 customers you’re trying to reach, getting under their skin is crucial to delivering success and we know that knowing your customer even better is something all marketers want to achieve this year.

It’s what’s on the inside that counts

Let’s keep it simple, connections are emotional. And as financial marketers, we’re usually trying to convey rational messages! It’s emotions that connect us; love, hate, excitement, ego, the list goes on. Brands need to elicit an emotional reaction to build connections, but they need to be authentic to make them real. It’s not easy! However, businesses can be authentic by taking the inside to the outside. As consumers (and shareholders) demand to see the true face of the brands they buy from, what’s increasingly more important is what’s on the inside. Culture, vision and a great team will be central to the brands that drive success in 2020.

Confidence in a ‘crisis’

The threat of a crisis can be more damaging to the consumer psyche and spend than a crisis itself. How much of a crisis will Brexit be when it happens? Or has the countdown to Brexit done more damage? When will we next enter a bear market again? When will the corporate debt bubble burst? To what extent will the China/US trade war lead to a slowing of large global economies? The threat of the unknown, endless negative possibilities and constant change makes people and businesses feel uncertain. And making decisions when we’re uncertain is hard, so how can brands instill confidence? Does everybody have four or five stars on TrustPilot now? It comes back to more basic human emotions – personal interactions, networks, and recommendations. “I’ve heard of you”, “so and so recommended you”, “I’ve seen you here” … how often have we all said and felt these things as a part of buying processes. It matters; the power is personal. Building personal connections and driving emotive reactions will enable brands to connect with their audiences this year.

Where do you think 2020 will take us? What’s your 2020 vision? Share them with us on Twitter (@vested) and Linkedin

The influence of brand on Christmas spending behaviour

It’s the most wonderful time of the year… And it’s also the time when our purses are pinched and our credit cards stretched. Christmas has always been expensive, but as we reach the end of this decade, we can reflect on the ever-growing influence that brands have on our spending behaviour at this time of year. 

Black Friday

In a tradition which has boomed over the last ten years, US retailers have been slashing prices on the Friday after Thanksgiving since the 1950s. Amazon first offered these sales to UK customers in 2010 and on both sides of the Atlantic, almost every retailer now offers extended Black Friday sales. These are followed by pre-Christmas sales, a day of respite (Christmas Day) and then Boxing Day and January sales, meaning that for a solid two month period there are online and in-store bargains to be bagged. By using nudge techniques, native advertising, ‘exclusive’ codes and pop-up notifications which indicate that items are available for a limited time only, brands push consumers into making purchases without shopping around, comparing deals and considering whether they actually need the item. 

Big budget TV adverts

From the end of October, commercial breaks on TV are filled with big-budget adverts from all kinds of brands – and they seem to get bigger and better every year. According to a Retail Research report, UK retailers spent £6.8bn on this year’s theatrical treats, with the aim of connecting with customers, telling emotive stories around what Christmas is all about – and ultimately, helping them to hit their aggressive sales targets by encouraging spending. Over time, they have become a British institution; we share, discuss and dissect each hotly anticipated advert every year, declaring that ‘it isn’t Christmas until I’ve heard the Coca Cola music’. They paint a perfect picture and create a sense that ‘unless you have all of these things on Christmas Day, it won’t feel like Christmas’. 

“Let’s just do it, it’s Christmas”

It’s well documented that we’re increasingly driven by experience – and this ramps up at Christmas. From work parties, dinners with friends, pantomimes, carol services, and trips to European Christmas markets, we typically do more in December. And brands play an important role in influencing our decision making around this. The presence of brands on social media – both on their own channels and through influencers – highlight the experiences that other people are having and encourage consumers to book tickets, buy experiences and share them themselves, so they don’t miss out. 

The influence of brands on our Christmas spending intensifies every year, with increasing pressure to have fun, splash the cash and treat ourselves. But with some brands now starting to take a stand against consumerism, are we transitioning into a new era? For example, Swedish men’s clothing brand ASKET shut down its website on Black Friday this year, with an error messaging reading “If we continue consuming at the level we are now, we will need a dozen planets to make ends meet… Today – Black Friday – kicks off another celebration of hyper-consumption for a short-lived material satisfaction.” 

Let’s see where the next ten years take us, but in the meantime, I’m off to buy some Baileys – I saw it on a TV advert last night!

Recent blog posts:
Content isn’t just for Christmas
A Digital Yuan?
Why economists need English majors

Content isn’t just for Christmas

We hosted another event in our Breakfast & Brainfood series this morning, looking at how we can create content with impact in financial services. Chairing the discussion amongst Clare Allen, EMEA Content Director at the Financial Times, Catherine Maskell, Managing Director of the Content Marketing Association, and Simon Hodge, Audience Communication Director at Morningstar, enabled me to bring up the kinds of questions and topics that as a team we debate endlessly. Discussion today explored themes around what makes good content, measurement, keeping audiences front of mind at all times, and creativity in financial services. 

Consensus in the room confirmed that having an audience-first approach is fundamental to good content; regardless of what a brand wants to say, all content must deliver genuine value and be interesting to the end audience. Covering something some might perceive as ‘boring’ is ok too, if it appeals and helps your audience.

Businesses spend huge amounts of time and resources creating and distributing content, so understanding its success is key. Our panelists talked about objective setting and the importance of remembering to innovate; it’s easy to keep the same measurements once a robust method is in place, but this can stifle innovation and deter us from doing things differently. Having a different perspective of what success is, pivots the metrics that are needed.

Applying creativity to financial services content was acknowledged as a challenge across the industry, but one that passionate communicators are always working hard to move the dial on. The key driver for creativity is bravery – as the panelists said, you can be more creative and forceful if you’re ok with the fact that it may have a short term impact on the bottom line. When integrity sits at the heart of the content and its creativity, it works and stays true to brand.

Questions from the floor challenged our panelists for their advice for the next decade; they warned against underestimating the strength of integrity and reiterated the importance of focusing on the long term rather than being reactive and jumping on thematic bandwagons while being mindful that things will change. As Bill Gates famously said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next five or ten.”

Closing remarks from the panelists reminded us of the importance of story-doing as well as story-telling. We should always be sense-checking whether the themes and topics we’re exploring resonate with the values which sit at the heart of the business. If they don’t come from an authentic place, content simply won’t stick, and while it may drive awareness, it won’t go the full length of the marketing funnel down through to consideration, conversion, loyalty, and advocacy. When we’re working with our clients to develop content strategies, we always ask ourselves what their purpose is and how far we can stretch it before we turn people off.  After all, content isn’t just for Christmas, it can be a powerful marketing tool if it’s executed properly, authentically and with longevity. 

A Digital Yuan?

A few weeks ago, media outlets – especially tech-oriented organs – became agitated about an announcement from China’s central bank, the People’s Bank of China (PBOC).  Its spokespeople told the world that the PBOC intends to launch the world’s first central-bank-directed digital currency, CBDC. Many western commentators in response followed the lead of tech CEO Jeremy Allaire, who described the planned currency move as a breakthrough and speculated that the CBDC would “internationalize” the yuan and perhaps allow it to gain global dominance over the dollar.  This is all hype. China has done something considerably less momentous with the CBDC than popular descriptions imply. The digital yuan embodies little new and appears to aim less at unseating the dollar as the world’s premier international currency than in securing domestic control.

First on the list of things that are not new is the structure of this digital unit.  Unlike bitcoin and other cyber currencies, China’s CBDC will be tied to the yuan. Spokespeople for the new unit claim, correctly, that it will make this digital currency more stable than others.  It will also make it exactly like other national currencies. The man in charge of the project, Central Bank Deputy Director Mu Changchun, also described a two-tiered system for the distribution of the digital unit.  The central bank, he explained, would issue the currency but it would channel the unit to the public through licensed commercial banks and what he described as “operating institutions.” Rather than something new, this is precisely how every country in the world channels money and liquidity into their financial systems.  The Federal Reserve, the European Central Bank, the Banks of England and Japan, and all others issue reserves and license commercial banks to decimate money to the public as a strict multiple of those reserves. All monies are tied to central bank reserves, just as Deputy Director Mu proudly claimed for the CBDC.

If the PBOC’s system for distributing the digital unit is conventional in the extreme, neither is its digital nature especially revolutionary.  Most currencies in the world have long been mostly digital for decades. Reserves at all major central banks are digital as are people’s accounts at commercial banks and other financial institutions.  Account holders have the option of using paper checks and paper money, but debit cards have long made transactions entirely digital, everywhere in the world, increasingly through electronic wallets at which the PBOC aims with its CBDC.  

Nor do the claims – or perhaps it is fears – of the imminent “internationalization” of the yuan seem realistic, on the basis of the CBDC or otherwise.  Jeremy Allaire and the columnists who echo him point out that a digital unit could transact business anywhere in the world and so presumably steal a march on other, less digital currencies.  Of course, the capabilities of the technology are irrefutable and have been for years, as most major currencies have been digital for years. Any digitized unit could be used for transactions anywhere in the world, at least as long as there is an Internet connection.  Even though the dollar, the euro, sterling, the yen, are not wholly digital they could have accomplished such an “internationalization” decades ago within the long-established system, if, that is, it were a matter of technology only. But technology is far from the whole story.  Law, convention, and convenience matter too.

Several countries, including the United States, have laws about what currency can be used to settle transactions domestically.  Legislation allows people to barter and settle transactions in bitcoin and the like, but not in a foreign currency. Most wholesalers and retailers in this country and nations with similar laws would resist any push to settle in any currency but their own.  Even where such laws do not interfere, producers and merchants across the globe will hesitate to adopt the yuan (or any other foreign currency) however digitally convenient it is. They, after all, have recurring liabilities in their local currency – rent, payroll, inventory costs, that sort of thing.  Even if they were bullied into yuan-based transactions, they would, if they were prudent, quickly convert the yuan into local currency, effectively doing the conversion for their customer after the sale rather that the customary practice of asking the buyer to convert currency before the sale.

Since China’s leadership in Beijing knows all this, it clearly has purposes other than global dominance for the CBDC.  History says that its objective is domestic control. The Communist Party objects to Chinese people and businesses doing any transaction over which it lacks control or, at the very least, oversight.  It has banned bitcoin and similar cyber currencies because they would thwart that desire for complete oversight and control. Paper currency, however, remains a problem for the authorities in this regard.  It enables people and businesses to make anonymous transactions and also allows them to move money out of the country without the knowledge of the PBOC or the Communist Party. No doubt China’s leadership believes (hopes?) that the CBDC will tempt the Chinese to give up on paper currency and go digital.  Once that is done, the authorities will indeed have complete control and oversight. It is this rather mundane but significant police matter, more than hopes of global dominance that lies behind the CBDC.

Meanwhile, businesses in the West continue to digitize their practices, a subject that next month’s paper will highlight with a discussion for new ventures by Google and Facebook (no, not Libra).

More on the Vested blog:
Why economists need English majors
When it comes to ESG, it’s all about ownership and engagement
The rise of contactless: a penny for your thoughts?

Why economists need English majors

The Washington Post published an article recently that I’ve been waiting to read for the better part of a decade. World-renowned economist Robert Shiller believes the world needs more English majors. 

You might be thinking: Has the man who brought us the Case-Shiller Index gone soft in his old age? Is he petitioning for more raw, beating hearts in this world? Dreamers with a penchant for Hemingway but prose like Fitzgerald? 

Not quite. Although you can probably guess where I stand on the issue.

No, Shiller believes finance—and the world economy itself—is in desperate need of financial storytellers. With more than a 25% decline in students majoring in English since the ‘08 crash, we’re facing the prospect of a shortage, you see. A scarcity of skilled writers who can decode the inner workings of market movements and translate it all to the masses. A deficit of gifted communicators who can responsibly control and deliver information to the underbanked or to the new professional saddled with student debt. 

For a moment, the Washington Post headline placed English majors and storytellers in the spotlight, granting them their (long overdue and well-deserved) 15-minutes of fame. And, this English major turned financial storyteller is just about jumping up and down.

It’s not every day a national newspaper writes an Op-Ed in defense of the bookworms and the poets. To say English majors get a bad rap is an understatement. Comedian John Mulaney famously uses his degree as a punchline in a skit on tuition costs. Inciting laughs (present company included) with his line: “I paid $120,000…to accept a four-year degree in a language I already spoke.” That’s not the first time we’ve heard that one, Kid Gorgeous.  

No economist worth his salt shows up to a fight without data. And both Shiller and reporter Heather Long have it in spades. Beyond the societal value of storytelling, the data shows: English majors often get jobs earlier than their computer science and engineering counterparts. (Let’s hear it for the readers). And their salaries quickly climb to meet their peers in math and science by mid-career. (Get that money!!)

As much as I selfishly want to celebrate only the long-lambasted English majors, the truth is, we can’t accept all of the credit. I firmly believe the rise of the liberal arts education is setting up graduates across all disciplines to be stronger storytellers. And, perhaps more importantly, it’s setting up students to think critically, to challenge the stories they’re being told in the political realm as much as the economic realm. 

That’s the dream, right? The promise of a liberal arts education is creating a cohort of independent thinkers, people who disrupt the status quo and aren’t afraid to voice their opinions. 

Shiller’s words celebrate the potential good elements of controlling and shaping a story, but his words are also reminiscent of the dangers hidden in our daily grind. He argues the stories created leading up to the market crash exacerbated conditions and contributed to real families landing themselves in a financial bind. Stories that insisted the American dream was accessible to anyone but overlooked warning signals of risky mortgages and untenable interest payments. 

We live in a country with no formal financial literacy education, a knowledge gap we pay $280 billion for every year. The reality is, Americans are learning the ropes of the financial system through personal trial and error, and the stories that journalists and financial brands tell. If that doesn’t scare you, it should. 

I agree with Shiller, stories matter. But, listening critically and parsing out fact from embellishment matters just as much. No matter how diligent and how careful the majority of the country’s financial storytellers are, risky financial offerings will always be a part of the narrative. I hope the financial crisis made us all a touch more skeptical and a bit savvier. And when I do sit down, make my English professors proud, and read Shiller’s full book, I suspect I’ll find he agrees with me too.

My fellow financial storytellers: Wield your power wisely. The responsibility of shaping how the public understands the likelihood of a Recession or whether an investment is wise should weigh heavily on your conscience. 

It’s our job to write the stories: let’s make them worth reading.

More recent blog posts:
The Money Hackers take Vegas!
When it comes to ESG, it’s all about ownership and engagement
From Classroom to Campaign: A Vested Workshop

From Classroom to Campaign: A Vested Workshop

A few weeks ago, I returned to my alma mater to run a workshop for this year’s cohort of M.Sc. Strategic Communication students at the University of Liverpool in London, with our UK CEO, Elspeth Rothwell. 

I participated in the same session last year and it played a really important role in my decision to join an agency after graduating, so I knew first hand how valuable the session would be for all the students and their future careers.

vested campaign classroom

We started the session with introductions, before we talked through the process of taking on a client or prospect brief, including brainstorming, environmental analyses, campaign timeline projecting and budgeting. The class was then divided into five groups and given a short brief to work on a ‘quick’ campaign. Each brief included an issue and cause and the students had 45 minutes to develop a creative campaign concept and think about the activations. 

During the workshopping, we were able to get up-close and personal with each group, answering questions and helping them develop their ideas. After the 45 minutes were up, a few of the groups presented their ideas and campaigns to the class. As expected, each came up with different ideas from the last; sociology research teaches us that individuals with different backgrounds and experiences will always contribute different ideas even if given the same problem to solve.

vested campaign classroom

Giving communications students the opportunity to think creatively and strategically, and then present their ideas to their peers will always be valuable. Our industry is fuelled by different perspectives and ideas from individuals from different backgrounds, and we’re regularly presenting to clients, prospects, and colleagues. So those seeking careers in PR and marketing will find themselves exercising and building these skills on a regular basis, 

As with most industries, entry-level communications jobs are competitive and there are hundreds of graduates and school leavers looking to secure placements every year. We spend time with strategic communications students at the University of Liverpool to help them prepare for life in an agency or as part of a comms team and help them build the skills needed to thrive. Taking the time to give back and help those that are just starting out is really important to us; we were all one of these budding graduates at one time!

By Kris Lam, Account Assistant

More blogs from our UK team:
When it comes to ESG, it’s all about ownership and engagement
The rise of contactless: a penny for your thoughts?
A new home for the UK team

The Money Hackers take Vegas!

The Vested team recently headed to Las Vegas to celebrate the launch of our CEO Dan Simon’s upcoming book, The Money Hackers (HarperCollins 2020). Strategically timed with this year’s Money2020 conference, The Money Hackers’ party at CHICA drew a line through the casino and an impressive c-suite crowd including folks from American Express, HSBC, Synchrony, Nova Credit, Mastercard, The Financial Health Network, Broadridge, and more.

These CCOs and CMOs also had the opportunity to share their perspective on the fintech marcomms industry and its future with MEDICI, the No. 1 online fintech content hub. Host Shannon Rosic and team interviewed more than 20 influential guests on their thoughts. Don’t miss some highlights below:

When it comes to ESG, it’s all about ownership and engagement

Earlier this week I had the great privilege to join 400 investment management professionals at the CFA ESG Investing Conference in London. This was the opportunity for the investment community to meet and hear from some of the leading voices on ESG, with a succession of insightful perspectives from investment managers, asset owners, associations and even the Governor of the Bank of England, Mark Carney. It was also an opportunity to assess the current industry thinking and get an idea of the direction responsible investment is likely to take in the next 5 to 10 years.

First of all, it is worth noting that the great majority of these attendees were traditional investment management professionals rather than the ESG experts and enthusiasts usually encountered at this type of industry gathering. This unusual crowd is certainly indicative of the great momentum behind responsible investment and also perhaps one of the reasons why conversations seemed to go one step further than the slightly repetitive ESG narrative of the past couple of years. It would be impossible for me to cover all aspects of yesterday’s event but here are a few observations on some of the challenges and opportunities for the investment industry.

  1. Whether you are an active or a passive manager, the expectations from end-investors and other key stakeholders will be for you to demonstrate active ownership and a successful engagement strategy. Beyond the ESG expertise, taking a position on key issues impacting businesses you invest in but also your ongoing engagement with these businesses will be critical to remaining relevant in an ever more competitive industry. If divestment or exclusion is still an accepted tool, engagement is seen a more compatible with fulfilling fiduciary duties and more supportive of responsible investment. This is true for both public and private markets.
  2. But engaging with businesses you invest in is not enough. There is also a great opportunity in having important conversations with investee companies’ key stakeholders such as industry bodies, regulators and policymakers. This is particularly relevant for passive managers as understanding and contributing to shaping a sustainable economic environment is seen as one of the best ways to mitigate any potential risks and ensure that the index you track continues to perform. From an asset owner and investment consultant perspective, managers able to demonstrate that they regularly speak to the regulator and policymakers will score valuable brownie points.
  3. Which brings us to engage with clients. The days of “tell me what you want and we’ll do it for you” are over in the institutional space. Asset owners will increasingly demand managers act before being asked to and will expect them to proactively provide ideas and recommendations on ESG investing. They are hiring you for your unique investment expertise and philosophy after all.  Beyond reporting requirements, ESG provides your team of communications consultants with an opportunity to get creative. Infographics and comparisons seem to be appreciated by trustees who prefer to know “how many cars off the streets” your strategy represents rather than an intangible CO2 metric. 
  4. ESG integration to a firm’s overall investment decision making process is critical to its success. That doesn’t mean that it should take precedent but if you’re going to have analysts or even an in-house ESG specialist doing the work, it is essential that it is fully integrated into your process rather than being just another theme to consider. This suggests a cultural shift and the need for managers to embed elements of ESG investing in their core investment strategy. It also suggests that we’ll be moving from isolated ESG investment products to ESG is an integral part of the investment strategy.
  5. We’re stronger together. In the UK, the fragmented pension industry means that it has been more difficult for asset owners and their managers to have a significant impact compared to markets like the Netherlands for example. While industry consolidation is a route towards greater leverage, there is hope that collaboration and a coordinated approach between participants can deliver success (think UNPRI). Putting competition aside and leveraging technology to create a joint approach with like-minded entities should also be a focus in the coming years.

ESG tools and solutions are being built, standards being established and, while there is still huge room for improvement, the focus seems to be there. But to be credible in the eyes of asset owners and end-investors, investment managers need to develop new strategies and demonstrate successful engagement with a wide range of stakeholders impacting their investment. Only then will they be able to capture a market eager to drive positive change.