Majority of investors surveyed have changed their voting policies this past year to address ESG risks
91% of investors would consider investing with a lower rate of return if it meant including sustainable or impact investing considerations
Survey also showed that Canadian investors are increasingly comfortable with activism, with 90% indicating they are "more interested" in taking an activist approach
TORONTO, Dec. 18, 2018 /CNW/ - Canadian institutional investors are increasingly looking beyond financial metrics to consider environmental, social and governance risks (ESG) when evaluating companies they invest in, according to the Edelman Trust Barometer Special Report: Institutional Investors. The report notes that 91% of institutional investors in Canada have changed their voting policies and/or engagement policy to be more attentive to ESG risks and 65% have done so within the past year.
"This data makes it very clear that issuers can no longer turn a blind eye to environmental and social considerations," said David Ryan, Executive Vice President, Corporate and Financial Communications at Edelman. "Canadian institutional investors are measuring companies not only on their financial returns, but also on their contribution to social issues that are shaping business and political environments. This data tells us that to build and maintain trust with institutional investors, companies can benefit from responding to this new investing criteria, having clear and forward-looking disclosures, and placing greater importance on verbal communications with the investment community."
The Edelman Trust Barometer Special Report: Institutional Investors research looks at what drives institutional investor trust in companies. The second annual special report surveyed more than 500 chief investment officers, portfolio managers, and buy-side analysts in five countries (U.S., Canada, UK, Germany and Japan), representing firms that collectively manage over $4.5 trillion in assets. The report is a supplement to the Edelman Trust Barometer launched annually in January at the World Economic Forum.
Key highlights from the Canadian findings of the Edelman Trust Barometer Special Report: Institutional Investors include:
Companies need to step up their social responsibility 96% of Canadian investors believe that addressing societal issues impacts trust in a potential investment, and a further 91% of investors would consider investing with a lower rate of return if it meant including sustainable or impact investing considerations. The top three social issues that Canadian institutional investors feel companies need to take an urgent public stand on are cybersecurity, globalization and income inequality.
Investors more likely to take activist approach 90% of institutional investors say their firms are more interested in taking an activist approach to investing and 95% will support a reputable activist investor if they believe change is necessary. Yet, a strong majority (90%) of Canadian investors believe that most companies are unprepared for shareholder activism.
Canadian investors believe market slowdown will come sooner than U.S. counterparts One-quarter (25%) of Canadian investors believe that the bull market will come to an end in the next six months (versus 18% of U.S. investors) and 53% believe that the run will end in less than one year's time.
Simultaneously, 93% of Canadian investors are more positive on the investing environment's 12-month outlook compared to only 77% of U.S. respondents.
Trump administration policies driving greater investment in U.S. 85% of Canadian investors are more inclined to invest in U.S. assets as a result of the Trump administration's economic, trade and immigration policies. Only 4% are less likely to invest.
Personal relationships key to building trust When it comes to building and maintaining trust, Canadian institutional investors place greater importance on personal relationships or verbal communications with senior management and the board of directors. In comparison, U.S. investors look to quantifiable KPIs, such as long-term financial guidance and operational metrics, as the primary trust drivers for companies they invest in.
Investors want more updated IR practices, forward-looking disclosures 87% of Canadian institutional investors believe the way most companies share information for IR purposes is outdated. When evaluating a current or prospective investment, an overwhelming majority of Canadian investors (89%) want to see more visual ways of sharing information and 92% want more qualitative, forward-looking disclosures.
Digital is a leading source of information in the investor decision process 89% of Canadian investors consult a company or an executive's social media channels when evaluating a current or prospective investment. Companies should consider using a variety of digital channels strategically: the top platforms that Canadian institutional investors turn to on a weekly basis are Facebook, LinkedIn and YouTube.
The Edelman Trust Barometer Special Report: Institutional Investors is based on an online quantitative survey of 500 institutional investors in the U.S., Canada, UK, Germany and Japan. Participants included portfolio managers (39 percent), chief investment officers (29 percent), financial analysts (26 percent), directors of research (4 percent) and ESG analysts (1 percent). Respondents represent firms which manage assets ranging from less than $500 million to more than $50 billion USD. Data Fieldwork was conducted by Edelman Intelligence between September 9 – October 22, 2018.
About Edelman's Financial Communications Practice
Edelman Financial Communications & Capital Markets is a boutique strategic consultancy with the reach and resources of a leading global communications marketing firm. We advise public and private companies on strategic and capital markets communications to help effectively position them with the financial community during transformative events as well as during the normal course of business.
Clients choose to work with us because of our specialized and experienced financial communications team, our ability to provide the full range of Edelman's services (such as digital and social media, public affairs and employee engagement) as well as our ability to access Edelman's global network with more than 65 offices around the world.
Edelman is a leading global communications marketing firm that partners with many of the world's largest and emerging businesses and organizations, helping them evolve, promote and protect their brands and reputations. Among its many honors, the firm was awarded the Cannes Lions Grand Prix for PR, named one of 2018 "Agencies to Watch" by Advertising Age and "Global Agency of the Year" by both the Holmes Report and PRWeek, and cited five times by Glassdoor as one of the "Best Places to Work." Edelman owns specialty firms Edelman Intelligence (research) and United Entertainment Group (entertainment, sports, lifestyle).