2017 edelman trust barometer special report: institutional investors
TRANSCRIPT
2017 Edelman
Trust BarometerSpecial Report: Institutional Investors
New Challenges and Expectations for
Public Companies
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)
Global Trustis in Decline
55 5348
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)
New Challenges for Public CompaniesAre You Prepared?
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
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 1in2investors 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
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
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
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
New Expectations for Building Trust with Institutional Investors
Upgrade
Fundamentals
Address New
Considerations
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
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
Investors Care About How You Treat Employees
69% say prioritizingemployee 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
Customer Satisfaction Plays a Major Role
87% say a company’scustomer servicesatisfaction impactstrust 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
Highlight Innovation to Show You Are
Ahead of Disruption
16
86% say the reputation of innovationimpacts 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
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
Upgrade
FundamentalsKeep 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%
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
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-termguidance on financialperformance impacts trust
68%
Upgrade
Fundamentals
5759
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
Trust Drives Valuation
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
“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
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
Key Takeaways: New Challenges and Expectations in Building Trustwith Institutional Investors
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
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 ChallengesTrust Drives
Valuation
and
Investment
Decisions
28
Thank You
Appendix
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 CountriesMass
Population
All population not including Informed Public
Represents 87% of total global population
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.
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 %
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
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
Contact Us
Lex SuvantoGlobal Managing Director,
Financial Communications & Capital Markets
Deb Wasser, IRCExecutive Vice President, US Practice Lead, Investor Relations,
Financial Communications & Capital Markets
Julia SahinAccount Supervisor,
Financial Communications & Capital Markets
To learn more about us, visit:
www.EdelmanFinComms.com