We have reached a pivotal moment in the growth of ESG investing, brought on in part by the coronavirus pandemic. With capital flooding into this marketplace, it’s crucial for asset managers to stand out from the crowd with distinctive brand positioning.
The case for ESG
Prior to the pandemic, ESG investing was steadily rising in profile, with a growing understanding among investors that financial return and ESG are not opponents, but rather partners.
The pandemic has strengthened this case. Companies built on solid ESG foundations now seem to be best positioned to survive and recover, and ESG indices are outperforming the broad market.
It’s no wonder then that the numbers showing a rapidly increasing demand for ESG investment products:
- Sustainability-themed funds in the US saw record inflows in Q1 of 2020 reaching $10.5 billion, despite harsh market conditions
- Data from global funds network Calastone has UK investors have invested £3.9 billion into ESG funds since July 2017 (up from £107 million in the previous 33 months)
- 76% of UK asset managers report that they are facing pressure for ESG integration across their whole product range
Concurrently, ESG concerns are fast becoming integral to adviser conversations. A recent study from FE fundinfo found that more than half of advisers have increased the amount of client money they have invested in ESG funds in the past 12 months.
This will no doubt grow when changes to MiFID II, likely to be introduced in 2021, require advisers to incorporate ESG considerations into their suitability requirements.
The challenge for asset managers is differentiation
Clearly, the challenge is not a lack of demand. But this huge – and growing – audience has an overwhelming array of ESG investing options. The risk that asset managers face is getting lost in the crowd and losing the fight for audience attention. On the whole, asset managers are all using the same approach to communicate their ESG product offering. The language and visual style used, as seen here, has a consistency, while the content lacks differentiation. Investors cannot make a choice between products because they do not have a distinct impression of each one.
Another challenge in differentiating your ESG product offering is the absence of industry standard taxonomy. In a survey from Alpha FMC, 88% of UK asset managers called for such taxonomy to be introduced, to allow for easier product comparison. Others have suggested a numerical rating system.
Both are difficult to implement, given the nuances of the landscape. As recently highlighted by Jay Clayton, head of the SEC, giving a score that combines all environmental, social and governance factors is imprecise, and doesn’t facilitate meaningful comparison.
Typical product-led marketing messaging loses its power without numerical ranking, so asset managers must use different tactics to strengthen their proposition.
A brand-led proposition to stand out from the sea of sameness
To address these challenges, an asset manager needs a single-minded brand positioning on ESG. A unique perspective that allows asset managers to create an ownable space in the conversation, and a credible platform that clients can believe in. At Arthur London, we help asset managers find a brand positioning that is true to their business and that sets them apart from others, by identifying their organising idea.
Based on this ownable brand positioning, we help to activate it through disruptive communications that stand out from the sea of sameness. With 10 years’ experience in ESG brand communications, and a profound knowledge of the marketplace, we know how to meet the category conventions while adding an unexpected layer that provokes a response.
We can help you get cut through with your core audience, leaving them with memorable messages. Find your distinct space in the ESG marketplace and make your own rules with Arthur London.