2017 Edelman Trust Barometer - thedbzarrow.com€¦ · Source: 2017 Edelman Trust Barometer Q11-620. Below is a list of institutions. For each one, please indicate how much you trust

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


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 %


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


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


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


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


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


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


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



your trust?

“Be fearful of being disrupted and

continuously seek ways to innovate...”

- CIO, mutual fund, $500

million USD AUM

Address New

Considerations




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




77% say providing equal voting

rights to shareholders

impacts trust of a company

Address New

Considerations

Upgrade

FundamentalsKeep Investors Consistently Well Informed




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



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


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



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


Q4. Please indicate the extent to which you agree or disagree with the following statements. (Top 2 box, Disagree)



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 or 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


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


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



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


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



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 per 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


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


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

[email protected]

Deb Wasser, IRCExecutive Vice President, US Practice Lead, Investor Relations,


[email protected]

Julia SahinAccount Supervisor,


[email protected]

To learn more about us, visit:

www.EdelmanFinComms.com

mailto:[email protected]



http://www.edelmanfincomms.com/

Documents

2017 Edelman Trust Barometer - thedbzarrow.com€¦ · Source: 2017 Edelman Trust Barometer Q11-620. Below is a list of institutions. For each one, please indicate how much you trust