ESG Strategies and Marketing

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ESG Overview: Freddie Mac

Freddie Mac relies on owned media in the form of its website, podcast, blogs, and Instagram account to communicate its ESG strategy (activities and initiatives). All the marketing communication methods are tailored to reach investors, ESG rating agencies, and other external audiences. The messaging, in some instances, is tailored to support the claims that are made surrounding ESG initiatives. More details can be found below.

About Freddie Mac

Freddie Mac is a company that provides affordable and accessible housing for ownership and renting. It operates in the secondary mortgage market. Its mission is to provide affordability, stability, and liquidity to America's housing market.

The Overall ESG Strategy (Initiatives and Activities)

  • Freddie Mac's ESG strategy is well-defined and can be seen through the activities and initiatives that are undertaken on short and long-term basis.
Environmental:
Social:
Governance:
    • Code of Conduct
    • By-laws.
    • Corporate governance guidelines.
    • Committee charters.
    • Investor relations.
    • Leadership and management structure.

ESG Initiatives' Messaging and the Marketing Communications Strategy

Social

  • Freddie Mac has a careers' blog where it posts details surrounding the commitment that it has to comprehensive benefits, innovation, the focus on community service, and diversity. The blog is dedicated to posting content about employee life, community activities, and other information that is helpful to the readers in their daily lives. For example, there is content about COVID-19, virtual internships, and working from home.
  • The messaging attached to the blog is, "Freddie Mac is your destination employer because more happens here. Find out more about our commitment to diversity, comprehensive benefits, innovative culture and focus on community service."
  • On the "Our People" page on the company's website, there is a lot of information surrounding the social criteria. From the people to the suppliers, there is a clear definition of the initiatives that are in place within the company.
  • A good example is, "We emphasize diversity in our people because it’s smart business. Our focus on an inclusive workplace that values different perspectives makes us a stronger company, drives innovation, and supports our efforts to make home possible for America’s families. Our commitment to diversity starts with our hiring process, where we ensure all interested candidates are given a fair opportunity and consideration." This is the type of messaging that is directed to the general audience and focuses on the social criteria by touching on issues of inclusion.
  • A separate segment on the website is dedicated to suppliers and includes information about how the company welcomes diverse suppliers and aims to ensure transparency and inclusion in the procurement of goods that support its business and operations. ESG communication is also seen through clear articulation that the suppliers are vetted for the promotion of human rights and other criteria.
  • On its Instagram account, there are several posts that are dedicated to meeting the social criteria. This post focuses on the company's drive to build a diverse and inclusive culture and address any inequalities in the housing sector which it operates in.
  • Freddie Mac also has a podcast that is dedicated to providing consumers and listeners with information and insights surrounding housing. However, there is clear marketing of ESG strategy and initiatives on the podcast called "Freddie Mac Single-Family Home Starts Here Podcast." This can be seen via episodes that discuss how the company is committed to the home buyers (Social criteria) and their desire to provide sustainable and environmentally friendly solutions (Environmental criteria). The podcast is free and can be accessed by investors, ESG rating agencies, and other external audiences. A multi-family podcast is also available.

Governance

  • Information on initiatives surrounding corporate governance is openly displayed on the website within the Corporate Governance page. It can be accessed by all types of audiences including the investors and ESG rating agencies. Details include the code of conduct and the authority of the board. This also includes controls to the check the behavior and powers of the company's leadership. There are by-laws, corporate governance guidelines, and committee charters, which are all linked within the web page for easy access.
  • The investor relations segment of the website can be used to access all the strategies and initiatives that the company has put in place to control the activities of shareholders.
  • The messaging about governance is clearly articulated and geared towards showing that the company meets the necessary criteria. An example of messaging is, "Freddie Mac has built our business on the basis of service, trust and confidence, making us a leader in the mortgage finance industry. How we conduct ourselves, both individually and collectively, represents the conduct of Freddie Mac. Freddie Mac has had a strong Code of Conduct for many years, with separate versions that apply to employees and Directors."
  • Details surrounding auditing are also displayed on the website with a chronological account of its activities and impact on the company's governance. The messaging is clear and conclusive about the initiatives that the company has put in place to achieve efficient governance. This can be seen through the following statement, "Freddie Mac's complaint policy for accounting, internal accounting controls and auditing matters pertaining to the company's business has been created in accordance with the Sarbanes-Oxley Act of 2002 and the corporate governance rules of the NYSE."
  • The management structure is also displayed on the website from the CEO to the Senior Vice President, Chief Human Resources Officer and Chief Diversity Officer. Each leader has a full description attached to their profile, proving that they are qualified for the position. The management structure also supports the company's claim of supporting diversity and inclusion. The website provides access to the Board of Directors.

Environment

  • The website is also used as a marketing communications strategy for the environmental initiatives.
  • The Green Campus is discussed on the "Our Communities" website and it contains a brochure revealing the efforts that the company has put in place to ensure sustainability, recycling, and the reduction of GHG emissions.
  • The messaging is stern and action-oriented, showing that the company's actions are supporting their claims. Freddie Mac states that they are working towards building earth-friendly, sustainable practices in every part of their business to minimize the impact that they have on the environment.
  • Messaging that supports this claims and has been used as communication to investors, ESG rating agencies, and other audiences is then attached. Examples of wording used in the messaging are:
    • "145 tons of organic food waste composted. That's the weight of 3 commercial jet airplanes."
    • "2 electric car charging stations on campus. In just 8 months, our charging stations have saved 898 gallons of fuel from being used."
  • There is a separate blog linked to the website that contains articles about environmental conservation and issues like green homes, green improvements, and eco-friendliness. The messaging in these articles is directed towards general audiences and it makes the company meet environmental and social criteria.
  • On its news' web page, there are posts focused on discussing the community and environmental initiatives. For example, this release discusses an ESG initiative called "Freddie Mac's Green Advantage Program" that aims to attract investors.
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ESG Case Studies

Introduction

This research provides an overview of two financial lending companies — American Family Insurance and Cerberus — and the ways in which each of them markets their respective positions in the ESG space. As financial lenders, both of these organizations have opted to focus on complying with industry standards for ESG along every step of their investment processes. Each business has published annual ESG reports and figures that help to visualize the impact of their ESG initiatives on business, their communities, and the environment alike. Below is a breakdown of how each of these two financial businesses market their work with ESG initiatives, how they market this information, and metrics of success for these programs. The data used to compile this information was located specifically on each company's website, as well as within their annual reports and ESG publications.


Case Study 1: American Family Insurance

Marketing ESG Initiatives
  • The American Family Insurance company has landscape and water management programs in play as part of their ESG initiatives.
  • AFI is LEED certified (Leadership in Environmental Energy Design), which means they have implemented water efficiency and quality standards among other strategies to showcase their efforts to be a sustainable organization.
  • On AFIs web page for sustainability, the company details their action strategy for the year to prepare for environmental changes. The company makes a big effort here to be clear on the changes they are implementing to save the environment through technological advancements.
  • By the year 2030, AFI has publicized that they plan to achieve carbon neutrality by the year 2030 to reduce the effects of climate change. The focus in this area by AFI is especially set on reducing greenhouse gas emissions, utilizing renewable energy sources, and landfill waste reductions.

Channels for Marketing ESG Initiatives
  • The American Family Insurance company publishes an annual Corporate Responsibility Report that contains a detailed breakdown of how the business is building an ESG initiative, what the process involves, and outcomes of the project.
  • AFI also publishes an annual Environmental Report to detail the practices they are implementing on a company-wide scale to help explain long-term goals for maintaining the environment during business practices.
  • American Family Insurance company also created a Sustainability and Climate Action Strategy in 2019, which includes a roadmap strategy with specific goals for reducing waste.
  • In 2019, AFI acquired the naming rights to the Milwaukee Brewers baseball stadium, Miller Park, which helps the company have a physical platform for promoting their goals in corporate social responsibility.

Outcomes of ESG Initiatives
  • Through AFIs ESG initiatives, the company has diverted over 3,282 tons of waste from landfills, reaching a waste diversion rate of 90%.
  • AFI has also recently installed 12 electric vehicle charging stations on campus to reduce pollution and promote environmentally friendly transportation.
  • At the time of publishing in 2019, 60% of AFIs employees were part of an employee health and wellness program.
  • Through AFIs ESG program, the company has awarded $832,500 worth of student scholarships and $1,208,307 worth of employee tuition support.
  • The Steve Stricker American Family Insurance Foundation has donated $15 million and raised $2,404,000 to promote economic stability.

Case Study 2: Cerberus

Marketing ESG Initiatives
  • On Cerberus'' ESG webpage, the company directly states that they are focused on being forward-thinking when it comes to ESG matters, even if it does not completely align with the brand's investment philosophy.
  • Cerberus created an ESG evaluation tool for the company in 2017 that enables them to assess industry-specific indicators related to ESG initiatives, as a means to measure how the company is performing against best practices related to the matter.
  • Cerberus has ESG initiatives in action right now that include food drives, foundation holiday raffles, reusable water bottle programs, diversion and inclusion webinars, and even programs focused on the blind.

Channels for Marketing ESG Initiatives
  • Cerberus has an entire webpage on the company site dedicated to the work they are doing with ESG initiatives. The page specifically mentions that the company has been focused on ESG issues for the past 14 years, too.
  • Cerberus has a dedicated ESG Committee that helps ensure the brand is being compliant at all points in the investment process.
  • Every year, Cerberus publishes an ESG Impact Report that provides insights into how they, as a company, are focusing on ESG matters, as well as the progress that the different company initiatives are making on the environment and business actions.
  • In their 2019 ESG Impact Report, Cerberus offers readers a QR code to scan to see the progress that the company has made over the last 14 years in implement ESG policy into every stage of their investment process.

Outcomes of ESG Initiatives
  • In 2019, Cerberus reported 0 ESG incidents for the entire year.
  • Cerberus achieved a 100% response rate to their company-wide ESG questionnaire.
  • By the end of 2019, Cerberus had managed or was in the process of handling a total of 134 ESG projects across the company, including ones related to due diligence for ESG issues.
  • The paper used to print Cerberus'' ESG Impact Reports is made of 100% post-consumer waste, as well as being FSC-certified and made with wind power.
  • Cerberus utilizes the GRESB, UN Global Compact Principles, and the PRI standards for checking their compliance with ESG initiatives.
  • Through their ESG initiatives, Cerberus has managed to save 126,807 metric tons of CO2, as well as 39,553 metric tons of fuel.
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ESG Leadership

Important rating companies have established criteria to determine if a company is an ESG leader. In the financial industry overall, corporate governance, sustainable finance, and codes of business conduct stand out as some of the most important issues to be considered. Activities involving efficient use of resources and benefits for employees are some of the most commonly seen among ESG leaders. B2B companies benchmarking their ESG initiatives could follow a cycle of diagnosing, comparison, data analysis, and actions.

Leadership for B2B Companies in ESG

  • The Dow Jones Sustainability World Index includes companies that are considered sustainability leaders according to SAM. In total, this index is composed of the top 10% of 2,500 worldwide companies.
  • According to the index created by SAM, an S&P's company, institutions in the area of diversified financial services are evaluated according to certain criteria to determine their position as leaders.
  • Some items with the heaviest weight for a company in this industry to be considered an ESG leader include their score in corporate governance, sustainable finance, codes of business conduct, climate strategy, human capital development, and talent attraction and retention.
  • Other criteria include risk & crisis management, labor practice indicators, financial inclusion, and anti-crime policy & measures.
  • It is important to note that companies around the world have rated SAM as the most useful rating tool when it comes to rating their ESG programs and initiatives. Therefore, their criteria are accepted globally to identify ESG leaders in any industry.
  • Similarly, MSCI is a finance company that has the goal of bringing transparency into the financial world. One of their activities includes rating investment funds according to the ESG programs of the companies these funds are involved with.
  • According to MSCI, funds leading in this area invest in companies that have a strong management of governance issues as well as social and environmental matters. In addition, MSCI identifies these companies as better prepared to withstand ESG-related problems.
  • When it comes to benchmarking, according to McKinsey, companies consider that ESG programs can help to improve the financial performance of a corporation.
  • This is achieved by improving the image and reputation of the company, attracting and retaining important talent, and making the company open to new growth opportunities.
    • Complying with regulations and the expectations of the industry is one of the main benchmarks for companies implementing ESG programs according to this McKinsey survey.
    • SAM performs an annual assessment on ESG programs in companies all over the world. This group proposes a benchmarking cycle that companies can use to assess their ESG goals.
    • This cycle starts with a diagnostic assessment, followed by an adequate comparison with competitors, the analysis of the data obtained, and the establishment of a plan to follow.

Activities Performed by ESG Leaders

  • ESG leaders are involved in numerous activities. According to Corporate Citizenship, ESG leaders invest in energy and water conservation and overall efficient use of resources.
  • Other aspects in which these companies invest include benefits for workers such as providing sick pay and guidance during health events, and in issues that might represent any type of governance, social, or environmental risk.
  • According to the firm Russell Reynolds, companies wanting to be ESG leaders would need to focus on activities related to climate change, human rights, and sustainability as these are the three main concerns of shareholders.
  • At a more internal level, the Principles for Responsible Investment published by the UNEP Finance Initiative and the United Nations Global Compact, propose other considerations to be taken into account for a company to become an ESG leader.
  • This report states that dynamic communication between corporations and its investors is key for the completion of ESG initiatives.
  • In addition, establishing learning dynamics about ESG across the company in question is also a pivotal point. Lastly, creating political value through political dynamics within the company helps to facilitate relationships between investors.
  • An example of a B2B company leading in ESG activities is Microsoft. Some aspects that allow it to be considered a leader in this area include important investments in cybersecurity.
  • However, there are other activities performed by this company in the ESG sector. These refer to the benefits received by employees, which include resources for professional development, fair pay, and diversity training.
  • Other activities performed by this company have to do with the environment and the investments made in renewable energy to run data centers owned by the company. This corresponds with the activities previously identified as performed by ESG leaders.
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Demographic Profile: Decision Makers at ESG Ratings Agencies

The decision makers at ESG rating agencies are typically highly educated white females in their late 30s who earn six-figure salaries.

Age

  • Although ESG rating agencies vary dramatically in format from NGOs to research conglomerates, the decision makers at the top of these organizations are typically sustainability executives, according to Sustainable Insight Capital Management.
  • Notably, these sustainability directors and chiefs are generally in their late 30s, per latest research from The Association for the Advancement of Sustainability in Higher Education (AASHE).
  • Specifically, sustainability executives are most commonly between the ages of 30 to 39 years old (37%), while a significant portion (31%) are between the ages of 40 and 49 years old.

Gender

  • In parallel, AASHE reports that these decision makers are typically female (59%), while a large subset identify as male (38%) and only a small minority identify with a different gender identity (3%).
  • Notably, this represents a significant shift from 2012, when PWC found that sustainability executives were evenly split between men and women.

Income Level

  • The average income level for sustainability executives in the US is approximately $143,109, according to Comparably.
  • However, estimates for the salaries of these leaders vary dramatically from as little as $80,000 per year (e.g., Glassdoor, ZipRecruiter) to just over $200,000 per year (e.g., Salary.com, OwlGuru).
  • Notably, more detailed, industry-specific analysis by Recruiter.com suggests that decision makers at ESG rating agencies likely earn closer to $200,000 per year in the United States.

Education

  • Sustainability executives are generally highly educated, according to industry experts (e.g., AASHE, CareerOneStop, Vault).
  • Not only do the decision makers at ESG rating agencies almost always have a Bachelor's degree, but 64% have a Master's degree and an additional 21% have a Doctoral degree.
  • These degrees are most commonly in the areas of environmental studies and sciences (23%) and sustainability (9%).
Race
  • Meanwhile, available research from AASHE indicates that the large majority of sustainability executives are either white (88%) or prefer to not disclose their race (3%).
  • Less than 5% of decision makers at ESG rating agencies are mixed race, while less than 3% are Asian, Hispanic, Black or from another race/ethnicity.
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Demographic Profile: U.S. Investors

According to the most recent research, US investors are more likely to be male, white, older than 55, college-educated, and have high household incomes. The complete information regarding the demographic profile of U.S. investors is provided below.

Gender

  • About 56% of US investors are male.
  • The number of men "who have non-retirement investments" has increased from 35% to 39% (2015 – 2018), while in women this number has remained at 25%.
  • As per investment frequency, "men tend to trade more frequently than women," as 40% of men make four or more transactions per year, compared to 25% of women.
  • Women are more likely (64%) to ask a professional for choosing investments than men (58%). About 34% of men and 31% of women use an online tool that chooses investments for them, while 23% of men and 21% of women use a mobile app for this purpose.
  • Men (34%) are more likely than women (24%) to have a margin account.
  • About 12% of men are willing to take substantial financial risks expecting to earn substantial returns, compared to 7% of women.
  • Men (26%) are more likely than women (18%) to buy stocks in response to the market drop, and both genders are equally likely to sell when this occurs (7% and 6%, respectively).
  • Women represent 53% of workplace-only investors, while 38% of women are active investors.

Age

Ethnicity

  • The majority of US investors are White, representing 77% of investors.
  • The percentage of African-Americans "who have investments in non-retirement accounts has increased from 20% in 2015 to 26% in 2018."
  • In 2017, approximately 67% of African-Americans who had "incomes of at least $50,000" were stock investors.
  • According to a 2014 Wells Fargo survey, 47% of Hispanics "would prefer to place money in no-risk savings accounts, rather than in stocks or various funds."
  • As per the Financial Industry Regulatory Authority (FINRA) Foundation, "22% of blacks, 25% of Hispanics, 36% of whites, and 47% of Asians held taxable investment accounts."
  • The portfolios of black and Hispanic degree-holding households represent only 2.4% of the equity market wealth.
  • According to a recent study, Asian American retirees and pre-retirees worry more than other ethnicities "about taking too much risk (69% vs. 44%) or making a poor investment decision (67% vs. 54%) within 15 years before or after retirement." About 75% of pre-retirees worry "about taking too much investment risk." This population also believes that "workers approaching retirement should reduce their investments in equities (64% vs. 53%)" and has more conservative investment goals, "aiming for their assets to 'match the market' (43% vs. 32% of the general population) rather than outperform the market (55% vs. 65%)."

Education

  • About 45% of US investors have graduated from college or higher.
  • About 86% of white households "headed by a college graduate owned stocks in some form in 2016."
  • In a study where 61.1% of investors had graduation and above qualification, it was shown that education was not relevant when choosing a type of investment risk.

Income

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Psychographic Profile: Decision Makers at ESG Ratings Agencies

Most decision-makers at ESG rating agencies value innovation, identify with the latest technology on the market, make decisions based on others' experience, and spend about 11 hours each week listening to the radio. They are not extravagant spenders but they are willing to purchase what they feel is important.

Overview

Psychographic Profile of Millennials

  • According to AASHE, most sustainability executives fall in the 30-39 years age set and this implies they are mostly millennials.
  • Millennials value innovation and they tend to identify with the latest technology on the market, for example, millennials will love to own the latest iPhone on the market.
  • Millennials mostly make decisions based on others' experience, for example, they are likely to love a particular grocery shop based on a recommendation from a friend.
  • According to WordStream, about 93% of millennials in the US love listening to the radio, and they spend about 11 hours listening to the radio each week.

Psychographic Profile of the Highly Educated

  • Vault indicated that most sustainability executives are highly educated and they mostly have degrees in courses related to environmental sciences.
  • According to NPR, most highly educated Americans are very liberal on several societal issues, including partisan politics and socialization.

Psychographic Profile of the Upper Class

  • According to CNBC, Americans are classified into the low, middle, and upper classes based on income and household size. For example, a household of one with an income of about $78,000 per annum will be considered upper-class.
  • Based on the report provided by Comparably, most sustainability executives are in the upper class, assuming they have households of not more than two people.
  • According to Instapage, most upper-class Americans earned their wealth through hard work and they know that effort brings reward. They are not extravagant spenders but they are willing to purchase what they feel they need to have.

Research Strategy

The demographic profile of decision-makers at ESG rating agencies shows that they are mostly millennials and they earn about $143000 annually. Most decision-makers at ESG rating agencies are highly educated. Your research team based on this demographic profile to determine the psychographic profile of the decision-makers. We assumed that the psychographic items derived from each of the demographics apply to people of all professions, including decision-makers at ESG rating agencies.
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Psychographic Profile: U.S. Investors

Most US investors tend to like companies that pursue climate solutions while they dislike trading using mobile or online platforms. They are interested in receiving more guidance especially during this pandemic and they have a habit of consulting review sites like Yelp. More details regarding their likes, dislikes, attitudes, interests, and habits are provided below.

Likes and Dislikes

  • Most US investors like to invest in individual stocks and mutual funds for their non-retirement accounts. Those who have a portfolio value of less than $50,000 like to invest more in individual stocks while those who have a portfolio value of more than $50,000 like to invest in mutual funds.
  • Those who have a portfolio value of less than $50,000 like to have a "less diverse mixture of investment vehicles" while those who have a portfolio value of more than $250,000 like to have a more diverse mixture of investment vehicles.
  • US investors like the portfolios of companies and funds that pursue solutions to climate issues since these companies have a potential stronger return.
  • Investors who are 55 years old or older and have a portfolio value of $250,000 or higher don't like to use mobile apps that help them choose their investments. They also dislike trading using mobile or online platforms.

Attitudes

  • Investors do not "limit themselves to one single approach" when making investment decisions. Survey shows that when making investment decisions, 78% frequently based their decisions on their own research, "61% also let a professional choose their investments, and 65% discuss investment options with a professional before deciding themselves." These methods are not mutually exclusive.
  • When it comes to their attitude on investing or financial risks, "nearly half of investors (49%) describe themselves as willing to take average risks in exchange for average returns. Less than a third (29%) say are willing to take above average risks, and 10% report being willing to take substantial risks in pursuit of substantial returns."
  • Findings from a 2018 Investor Survey reveal that "a large majority of investors (85%) are aware of cryptocurrencies, but only a minority (18%) are considering investing in them, and even fewer are currently invested (12%)." Furthermore, only 2% of investors who are 55 years old or older invest in cryptocurrencies. They consider it to be an extremely risky investment.

Interests

  • According to the president of UBS Americas, "as investors navigate the COVID-19 crisis, they are seeking the latest insights and more tailored advice on how to achieve their financial goals." They are basically interested in receiving more guidance as "the pandemic is causing many of them to rethink how they’ll fund their liquidity, longevity, and legacy needs."
  • Male investors in the US have a preference for companies that are started by men.

Habits

  • Around three-quarters or 73% of US investors consult review sites such as Yelp or TripAdvisor.

Research Strategy

Publicly available data regarding the psychographic profile of US investors are limited. We have looked at various press releases, news articles, and relevant industry reports and publications and found that the data available are mainly focused on points that are related to investing. Since the demographic profile of US investors shows that they are male, white, older than 55 years old, college graduate and with a high household income, we decided to narrow down on the profile of male US investors but also found limited data regarding that.
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Media Consumption: Decision Makers at ESG Ratings Agencies

Most decision-makers at ESG rating agencies consume significantly less traditional media and consume more digital media spending a lot of time on social media, video, ads, and news content.

Overview

  • According to AASHE, most sustainability executives fall in the 30-39 years age set and, this implies they are mostly millennials. Also, the demographic and psychographic profile of decision-makers at ESG rating agencies shows that they are mostly millennials.
  • Millennials consume significantly less traditional media and are continuing to change away from traditional media and their rate of change is faster and more fundamental than for older generations.

Types of Channels

  • Millennials tend to spend more time accessing web and app content with their smartphones, as app/web usage accounts for 29% of their daily media time.
  • Among millennials, the monthly national TV and digital news reach are high at 95%.
  • The uptake of new digital media platforms is significantly higher as millennials consume a lot of video content on social media platforms.

Types of Content

  • Millennials consume different types of content like social media, video, ads, and news.
  • There is a strong interest in OTT bundles from millennials, as at least 85% of millennials subscribe to at least one OTT video service.
  • Millennials are heavy digital video news consumers as 36% consume digital-only news, while 56% consume both TV & digital news.


Research Strategy

The demographic and psychographic profile of decision-makers at ESG rating agencies shows that they are mostly millennials. Based on these profiles, the research team determined the media consumption habits of the decision-makers at ESG Rating Agencies. We assumed that the demographic and psychographic items apply to the decision-makers at ESG rating agencies, and summarized the media consumption habits of this group.
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Media Consumption: U.S. Investors

Based on a survey from the Brunswick Group LLP that mainly involved investors from the U.S., 98% of the investors surveyed refer to digital sources to do their research as they embark on their investment journey. Meanwhile, the 2018 National Financial Capability Study (NFCS) revealed that 46% of the investors surveyed said that "free online services, websites, and blogs" are the most referenced media for obtaining investment information. The rest of the media consumption habits of U.S. investors were presented in the section below.

  • Based on a survey from the Brunswick Group LLP that mainly involved investors from the U.S., 98% of the investors surveyed refer to digital sources to do their research when undertaking an investment procedure.
  • Around 88% of the investors mentioned that they base their investment decisions on insights that they obtained online.
  • Investors are also becoming more confident that the insights that they got online can be trusted.
  • Even if their trust level in online sources is not yet at par with the level given to leading financial publications, digital media is now almost at the same trust level as traditional content media.
  • As an example, investors' trust in the information from search engines is now comparable to the one given to The New York Times, CNBC, and CNN.
  • Investment insights from LinkedIn, the leading professional networking site is more relied on than those from MSNBC, TechCrunch, and Politico.
  • Around 81% of the respondents trust the information that they got from Google when researching about their planned investment decisions. Around 63% of the respondents depend on LinkedIn for the same objective.
  • The rest of the information on the varying degree of trust of investors on various content is shown in the graphics below:
  • With regard to the use of digital media, around 74% rely on digital media to be updated with news about market dynamics.
  • Around 73% depend on digital media to know more about a particular segment. The rest of the data points on investors' use of digital media is shown in the graph below:
  • Another survey from Public and Finimize revealed that 26% of investors get insights from online communities and forums.
  • Meanwhile, the 2018 National Financial Capability Study (NFCS) conducted by the FINRA Foundation revealed that 46% of the investors surveyed mentioned that "free online services, websites, and blogs" are the most referenced media for obtaining investment insights. The breakdown of the rest of the media sources of the investors for investment information is as follows: "newspapers, magazines, and books" (42%); brochures or newsletters (30%); television or radio programs (29%); social media (17%); and investing sites such as BrokerCheck (7%) or Investor.gov (9%).
  • Based on the demographic profile of U.S. investors from a previous research, American investors are more likely to be "male, white, older than 55 years old, college-educated, and have high household incomes."
  • With regard to their psychographic profile, U.S. investors have a habit of referring to Yelp to check for online reviews. They are also interested in uncovering the most recent insights as they navigate through the turmoil caused by the COVID-19 crisis. They also seek more personalized financial advice to reach their goals.
  • Those who are 55 years old above are considered to be part of the boomers' generation group.
  • Based on the Global Web Index survey involving U.S. and U.K. citizens, 42% of boomers prefer to rely on content from broadcast TV. The rest of their media consumption preferences were shown in the visualization below.
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ESG Communications: Best Practices

Paying attention to the three pillars of ESG communications, namely, the foundation, the sustainability report, and the supplemental communications, and following highly credible ESG frameworks are two best practices that B2B companies can follow when communicating ESG information to investors and ESG rating agencies.

Pay Attention to the Three Pillars of ESG Communications

  • Companies that wish to communicate their ESG information effectively to investors and ESG rating agencies are advised to follow a three-part formula that involves paying attention to the three pillars of ESG communications, namely, the foundation, the sustainability report, and the supplemental communications. Essentially a list of best practices for effective ESG communications, this three-part formula was developed by thinkPARALLAX, a California-based agency specializing in sustainability communications and branding. The figure below shows a visual representation of this formula.
  • thinkPARALLAX has published a white paper detailing this three-part formula. The company wrote this white paper with no specific type of company in mind, so it can be assumed that the best practices listed in this white paper can be applied to both B2C and B2B companies.
  • According to this white paper, effective ESG communications start with a strong foundation. Companies can build a solid foundation for their ESG communications by clearly defining and identifying their brand narrative, stakeholders, material ESG issues, ESG goals, and plans to achieve these goals. To define their brand narrative, companies must understand and define their purpose, vision, mission, and values.
  • Companies, especially those that wish to communicate their ESG information to investors and rating agencies, are advised to prepare sustainability reports even though they are not mandatory. Investors and rating agencies need granular details, and sustainability reports, otherwise known as corporate social responsibility (CSR) reports, ESG reports, impact reports, or citizenship reports, are a great tool that companies can use to communicate these granular data and metrics. Case studies and in-depth stories are more appropriate for other audiences such as customers and employees.
  • For a sustainability report to be effective, it must demonstrate commitment, transparency, progress, credibility, and accessibility. It must have the following elements: leadership alignment, clear strategy, management of material issues, focus on stakeholders, progress toward targets and goals, ethical business practices, and future projects or efforts. Sixty-four percent of shareholders demand "clear and substantive disclosure reporting," so preparing a well-organized comprehensive report is important.
  • Rating agencies and investors typically look beyond the sustainability report and the foundation for clues about a company's ESG performance, so it is important for companies to have a holistic communications strategy. Messaging should be consistent across all communications and disclosures, including SEC filings, quarterly reports, earnings calls or transcripts, analyst questionnaires, code of conduct, corporate website, leadership announcements and news, advertisements, responses to legislation or regulation, political contributions, and sustainability stories, and press releases about partnerships with organizations or the government.
  • Companies should also be mindful of public sentiment, as it is also taken into consideration by investors and rating agencies. To steer the public narrative in the desired direction, companies can apply proactively for awards, encourage employees to post reviews, partner with non-government organizations, and integrate their ESG strategy and marketing strategy.
  • Salesforce is one example of a B2B company that has a holistic ESG communications strategy. Its latest stakeholder impact report can be seen here.
  • California-based Salesforce is a member of the Dow Jones Sustainability Indices and is one of the most sustainable companies identified by Barron's. MSCI also gave Salesforce an ESG rating of AAA, the highest possible ESG rating, in 2018 and 2019.
  • In determining ESG ratings, MSCI focuses on 37 key ESG issues related to climate change, natural resources, pollution and waste, environmental opportunities, human capital, product liability, stakeholder opposition, social opportunities, corporate governance, and corporate behavior.

Follow Highly Credible ESG Frameworks

  • Companies that wish to communicate ESG information effectively are advised to follow ESG frameworks that investors find most credible. In the United States, the most valued ESG frameworks appear to be the ESG frameworks provided by the Sustainability Accounting Standards Board (SASB), the Paris Climate Accord, and the Carbon Disclosure Project (CDP).
  • Broadridge, a New York-based company that specializes in investor communications, recently commissioned a survey of shareholders. Based on this survey, the ESG frameworks provided by the SASB, the Paris Climate Accord, and the CDP are the ESG frameworks that ranked the highest in terms of credibility and usefulness among investors in North America. The chart below shows the percentage of shareholders in North America that consider these frameworks very credible and useful.
  • Fifty percent of shareholders in North America find the SASB framework very credible and useful. For the Paris Climate Accord and CDP frameworks, the percentages are 46% and 44%, respectively.
  • Companies that are planning to prepare their first ESG report are especially advised to use at least one ESG reporting framework. They should choose the framework/s that are best suited to their business and the needs of their stakeholders. It is possible for a company to use multiple ESG reporting frameworks.
  • Washington-based Microsoft, another B2B company that is highly rated by MSCI, is an example of a company that uses the CDP framework. As can be seen in its latest CSR report, Microsoft responds to the annual CDP climate change and water questionnaires. MSCI gave Microsoft an ESG rating of AAA, the highest possible rating, in 2016, 2017, 2018, 2019, and 2020.

Research Strategy

While there are a number of recently published articles and reports in the public domain that list best practices for communicating ESG information to investors and ESG rating agencies, including those published by thinkPARALLAX and Broadridge, none of these sources have any information specific to B2B companies. As a workaround, we looked for B2B companies that were recently given high ESG ratings or were recently recognized for their ESG communications. We figured that if these B2B companies were highly rated by an ESG rating agency or were awarded for their ESG communications, the way these B2B companies have communicated their ESG information can be considered best-in-class. We examined these B2B companies' ESG communications to determine if they follow best practices that were listed by experts or authorities in ESG communications.
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