Sitting down to write this last edition of VFTD for 2018 we find ourselves in the midst of a turbulent period for global financial markets. Whether it be the ongoing debacle of Brexit; the prospect of an intensifying and highly damaging trade war between China and the US; uncertainty surrounding future Fed policy; or concerns about a slowing global economy, it is no surprise sentiment is poor. This year may end with negative returns from both equities and bonds – a rare event. At times like these, despite the loud noise in the background, it is important for investors to maintain their composure, keep themselves informed and continue to ‘crunch the numbers’. However, not everything that can be counted counts, and not everything that counts can be counted.
Post the Global Financial Crisis, legislation and regulation forced many businesses – particularly those operating in the financial services sector – to do a lot of work in the ‘not everything that counts can be counted’ column. In essence, it became incumbent on them to reassess how to express their essential selves, their values and culture. For example, management teams across the world were tasked with revising their approach to building and maintaining connections and relationships. They were forced to think about how their businesses established legitimacy and gained trust and credibility; how to foster pride and generate positive perception. Moreover, to be successful, it has become even more important for any enterprise to clearly articulate and communicate their values — the intangible intellectual and emotional capital that serves more and more as the key distinguishing factor between competitors and peers.
So 10 years on, how is the corporate sector performing in terms of these ‘intangibles’?
Edelman's Trust Barometer® is an annual global survey which measures attitudes about the state of trust, not only in business, but across government, NGOs and the media. According to their website (www.edelman.com) ‘the Trust Barometer surveys over 33,000 respondents from 28 different countries, with the results helping all stakeholders better understand the fragile roots of trust and how to navigate these with responsible actions and behaviour’.
The 2018 Edelman Trust Barometer made for interesting reading as it revealed trust in the US had suffered the largest-ever-recorded drop in the survey’s history, across the general population. Trust among the “informed public” in the States has imploded, making it the lowest of the 28 markets surveyed, below Russia and South Africa. This collapse of trust was reported as being spearheaded by a staggering lack of faith in government, with the remaining institutions of business, media and NGOs also experiencing significant declines.
This edition of VFTD has not set out to be a year-end review of Trump’s presidency – we are sure there will be plenty of those written. Instead, it is a reflection on the interconnectedness of corporate values, brand and sustainability; intangibles on the balance sheet, but key to building an organisation’s reputation; seen as a huge contributor to positive business outcomes. Attracting the right kind of people to an enterprise – from both human resources and customer standpoints is critical. Among all constituent audiences, a positive view of an organisation, a product or a service results in higher perceived value and a loyalty that provides greater tolerance and forgiveness when things go wrong.
The Value of Intangibles
Source: RobecoSAM – Ocean Tomo, LLC (*January 1, 2015)
Returning to the Edelman results, it would seem the US is enduring an unprecedented crisis of trust. The contract between corporations and society is evolving quickly in the 21st century and the real time nature of news flow and social comment thereon, can make or break corporate reputations over a very short timeline. Accountability, not only in terms of what financial goals and objectives have been met – but ‘how’ they were met – is an increasingly important consideration in determining the long term sustainability of any enterprise.
What does sustainability mean to Affinity?
The numerous corporate scandals of recent years – ranging from VW to Facebook to Samsung to Wells Fargo and most recently Johnson & Johnson – have highlighted the governance and stakeholder risks that have a bearing on the sustainability of a company’s business model and its license to operate in society. The ever-present challenge faced by those mandated to govern an enterprise; namely the allocating of resources – both natural and human – to maximise profit for the owners; versus the constraints imposed upon them via legislation, access to capital and their ethics and values encompasses many of the factors we think about when wanting to invest sustainably.
The rationale for sustainable investing is increasingly gaining support and legitimacy. Moreover, the imperative of sustainable finance is nothing new; what is new is the momentum behind its implementation. Today companies that provide solutions to the challenges faced – whether this be recycling the plastics on the verge of overwhelming our oceans or addressing the growing social and economic inequalities we see around us – are well placed to perform strongly. We believe, by investing in these firms, our clients can make a positive contribution towards a more sustainable world and generate attractive capital gains. Sustainability means making economic prosperity long lasting, more socially inclusive and less dependent on exploitation of finite resources and the natural environment.
Gorillas in the room
The destruction of biodiversity, at an ever faster pace, has also made news headlines this year. With UK retailer Iceland’s Christmas advert provoking wide debate and highlighting the increasing vulnerability of the orangutan population. On the subject of primates, Affinity is excited to be a sponsor of the up-coming Go Wild Gorilla’s Jersey 2019 Campaign. This 11 week event is being organised by Durrell Wildlife Conservation Trust and is an integral part of their Re-Wild our World project, which includes an aim to reconnect people with the natural world they share It will comprise of circa 35 individually designed large fiberglass gorillas, to be placed across Jersey’s streets, parks and open space.
Our participation is part of a broader relationship with Durrell, which includes donating a percentage of our management fees received from mandates in our Sustainable Strategy. This discretionary offering aims to deliver growth with impact and help clients align their values with their wealth. It is also consistent with our ethics and values – the intangibles that count.
Please do contact us with any questions.
Enjoy the holidays.
Julia Warrander and Russell Waite
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