The industry and societal shift on consideration of culture

Despite the pushback on wider ‘ESG’ in the world of investment in recent years, culture is increasingly becoming a more important factor in investment portfolios, as well as for consumers. 

For example, people are much more interested in where their produce is coming from, they are not just focused on price, and they are more conscious about the impact they are having on the world, explained Sophie Kennedy, joint chief executive at EQ Investors, speaking at a recent institutional event hosted by City Hive and partner Invesco. 

“Culture features so much more in our day-to-day lives - in our working life, in consumer behaviour. 

“We are also seeing that in the way many clients are looking at their investments and aligning them with their ESG values - there has been a pause recently, but it is very much still there.”

Within the investment management industry, there is an increased awareness on the importance of culture now, along with a shift to more diverse and inclusive practices. 

“When I started it wasn’t something people talked about much, and where you did see culture, it was generally not great,” said Stephanie Butcher, CIO for equities at Invesco. 

“The awareness of how important it is and how foundational it is to a business - it has become fundamentally important.”

Read more: The idea of culture and brand

The ESG pushback discussed has largely derived from the “anti-woke” sentiment in the US and politicising of the sustainable agenda. Furthermore, investors have also withdrawn from sustainable investments citing fears of greenwashing in the market. 

However, the concerns around greenwashing are a reason to pay closer attention to a firm’s culture. 

“There’s also huge pressure around greenwashing and that means you have got to get to the bottom of the things you are being told by asset managers and make sure they are true, and how they are true,” highlighted Mandy Kirby, co-CEO of City Hive, at the event. 

“This pushback against ESG, sustainability, diversity and these waves of topics… we want to confront that head on - it’s a very short termist and risky way of thinking.” 

This is also something that regulators have been keen to get on top of. To counteract greenwashing and increase consumer protection, regulators have ramped up their expectations from investment firms. These have been grappling with the demands of Consumer Duty and the Sustainability Disclosure Requirements (SDR) over recent years, as well as meeting proposals released last year to boost diversity and inclusion in financial services. 

“[These are] having an impact on how businesses are managed, their output and what’s driving them. We have seen significant shifts,” said Mandy. 

However, firms are lacking the tools to help them understand where their firms are or aren’t making progress, frameworks to report on culture and sharing their assessments with clients. 

“Regulators are becoming increasingly demanding, but there is very little guidance. It leaves a gap and that is why we created ACT. It puts the scaffolding around a topic that is quite subjective,” Mandy said. 

For more on the ACT Framework, click here.