Ethics matter, and corporate ethics – though historically overlooked – are increasingly relevant to brand, share price, growth and talent acquisition. Over 75% of people now believe that business should have a legal responsibility to people and the planet, and customers have actively started seeking out and intentionally supporting companies that not only talk about social good, but act on it. 

Younger generations take this a step further, basing decisions about future employers on a brand’s ethical, social and environmental track record. According to a Deloitte survey, over 30% of millennials and Gen Z turned down offers from employers they deemed to not be doing enough on key matters like diversity, mental health and sustainability, and a quarter are currently planning to change jobs or sectors due to climate concerns. 

Is ESG a dirty word? 

Environmental, social and governance (ESG) – once the flagship for a financial industry set on moving with the times – has hit something of a roadblock in recent years. Forecasts suggest inflows into ESG-related products will continue to grow to around 30% of total AUM in the next two years, but the term ‘ESG’ itself has fallen out of favour.

Examples of ‘washing’ (either social or green) abound, and consumers have tired of brands that claim to be doing good without actually bothering to. A volatile political backdrop is also playing its part. Incumbents with the most money and, arguably, the most responsibility to do good, are moving further away from anything ESG-related, keen to avoid brand associations with topics increasingly seen as political. 

And those brand implications are important. By shunning an entire swathe of investment opportunities for fear of picking a side, incumbents are effectively doing just that. No ESG is anti-ESG, and it's a trade off between short-term and long-term brand risk. By opting for a ‘neutral’ stance now, incumbents risk not being able to transition to sustainable finance at all in the future. 

BlackRock’s approach – ditching ESG to focus instead on ‘transition investing’, which is solely environmental focused – is a smart solution to balancing this brand risk. By confronting what it is doing and limiting activity to an area it can meaningfully deliver on within the confines of established brand positioning, the company is nailing its colours to the mast and providing a roadmap for established institutions to assess and redefine their commitment to sustainability and social responsibility. 

The value of B Corp in finance 

Initiatives like B Lab have the potential to deliver a similar roadmap, providing it is used appropriately. The non-profit network has come under criticism for making businesses obsessed with goal trackers and rating numbers rather than real life results. Yet, it’s the responsibility of individual businesses to use the service responsibly. Which is more valuable, a perfect B Corp rating or a credible reputation as an ethical brand?

Hedgehog was built on the premise that greater access is the first step to giving people more opportunities to invest in the world around them. It is at the core of what we do and the technology we’re building will bring about that access. Attaining B Corp status was important to us as a brand since it provided accountability and a framework to measure impact, but becoming a B Corp in and of itself was never our goal. B Lab created checks and balances that were useful to us in setting the groundworks for a brand with sustainability at its core.

Transitioning without greenwashing 

ESG is an unhelpfully expansive label that was always destined to be watered down. No brand can realistically be expected to meaningfully tackle issues as gnarly as climate, diversity and poverty all at once. 

That’s why BlackRock’s strategy to narrow its focus is smart, and a notable example of where strong brand foundation can really help to clear a path against even the most volatile backdrops. 

Established brands have a personality that is known to their audiences, this gives consumers confidence that they know how a brand will react in most situations, which is key to building lasting relationships and instilling trust through consistency. If a well-established investment firm, with (even only one) past accusation of greenwashing to its name, had launched 'transition investing' this new label would have been met with frustration and ridicule. From BlackRock, it has the potential to become a trusted alternative to a category that’s become polarised.

This is why brand foundations – or personalities – are so important. And why they should form the starting point for exploring any new strategy; be it growth, restructuring, sustainability or talent acquisition. A brand discovery or audit ought to be the first step in this process, and will not only help to determine how a brand ought to evolve, but the types of actions in keeping with that evolved personality. This approach ensures that any new course of action is closely linked to a brand’s biggest strengths and is perceived as authentic. 

Building a finance brand for the future 

Fundamental change never happens overnight, especially within established systems and organisations. A more gradual approach (if we have any time left) is needed to avoid a complete backlash. 

Regulation is constantly evolving, and there will always be a certain amount of catching up to do, even for initiatives like B Lab. But the seed of fiduciary duty has been planted now and investors will continue to demand ethical financial products. How they achieve that without jeopardising returns is where most will need help, and that’s a gap incumbents need to fill – or younger, more nimble brands will. 

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Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. This article is not intended to be relied upon to make financial decisions. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment. The article may contain links to third-party websites or resources. Hedgehog provides these links and resources only as a convenience and is not responsible for the content, products, or services on or available from those websites or in those resources, the links displayed on such websites or the privacy practices of such websites.‍