How can investors tell if a company is genuinely purpose-led?
Written by Michael Hilton and Charles Wookey
What questions should I ask to get under the skin about whether a company is serious about purpose? In March 2018, Blueprint and Quintin Price (former global head of active strategies at BlackRock) convened a group of 10 leading stewardship investors. Together they drafted a short list of questions which they believe will help investors respond to this challenge. You can download the full paper ‘How can investors identify purpose-led companies?’ here.
Purpose is having a moment. We are seeing a shift from the dominant view that the purpose of business is to maximise returns to shareholders, to seeing the purpose of business as being to benefit society producing returns to investors as one outcome. But alongside this is a rising worry that the purpose provocation may result simply in a re-branding the status quo without anything else changing.
The challenge faced by investors is how they tell the difference between a company which has undergone a slick communications exercise and one which is genuinely pursuing a purpose beyond profit, through which it seeks to generate its returns to investors. Last year we were challenged by a senior investor who asked what questions should be asked to get beneath the skin of whether a company is serious about this. We didn’t have a good answer and asked for their help.
So in March 2018 Blueprint convened a group of leading investors from a range of asset management companies, with combined assets under management of over $8 trillion. They were keen to work on this and together they came up with a short list of key questions which an investor can ask a Chair, CEO or other senior executives to glean insights into the extent to which a company is being genuinely and effectively purpose-led. This is not a checklist but designed to stimulate deeper conversation, encouraging personal rather than pre-scripted answers.
The seniority of participants displays an appetite from the investment industry to prompt a deeper discussion about purpose. This is a first step, and a contribution to other work aimed at improving the quality of dialogue between investors and companies. A number of the investors involved in creating this list are now going to try it out in their own organisations and share their feedback. We don’t see this an exhaustive list or as a static document and rather it will adapt and improve with use.
Sacha Sadan, Director of Corporate Governance, Legal and General said “Having a clear corporate purpose is a critical part of creating long-term sustainable growth that benefits all stakeholders. The usefulness of companies is being increasingly challenged. These Blueprint questions, which were developed by investors, including ourselves, provides a simple and effective mechanism to help identify genuinely sustainable companies”
Click here to download the list of simple questions investors can ask to get a much clearer idea of whether a business is truly committed to becoming purpose-led.
This work was also featured in the FT – Asset managers agree on 8 questions to put to companies