How the UK’s Stewardship Code refocuses the brand

8 March 2021

Regulatory changes and brand strategy go hand in hand as ESG plays a critical role in post-covid recovery.

In response to the mainstream and investor-led ESG agenda, recent regulatory changes are pushing companies to take a rigorous approach to reporting environmental and social impacts. The result is a governance and reporting environment with ESG as a central pillar rather than a virtuous afterthought. These important changes present an opportunity for public companies to revisit why they exist, how they operate, and to rethink the role their brand plays in communicating their strategy.

 The Financial Reporting Council issued its first UK Corporate Governance Reporting Review in November 2020. It analyses how well the Code was applied in its first year and identifies areas where companies are falling short. Topics where companies need to do better include purpose, culture and diversity. These are topics that cross over directly into brand and reputation.

 The revised UK Stewardship Code 2020 (a principles-based voluntary code adopted by asset owners and managers) requires institutional investors to report on how they have held their investee companies to account on ESG topics. The definition of stewardship described in the Code makes this clear: “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries, which leads to sustainable benefits for the economy, the environment and society.” This includes, amongst other things: corporate governance, wider stakeholder considerations, diversity and inclusion, executive remuneration, workforce interests, and environmental and social issues including climate change.

 There is evidence that investors are already taking action by withdrawing investment from companies that do not meet their benchmarks and engaging with companies to make them do more. The World Benchmarking Alliance for example, whose members include large investment groups, uses public consultation and scientific analysis to create persuasive benchmarks. Its no longer just Larry Fink writing to investee companies or Mark Carney’s climate speeches. Data from the Investment Association reveals that between January and October 2020, £7.8 billion was placed into responsible investment funds, representing almost half of all money placed into funds (47.5%). Conversely, as reported by Refinitiv, UK Equity Income experienced outflows of £6.8 billion. Investment managers have responsible investment (RI) policies that exclude companies with high ESG risks. AXA Investment Managers, for example, excludes strong ESG risks that surround palm oil, soft commodities and coal for all assets under management, and for its RI funds, it applies additional screening on tobacco, climate risks, general controversies and low ESG scores.

 This is just the tip of the iceberg. Fast forward a few years and ESG funds and investments will be the norm. Companies will be expected to do better in order to survive.

 Unlike other codes, The Stewardship Code, for the first time provides investee companies with a definitive, financially driven reason to focus on their brand as a strategic asset. This may sound like painting a silver lining on an otherwise intrusive level of inspection, but it spells good news for many investee company brand owners.


Why should The Stewardship Code lead to a renewed focus on brand? 

 Brand is the sum of a company’s tangible assets (land, vehicles, equipment and inventory) and intangible assets (patents, trademarks, IP, software and goodwill). When managed actively, this combination confers value on the owner. Critically, in these ESG times, brand is what people say about you when you are out of the room. It is a licence to operate and a summation of your reputation. However, for many companies, brand remains an underused or poorly understood tool to channel strategy.

 Accomplished brand owners will benefit from The Stewardship Code because they are better equipped to demonstrate and communicate their shift to ESG. They will be able to extend their lead disproportionately. Additionally, better brand managers are far more likely to define ESG leadership. Research by INSEAD, The Wharton School and University of Pennsylvania suggests that companies with strong governance (the ‘G’ in “ESG”), benefit from finding opportunities in “E & S” rather than just mitigating risk. Under the new Code, company managers will be actively encouraged by investors to shift their thinking from a pre-2015 focus on growth, to relevance and leadership. The trend to ESG investing will enable already successful brand owners to stretch their lead through more certain investment flows that enable faster growth. It will also give hesitant or recalcitrant Boards the push they need to act – and in the process, fire up aspects of their games, particularly in social dimensions as part of Diversity & Inclusion that will transform their futures.

 If companies have been travelling ideologically light, or have not developed a response to ESG, they will need to do this quickly. The force of the Code may also help to dissolve divisions between communication fiefdoms, saving companies money and instilling a focused storyline driven by a meaningful purpose. Decluttering is needed after 40 years of terminology layering. Terms we readily use today such as brand, positioning, identity, values, vision, purpose, mission, employer brand, sustainability, CSR, business model, strategy,are beginning to sound complex. They prolong communications rather than clarify. These terms will be edited as ESG becomes the core story.

 Why is brand so key to the shift to ESG?

 A public company’s appeal for its stakeholders, including its institutional investors, will increase with its ability to communicate an effective ESG-analysed strategy. Brand remains by far the best tool to do this.

 Many companies have legacy brand strategies designed for a different era and a different way of thinking. Many will have degraded and the notion of a ‘brand strategy’ will be hollow. The Stewardship Code and the reality of ESG offer a ‘real money’ reason to reconsider everything. ‘Brand’ will no longer be discretionary. It will become the mainstay of a public company’s prospects.

 Brand is a mature concept and, in many companies, will still be controlled by a marketing-oriented function with tenuous links to governance. Internal incentivisation too, may also favour departmental wins over joined-up thinking. ESG is strong enough to pull thinking into the same direction using the company’s brand as glue.

 As ESG becomes core and critical, employees will need to be able to explain it. It won’t just be down to their IR teams. There will be no point in saying: “we are strong in ESG but we have no idea what we are doing or who is doing it”. Brand is the fastest carrier of important internal and external messages.

 From a marketing point of view, there may be a rush to capitalise on a post-lockdown boom. Internal teams will want to push their messages via social media, and websites – but these efforts will be wasted if they are not bound into the same ESG storyline as their parent. Again, a strong brand can provide a universal focal point.

 Opportunities for cross-selling may also be extensive, especially in broad-based service industries, but these will be undermined if the basics of a single narrative are not aligned. And if, in this situation, companies rehash old brand messages, they will appear anachronistic and damage their credibility as an ESG leader.

 An enhanced brand and reputation will be rewarded by greater investment flows because these predict secure returns. The correlation between brand strength and market capitalisation will not change because of ESG. But since ESG-analysed investment will replace previous norms, corporate brands by default will only be attractive with ESG-compliance. Leading will come down to superior communication. Without a purpose, a company absents itself from having a fundamental meaning. Without a brand, it cannot communicate, cannot expect to win investors and cannot function properly.

 While the investment zeitgeist is ESG, this does not mean that companies won’t have to answer to the everyday realities of running a business that sometimes appear to contradict the warm words in their purpose statements. What it does mean though, is that sharper, clearer and simpler communication will be needed. This is where brand plays a key role.

 The updated Stewardship Code is likely to remain voluntary for a time, but this does not mean investee companies are not under pressure to act now. Ever-growing societal focus on ESG not only increases the reputational risk of inaction, but also gives investors the confidence to be more assertive and demanding with their use of stewardship tools.

 Up to now, communicators have been reasonably free to argue for a particular ideology and win through, often based on the strength of their conviction. As the adage goes, when no one knows the future it’s easier to be a visionary. The great thing about ESG-analysed performance is now we all know. The next five years will be a time to ditch pre-2015 brand thinking and adopt a leaner, ESG-directed brand mode that uses fewer terms and produces more results, faster.

Gather is corporate communications consultancy specialising in developing brands, purpose and sustainability strategies, digital communications and corporate reporting.

Our clients are ambitious companies wanting to respond to a new reality and change the way they communicate and grow.

In a world of disruption and uncertainty, our experience counts.

We solve business and communication problems through strategic insights, compelling creative and powerful partnerships.


If you’d like to learn more, contact Will Davenport at