The value of influence
The prominent role of social media influencers in society highlights the benefits of a well-connected investment manager
There’s a booming industry opening up on social media: the rise of "influencers" paid to promote products or services to their followers, because we are more likely to buy things recommended by people we trust.
Building an online following, and posting inspiring and entertaining pictures designed to engage your audience, is now a job, and although celebrity status helps, it’s not essential. Brands pay influencers to promote their services or products to their audience, either with gifts, affiliate links – where they get a share of the revenue if someone buys via the link – or payment.
It’s so common that the Advertising Standards Authority has released specific guidelines making sure that these promotions are labelled as adverts. And it’s a lucrative business if you are successful. Kylie Jenner tops the Instagram Rich List from HopperHQ and can earn $1.3m for a single promoted post. She is the youngest self-made billionaire ever according to Forbes, having built her cosmetics brand online.
I find this monetisation of influence fascinating. According to one study, the maths works out at roughly £1,000 per 100,000 followers. But how is it relevant to this column? I’ve been speaking more about influence in my day job looking after the investments of charities and foundations. As stewards of charity assets, many trustees look to us not only to choose the best investments to support the financial health of their organisations, but also to engage with companies on their behalf, promoting best practice in social, environmental and governance standards.
There is no doubt that this wielding of influence can bring about real change. We have numerous examples of companies that have responded to our concerns by improving labour practices, strengthening governance or committing to decarbonisation. But how can this influence be appraised and valued?
From a purely mathematical perspective larger investment managers must hold more influence than smaller managers. It is these managers who own larger proportions of companies and will have regular meetings with company management. The larger managers are also more likely to have more resource dedicated to this engagement.
For smaller organisations, collaboration is critical to amplify the message, and using other assets such as brand and networks can be helpful. But it’s not only about size; it’s also about how that influence is used. The UN-supported Principles for Responsible Investment have a rating system, scoring investment managers on their responsible investment activities from A+ to E. This can be a useful metric for charities when choosing which investment manager to work with.
Like the influencers charged with promoting the interests of a brand, investment managers are responsible for representing the mission and values of the charities that invest with us. I believe that we must use our power as stewards of charitable capital and the influence that comes with share ownership to seek sustainable business models, which successfully balance business, society and the environment. Having started with Kylie Jenner, I shall sign off with a quote from the Spider-Man films: "With great power comes great responsibility." Let us use it well.
This article was first published in Third Sector magazine.
Co-head of Charities
Kate specialises in investment on behalf of charities, endowments and foundations and has over 20 years of experience, with 15 years at Schroders and Cazenove. She is a CFA charterholder and has a BSc (Hons) in Natural Sciences from the University of Durham, is Chair of her local community foundation, Vice-Chair of her local primary school and Chair of the Finance Committee of the Cripplegate Foundation. She won a Women in Investment Award for her work with the Charity Commission and FCA creating a new charity investment vehicle.
She has researched and co-authored a series of publications on Charity investment best practise including 'For Good and Not For Keeps', which examines sustainable expenditure, ‘Intentional Investing’, which researches how charities can align their investment policy with their aims as an organisation, and more recently ‘Time and Money’, which explores how charities can make the best use of longevity. Kate was chair of the Charity Investors' Group for 12 years, standing down in 2019. In this role she collaborated with CFG and authored a guide to written investment policies. Kate also regularly writes on charity investment in the charity sector press.
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