Between Trumpism and the growing force of consumer protest movements, companies are under pressure to speak out on tough political issues. But which ones should C-Suites embrace? And do they risk more by staying silent? Patagonia is so committed to environmentalism it has removed all traditional sales copy from its website and replaced it with copy about at-risk public lands. Investor appetite for social debt issuance, including new gender-equality bonds, is growing around the world (see following chart). And #BoycottNRA is just the latest viral tsunami to slam through corporate America, compelling blue-chip financial institutions, insurance companies, and retailers to sever ties with gun interests after last week’s school shooting in Florida. The calculus is risky, but many executives are seeking a bigger prize: the chance to fill a void in governance and be a moral voice for the communities they serve.

Source: Financial Times

It is a voice that consumers increasingly want to hear. Sixty-six percent of U.S. consumers say they think it is important for brands to take a stand on societal issues like harassment, discrimination, and diversity, according to new data from Sprout Social. And 58% say they want this to happen on social media, “the top channel for consumer receptivity,” as opposed to TV or radio. This marks an about-face from last year, when several studies found that wading into politics proved too risky for brands.

“Corporate social responsibility" (shorthanded as ‘CSR’ within companies) is now one of the hottest topics in boardrooms,” Jim VandeHei and Mike Allen recently wrote for Axios. In their eyes, this speaks to a bigger, lasting trend:

The social compact between private enterprise, government and citizens has permanently changed. In most cases, this phenomenon is inspired not by the pure benevolence of corporations. Instead, it’s intense pressure from social media mobs and idealistic millennials in the companies’ workforces, who expect their employers to take stands. Trump gets credit for speeding up, if not inspiring, this new era of corporate action. After all, it was his early “travel ban” that forced CEOs to start speaking out.

This trend has been driven by social media, but it runs much deeper than tweets. #MeToo has put pressure on companies to be more transparent about diversity in their workforce. Activists like Arjuna Capital, Trillium Asset Management, and Calvert Research and Management say they are focusing on firms where women make up a majority of the workforce, but not top leadership.

In the last six weeks, six of the nine banks and companies targeted by Arjuna have agreed to take steps towards closing the gender pay gap across race and ethnicity. They include JPMorgan Chase, CitiGroup, and Bank of America. This marks another about-face from 2016, when six of the originally-targeted institutions rejected shareholder proposals pressing for similar disclosures about diversity data.

“Gender Pay was anathema to Wall Street when we started in 2017, but recent events have big banks rushing to manage the optics of equal pay for women and minorities,” Natasha Lamb, a managing partner at Arjuna Capital, said.

Motivated by ethics, risk management, or some combination of both, investors last year plowed more than $4.7 billion into funds that evaluate companies on social criteria, according to Reuters. As more millennials enter the market, more women run for Congress, and capital shifts from men to women around the world, this social criteria will only grow in value. According to the 2017 Wealth and Worth report, released by US Trust, Bank of America’s private-wealth-management arm, 76% of millennials—the largest living generation—said they saw their investment decisions as a way to express their social, political and environmental values, and 88% said that a company’s impact in these areas is a key consideration when they make investment decisions (see following chart).

This helps explain why social bonds are luring new investors, many of whom have never backed bonds before. That gender bonds, like green bonds, must perform socially as well as financially is part of their appeal. “It's not often that you see capital markets and diversity come together,” said Eva Zileli, head of group funding at National Australia Bank, which issued the country’s first gender bond last year.

Lee Cumbes, head of public sector debt for Europe and the Middle East at Barclays, see this as part of a larger trend towards ethical, impact investing: “People are increasingly aware of their power as consumers, with unprecedented access to information and new dynamics in building movements of belief.”

A recent study from PR agency Weber Shandwick found that 44% of Millennials would feel more loyalty towards their CEO if he or she took a stand on a hotly-debated issue versus 19% who said they would not. “Now a CEO in Miami is instantly connected to a random citizen in Seattle,” VandeHei and Allen observe. This makes their job a lot trickier, but a road map of sorts is developing.

When agency professionals were asked what they thought was the most essential marketing lesson gleaned from the 2016 election, 57% cited that understanding the demographics and values of a brand’s customers is more important than ever. So is transcending tribalism. According to Sprout, consumers said they were less interested in hearing a CEO’s opinion than learning about his or her personal experience regarding an issue. Instead of attacks on politicians, they wanted to know which charitable causes a company was supporting.

As AdWeek reports:

A brand’s morals and beliefs should inform the way it talks and interacts with consumers and their journeys and society at large, not the other way around. Having a point of view on issues that matter to a brand—and ultimately, its consumers—is a categorical imperative.

In a letter to large companies in the U.S., UK, France and Germany, BlackRock’s Larry Fink summed up what he saw coming. He urged companies to “understand the societal impact of your business as well as the ways that broad, structural trends—from slow wage growth to rising automation to climate change—affect your potential for growth.” Fink continued:

The time [has] come for a new model of shareholder engagement. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society. Companies must benefit all their stakeholders, including shareholders, employees, customers and the communities in which they operate.