The new era of ESG investing
A historic shift of assets is emerging. Take the lead, with us and your clients, in this transformation.
There is plenty of interest in sustainable investing, but not much knowledge, according to a survey commissioned by Vontobel. Banks and financial intermediaries in particular are widely trusted as advisors on ESG investments.
Sustainability is a hot topic. However, many have never heard of investing based on environmental, social and governance (ESG) criteria; those clients that have heard of it often want more advice and information. These were the findings of a survey of 5,146 clients from 16 countries conducted in August 2020 by Longitude, a Financial Times company, for the second time on behalf of Vontobel.
When asked which person or category of people would be most likely to convince them of the benefits of ESG investments, nearly half responded that they would be most easily persuaded by their financial advisor:
*Multiple responses possible
Source: Longitude survey, August 2020
This findings suggest that financial advisors have an important role to play in providing much-needed information about sustainable investments. This is a huge opportunity for financial advisors: They can actively address this client need, advise and educate their clients and present them with investment solutions that reflect their values.
This process involves more than merely presenting possible products to clients. Financial advisors also have to refute the stubbornly held misconception that returns are unavoidably lower on investments that are made based on ESG criteria.
Studies show that companies with high standards in environment, social, and governance (ESG) issues usually manage their risks better. Their profits may also be higher than those of their competitors as the long-term financial success of a company goes hand in hand with responsible use of natural resources. This can also have a positive effect on share prices.
It is essential to present examples (of which there are many) illustrating this point when talking with clients.
This is a good time for financial advisors to address ESG investing. The EU has developed an action plan that will make it easier for Europe to go carbon-neutral. The plan includes an environmental classification for investment products (taxonomy) and has major consequences for investment advisory services.
One key element is the disclosure obligation: Asset managers and financial advisors now have to state whether and, if so, how each product – whether sustainable or not – takes account of sustainability risks. In addition, they have to declare the sustainability goals and criteria of all products that are marketed as sustainable.
As a multinational investment house, we well aware of our responsibility towards our stakeholders to play an active role in putting our economy and society on a sustainable footing for future generations.
Over 25 years after launching our first sustainable investment solution, we are still seizing the initiative to talk to you about the challenges we face but also to show you how this historic transformation process has opened up unique investment opportunities for you.