2020: the tipping point for investing responsibly?
By Ben Peele - July 27, 2020
Great news hit my inbox at the end of last week: PortfolioMetrix has been shortlisted in the Portfolio Adviser Wealth Partnership Awards in the “ESG advocate” category. We have to wait until November to find out if we’ve won so we’re keeping our fingers crossed.
ESG (Environmental, Social and Governance) is the hot investment topic right now. A quick Google search for ‘ESG investing’ returned over 40 million relevant links and the financial trade press is full of news and information on the subject.
Considering just a few years ago ‘ethical investing’ was regarded as very niche, it seems 2020 and all its many challenges could be the catalyst for people to invest in making the world a better place.
ESG should always be central to the investment process
For us at PortfolioMetrix, ESG has been an integral part of the investment management process from the outset: all our portfolios can be considered ESG aware. For those who want to go further, our “Sustainable World” portfolios (formerly known as Ethical Emphasis) provide an investment solution that is dedicated to ESG considerations.
PortfolioMetrix is driven by the desire to help our end clients meet their financial goals. Maximising investment returns over the long-term is obviously a key part of achieving this, but so is meeting the needs and constraints of individual investors. We believe ESG considerations feed into both of these.
Firstly, ESG considerations help to maximise risk adjusted returns by ensuring all risks are fully considered in the investment process and clients are being compensated for all risks taken. Secondly, having an ESG option allows advisers to suggest a portfolio that is suitable to their clients.
By taking ESG a step further with additional portfolios, we’re able to offer customised solutions that meet the requirements of clients interested in making ‘responsible’ investing a key feature of their investment strategy. This is not a new area for us: unlike some of our peers who have entered the ESG arena in the last year or two, we have a track record that is heading towards its fourth year, so our experience and knowledge is well developed.
Defining ESG and client appetite
Of course, ESG is a broad church and it’s an area that is fraught with challenges of its own. To help advisers get a better understanding of what ESG means in practice, how it can be interpreted, how to capture where clients sit in their desire to embrace a more ‘responsible’ form of investing, what it means for performance plus many other aspects, the PortfolioMetrix team is currently working on a comprehensive white paper, due for publication soon.
The aim is to create a definitive guide that will help advisers get fully up to speed with this important and burgeoning area of investing as well as to understand the regulatory requirements regarding ESG that come into force next year.
What’s your take?
Before we finalise our white paper, we’re keen to hear from advisers. What’s your take on what clients want from investing responsibly? Do you have concerns about how to understand what your clients really want? Are there areas that you could do with much better information? Your feedback will be invaluable so please do get in touch via firstname.lastname@example.org.