For financial professionals only
A 2019 UK Government survey found that, “despite more than half the population saying they are interested in responsible and impactful investing, stated take up and awareness of responsible and impactful investment products is low.”
This sounds like a cue for more criticism of advisers – as if it was an easy process to find the right match between an individual’s attitudes to ethical investment and a suitable product. We know that it can be a very difficult task to find the perfect fit between an individual and the right investment, especially when strongly held views are part of the equation. Sometimes perfection is impossible. Often the right product does not exist or is hard to find. More and more, ‘greenwashing’ is confusing consumers.
So, when we created our ethical investment solutions we did so in partnership with specialist advisers with a strong background in this field. They knew the pitfalls and could help us define a range of portfolios that might appeal to a broad church of clients. Our ethical investment committee has maintained ethical adviser representation since inception.
How serious are people about investing ethically?
While more than half of the investors surveyed in the Government’s study like the idea of supporting their ethical views through responsible investment, it seems at first sight that they would not do so at the expense of all other factors.
When asked how far they agreed with the idea of investing responsibly if the returns they received were lower, only 28% were still interested. Only 6% strongly agreed when asked if they would still invest ethically if it meant an inferior return.
And when asked if they would still invest if their ethical investments exposed them to greater risk, 31% were still interested and only 8% were still strongly attracted to the idea of ethical investment.
Ask the right questions
What these results show is that, for all sorts of bad reasons, ethical investments carry a perception of both lower return and greater risk. If they didn’t the people surveyed would have answered. “That’s a stupid question.”
The facts are that with professional portfolio management, risk and return can be held in a tight relationship, within a portfolio risk framework, and an investor can make a sensible judgement on how much risk they want to take.
What’s more, the evidence suggests no structural inferiority in the levels of return that professional ethical investment produces compared to conventional investing. Those questions really are misleading. It is perfectly sensible to invest ethically and expect returns comparable to those of conventional portfolios. And we have solutions which make this whole process more straightforward.
Assessing suitability demands care
A key part of the advice process is assessing often conflicting needs and goals of your diverse clients, then coming up with a plan that best meets them. This may mean encouraging them to clear debt before they bolster savings. It may mean explaining the benefits of using surplus cash for pension contributions, even if they worry about locking money away.
Likewise, your client may have strong personal views on animal testing – medical and cosmetic – but continue to need dividends from businesses like GlaxoSmithKline because they have an overriding need for income.
Understanding these dilemmas from the adviser’s perspective helped frame our ethical portfolios into four different profiles, each with a choice of ten risk grades. You can consider with your client which of the four profiles best matches their preferences – or if they would prefer a combination, through our multi pot software. If animal testing is a bridge too far, Profile D could suit. If the emphasis is more towards investing with an eye on progress towards Sustainability, Profile A could be right for your client.
It’s all part of going that extra mile just for them, taking their unique personal situation and social and environmental opinions into consideration.
If you’d like to find out more about our ESG and ethical investment solutions, please get in touch on 0117 204 7678.
Read more about ESG investing
Why women are leading the way in ESG investing
Ethical Retirement: A realistic possibility?
For financial professionals only
A 2019 UK Government survey found that, “despite more than half the population saying they are interested in responsible and impactful investing, stated take up and awareness of responsible and impactful investment products is low.”
This sounds like a cue for more criticism of advisers – as if it was an easy process to find the right match between an individual’s attitudes to ethical investment and a suitable product. We know that it can be a very difficult task to find the perfect fit between an individual and the right investment, especially when strongly held views are part of the equation. Sometimes perfection is impossible. Often the right product does not exist or is hard to find. More and more, ‘greenwashing’ is confusing consumers.
So, when we created our ethical investment solutions we did so in partnership with specialist advisers with a strong background in this field. They knew the pitfalls and could help us define a range of portfolios that might appeal to a broad church of clients. Our ethical investment committee has maintained ethical adviser representation since inception.
How serious are people about investing ethically?
While more than half of the investors surveyed in the Government’s study like the idea of supporting their ethical views through responsible investment, it seems at first sight that they would not do so at the expense of all other factors.
When asked how far they agreed with the idea of investing responsibly if the returns they received were lower, only 28% were still interested. Only 6% strongly agreed when asked if they would still invest ethically if it meant an inferior return.
And when asked if they would still invest if their ethical investments exposed them to greater risk, 31% were still interested and only 8% were still strongly attracted to the idea of ethical investment.
Ask the right questions
What these results show is that, for all sorts of bad reasons, ethical investments carry a perception of both lower return and greater risk. If they didn’t the people surveyed would have answered. “That’s a stupid question.”
The facts are that with professional portfolio management, risk and return can be held in a tight relationship, within a portfolio risk framework, and an investor can make a sensible judgement on how much risk they want to take.
What’s more, the evidence suggests no structural inferiority in the levels of return that professional ethical investment produces compared to conventional investing. Those questions really are misleading. It is perfectly sensible to invest ethically and expect returns comparable to those of conventional portfolios. And we have solutions which make this whole process more straightforward.
Assessing suitability demands care
A key part of the advice process is assessing often conflicting needs and goals of your diverse clients, then coming up with a plan that best meets them. This may mean encouraging them to clear debt before they bolster savings. It may mean explaining the benefits of using surplus cash for pension contributions, even if they worry about locking money away.
Likewise, your client may have strong personal views on animal testing – medical and cosmetic – but continue to need dividends from businesses like GlaxoSmithKline because they have an overriding need for income.
Understanding these dilemmas from the adviser’s perspective helped frame our ethical portfolios into four different profiles, each with a choice of ten risk grades. You can consider with your client which of the four profiles best matches their preferences – or if they would prefer a combination, through our multi pot software. If animal testing is a bridge too far, Profile D could suit. If the emphasis is more towards investing with an eye on progress towards Sustainability, Profile A could be right for your client.
It’s all part of going that extra mile just for them, taking their unique personal situation and social and environmental opinions into consideration.
If you’d like to find out more about our ESG and ethical investment solutions, please get in touch on 0117 204 7678.