Case Study: How I talk ESG with clients

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Case Study: How I talk ESG with clients

Not having the conversation could be detrimental. To suddenly discover that someone you have been dealing with has not bothered to find out that you are actually serious about the environment is going to be quite a tricky conversation.

Having and recording this conversation covers the compliance issue – by asking, you avoid the risk of comeback if they have the sustainable investment conversation elsewhere.

If you are new to the subject, the opportunities to confuse both yourself and your clients are myriad (ethical/impact/positive tilt/avoidance/ESG/SDG anyone?).

Model portfolio service

If I were dipping a toe into this market I would find a sustainable MPS provider and use that as my go-to offering.

We use LGT, but there are a number of excellent alternatives, and it is possible that your current MPS provider (should you use one) either has, or is planning, a sustainable option.

We are currently working on an assessment tool for sustainable MPS, which will be available shortly to all IFAs, free of charge. 

We chose our provider following extensive due diligence. They offer everything we require, plus an excellent manager in Phoebe Stone, who combines investment knowledge with great passion for the subject.

A vital part of their sustainable MPS approach is a range of avoidance policies; certain activities are incompatible with a sustainable mandate, and our clients expect such areas to be avoided.

However, this is not a feature of all MPS with a 'positive ESG approach'. I recently reviewed an MPS making such claims with no negative exclusions at all – holdings included a huge arms manufacturer, tobacco firms and coal miners.

However you may feel about such issues, clients with a sustainable mandate expect such areas to be avoided.

An MPS with avoidance criteria should at least reduce accusations of greenwashing, but be prepared to both ask the manager how they address this issue and to answer the question when it is posed by a client.

Be ready for the inevitable 'how much will I lose if I do this/what will it cost?' question.

Having chosen a sustainable MPS provider, understand how they make their sustainability decisions, the assets into which they invest, and then gather information and stories about those funds.

Clients with a sustainability bent like to know where their money is invested and the positive environmental, social and sustainability impact that it is having.

Remember that it does not need to be an all-or-nothing approach, but starting with some exposure to this market is worthy of consideration and assuredly better than avoiding it altogether.

And finally, be ready for the inevitable 'how much will I lose if I do this/what will it cost?' question.