How ESG strategies can help boost income

Financial adviser Duncan Glassey of Wealthflow believes that adhering to ESG principles is a good sign in itself, as he says: “I believe that an ethical long-term outlook can enhance performance, as in many ways, ESG is about good company management. What gets measured gets done.”

Lisa Ashford, director and chief executive of Ethex, is also of the opinion that effective company management is key: “More and more companies are realising that it is good business practice to apply ESG principles – and that by not doing so introduces risk factors.” 

Changing views

There are, however, still some reservations with regard to ESG. While agreeing that it is a positive development, financial adviser Keith Churchouse of Chapters Financial points out that the details nevertheless require close scrutiny.

He comments: “We have seen a steady growth in ESG enquiries from clients – it is clearly a growing trend and that has to be a good thing.

"Advisers have to exercise caution, though. Just because it is a good thing does not mean that it is without risk and that has to be fully explained to clients.” 

The more they are aware of this, the more their confidence will grow.  Lisa Ashford

Further raising adviser awareness of ESG is key to overcoming concerns, according to Ms Ashford, who says: “Some financial advisers are quite sceptical about how they can invest their clients’ money in ESG and also get a good return.

"It is important that they are aware that there is evidence to support this – the more they are aware of this, the more their confidence will grow.” She adds: “It is becoming more and more established that portfolios which factor in ESG can outperform those that don’t. The more evidence there is, the more it will help shape people’s attitudes towards ESG.”

Ms Ashford also looks beyond immediate returns, as she says:  “There is not just room in the market for ESG funds delivering an income stream at the moment – there is room for those whose sole purpose is to achieve a positive impact, for instance game-changers such as electric vehicles.

"While they may not be paying a dividend at the moment, they have huge potential. The same goes for clean energy and sustainable transport.”

She concludes: “Historically, the perception was that if you are investing in the social good, you had to forego financial returns, but that is not the case now. Now, you can have both. It’s not a trade off any more.” 

Fiona Nicolson is a freelance financial journalist