Talking Point  

What you need to know about ESG investing

  • List the economic and social drivers behind growing demand for ESG investment strategies
  • Understand and explain the value and risks of ESG-focused investment portfolios
  • Describe the complexities of ESG investing to current and prospective clients
CPD
Approx.30min
Understanding ESG investing
How to help clients navigate the complexities of responsible investments
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Environmental, Social and Governance-focused investing has gained popularity in recent years, with more “considered” investment solutions paving the way for a future that is both profitable and sustainable.

But the adoption of ESG investing has not gathered pace at the same speed uniformly.

For example, ESG-related ETFs are more popular in Europe than in the US, according to research company ETFGI, which found some 60 per cent of ESG ETF assets are domiciled in Europe.

Some say investing in sustainable funds has reached an "inflection point", according to a report – The Evolving Approaches to Regulating ESG Investing – by Morningstar.

In the report, it stated that while 2018 saw a 40 per cent dip in flows to €37.4bn (£33.4bn) from the previous year's €57.9bn, it was a lot less than the 80 per cent slump in flows to the overall European fund universe.

"Passive sustainable funds bucked the overall trend with an increase in assets of 5.3 per cent to €76.9bn,” it said.

Yet interestingly, a recent FTAdviser poll found that one-third of advisers surveyed would never consider ESG funds.

Commenting on this result, Julia Dreblow, founding director of SRI services and Fund EcoMarket, said: “I know opinions on environmental and social issues vary, but this implies that one in three advisers would overrule their client's wishes… particularly terrifying at a time when the rest of the investment industry is heading in the opposite direction.”

So what are adviser’s clients to make of all this? How can advisers ensure they communicate the complexities of responsible investing to current clients, but also attract new clients?

Talking Point, in association with Schroders, considers how advisers can help investors understand and seek out ESG investments.

The report, which can be read by clicking the link in the image above, qualifies for an indicative 30 minutes' worth of CPD. 

victoria.ticha@ft.com

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. There is a real demand for ESG strategies and intermediaries should adapt if they wish to attract and keep clients in future, true or false?

  2. Which one is false?

  3. Which one is not a benefit of ESG investing?

  4. Which one is not a risk of ESG investing?

  5. What is the correct term for when a company boasts about environmental credentials without translating it into action?

  6. FCA chief executive Andrew Bailey used a speech last year to highlight two areas of industry growth, what were they?

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You have successfully answered all the questions correctly, well done!

You should now know…

  • List the economic and social drivers behind growing demand for ESG investment strategies
  • Understand and explain the value and risks of ESG-focused investment portfolios
  • Describe the complexities of ESG investing to current and prospective clients

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