Firing line  

My journey from SJP to ESG-focused advice firm

My journey from SJP to ESG-focused advice firm

When David MacDonald envisioned his retirement, he planned to be spending most of it walking his dog and picking up plastic bottles on the beach as a way of contributing to the environment. 

Little did he expect to be running a financial advice business exclusively focused on environmental, social and governance factors. However, that is what he did.

Mr MacDonald left St James’s Place in 2018 after an 11-year tenure, to set up his company called The Path. 

He says he was motivated by an emerging interest in environmental matters over the past few years, after observing that a number of fund managers were not investing sustainably, despite appearing to do so. 

It seems many of them were engaging in the process of greenwashing, which is when companies appear to be more sustainable than they are. 

“There is a lot of pressure by environmental activists – such as Extinction Rebellion – on local councils and institutions to divest any investments made into fossil fuels out of their pension funds. 

“Some faith-based groups and charities are keen to move their money out of fossil fuels,” Mr MacDonald says.

The profit pursuit that drives companies to try and make money “regardless of any situation” also facilitated his decision to found The Path. 

He says: “I came to realise that a lot of companies that people invest in have got investments which encourage the use of fossil fuels.” 

While Mr MacDonald says capitalism is needed in order for clients to maximise profits, he questions whether it has prevented people from wanting to invest sustainably. 

Mr MacDonald says The Path involves dealing only with clients who have got the desire to have their personal financial portfolios aligned with ESG investments. 

However, he has not actually come across any clients who are not willing to consider ESG factors while investing. 

“We started [onboarding clients] before Christmas and things are gathering pace through [the first quarter of the year],” he adds. 

The fees levied by the advice company are typically around 2 per cent of the funds invested with a 0.75 per cent ongoing management fee. 

He says the main challenge of running the business is assessing whether a market exists in the first place. 

“We started with a clean sheet of paper, no existing clients, no enquiries, no real model to follow.

“The biggest challenge is understanding and reacting to consumer demand and forging into the unknown. Is there a market there?” he adds. 

“I was fed up being part of this capitalist system, which I had naively imagined to be problematic from an environmental perspective,” Mr MacDonald says.

Mr MacDonald came into the industry by chance. He was born and raised in Edinburgh. He says: “There were only two careers in Edinburgh at that time. One was banking, the other one was insurance.