ESG regulations and their impact on advice

  • Describe the regulation that will affect advisers on ESG investing
  • Identify the questions you should be asking your clients
  • Explain what impact this will have on your advice proposition
  • Describe the regulation that will affect advisers on ESG investing
  • Identify the questions you should be asking your clients
  • Explain what impact this will have on your advice proposition
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ESG regulations and their impact on advice
  • Have you signed up to the Principles for Responsible Investment (PRI), and if so, can I see a copy of your most recent assessment report? 
  • Have you signed up to the UK Stewardship Code 2020? Are you a member of any other ESG related organisations?
  • Do you have any policies that outline how to incorporate Environmental, Social and Governance (ESG) issues into the investment decision making process? How do you monitor and evaluate compliance with the policy?
  • Do you have any voting and exclusion policies? Do you publish details of your voting track record? If it’s not available, why is this?
  • Do you have an engagement policy? What issues do you typically engage on, and can you provide examples?
  • What ESG data or research do you currently use? Do you have a specialist in-house team, or is it brought in by a specialist third party?

Focusing on these areas can help direct your research and as you start to integrate a responsible investment lens into your service and proposition, the next stage to consider is how to embed ESG considerations within your client fact finds and annual reviews.

Questions to consider including in your client fact finds and annual reviews

You may have been providing financial advice for two, three or maybe even four decades, and you may never have been asked any questions at all by your clients in relation to responsible investment and/or ESG factors.

However, this could all well change over the next couple of years due to the regulatory changes and societal shifts which have already been discussed.

Embedding ESG considerations within your client fact finds and annual reviews can ensure that you continue to provide a service and proposition that meets the evolving needs of your clients.

It could also put you in a prime position to take advantage of this new customer demand pool which is emerging around responsible investment. 

Everyone is already aware of the inter-generational transfer aspect of this. £1 trillion is expected to be passed down from this generation to the next within the next decade.

However, this demand pool does not just include millennials; it includes females as a demographic and it also includes those individuals who have yet to enter the advised market. To an extent, embedding ESG considerations within your advice process now can help future-proof your business.

What should you ask? 

Upcoming changes to MIFID II mean that soon, you will have to find out a client’s ESG preferences as part of fact finds and annual reviews. Some questions you might want to ask include: 

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