Or, as a pragmatist do you instead accept that some businesses are materially worse than others and engage with them to support their transition for the good of all? Or, thornier still, is whether you levy the same punishment on an emerging market (EMs) energy company as a European one, given that tighter regulations will likely take longer to be enforced in EMs.
Every IFA client is different and special
Stopping to pause, I am amazed at how far we have come already. It was 30 years ago that I worked on the launch of what we called an Ethical Index fund. It proved to be a hot favourite with IFA clients at the time, and it was built on a simple exclusion approach – it was the FTSE All Share Index with a couple of hundred ‘offending’ companies excluded altogether.
But today’s clients no longer want a ‘one size fits all’ approach like this. There are a thousand different ways to save the planet, and we both can and should listen to investors’ preferences. Nuclear energy is wonderfully clean yet terribly dangerous. Wind turbines harness an unendingly renewable energy source but can extract a terrible toll on sea bird populations.
‘Know Your Customer’ is the mantra of every good adviser. AI tools mean we can extend this into the field of Responsible Investing in the retail sector in a way that is impossible for institutions. The trustees of a pension fund with thousands of investors will never get beyond guessing what the majority of them think is responsible investing.
Yet a carefully worked questionnaire can help elicit what’s personally important to an IFA’s client, recording this and playing back their answers for confirmation, before feeding these results into an AI ESG algorithm to drive investment selection. Please use a computer based questionnaire rather than paper, they are much better for personalisation and create much more engaging customer journeys.
Adrian Boulding is director of retirement strategy at financial technology firm Dunstan Thomas and Dr Daniel Philps is head of investment strategy and partner at Rothko Investment Strategies
