How should advisers approach ESG with different generations?

There is still a camp out there that thinks ESG is a fad, but it’s a definite change.--Catriona McInally

“Businesses are increasingly facing pressure from regulators, society and government, which forces them to think longer term and be mindful of the planet, their employees and the way they make money. Respond well and they will thrive, but, fail to engage, and they could face fines, scandal or bankruptcy.”

This core narrative is largely generation neutral. Younger people have been quicker to ‘get it', but older people are also getting it and, because they have more money, account for the bulk of ESG investing.

However, differences in attitudes towards these investments from younger people are frequently highlighted.  

Rebecca O’Connor, head of pensions and savings at Interactive Investor, says: “Younger investors may want to hear the stories behind the investments and be given more detail about the companies within the funds and how they rate for ESG, and they may want this information as much as the financial and risk profile of investments. 

“They will want to know that their adviser takes these matters seriously too. ESG should be presented as on a par in terms of priorities for this generation, whereas for their parents, who may have more pressing financial needs and requirements, it may be more of a 'nice to have'.

“That’s not to say the younger generation doesn’t want to make a decent return too,” continues O’Connor. “Of course they do, but they want to have their cake and eat it and don’t see why this shouldn’t be possible. It’s best to find out attitudes at the beginning and then keep up the questions as conversations develop.”

Maria Nazarova-Doyle, head of pension investments at Scottish Widows, adds: “Our research has found that the main difference in generations’ attitudes to investing is how they consume data and information. Younger investors want to quickly understand what sits under the bonnet of their investments and expect to have this information at their fingertips.”

But some feel the generational message is being overplayed and that advisers should not let assumptions about age distract from focusing on clients’ personal requirements. 

Younger investors may want to hear the stories behind the investments and be given more detail about the companies within the funds and how they rate for ESG, and they may want this information as much as the financial and risk profile of investments.--Rebecca O'Connor

Delyth Richards, head of the client solutions group at Kleinwort Hambros, says: “It’s not necessarily true that it’s just younger generations who are more instinctively drawn to ESG. We have multi-generation families where older generations have had a deep focus on the social and environmental impact of investing.