Partner Content by Royal London

The responsible investment advice journey: preparation and education

There is so much noise around responsible investment at the moment but how exactly do you prepare and start to engage with your clients in this area? 

Responsible investment is an area littered with buzz words and acronyms and understanding all of this alphabet spaghetti should be the defaqto starting point on this journey. A sensible starting point is familiarising yourself withthe four principal approaches to responsible investment. Royal London use the definitions from Square Mile Investment Consulting and Research.  These are:

  • Ethical exclusions funds which will avoid businesses or sectors that do harm to society or the planet
  • Responsible practices funds which consider the operational practices of the companies they invest in, while encouraging them to improve their environmental and social performance
  • Sustainable solutions funds which actively seek to invest in companies that provide solutions to social and environmental challenges and believe in the long-term financial benefits of doing so
  • Impact investing funds which aim to make a wider measurable positive social and environmental impact, as well as meet financial objectives

Familiarising yourself with these terms and what they mean will allow you to clearly communicate with your clients in an honest and consistent way. Solving this terminology puzzle is a key part of any client conversation in this area.

Learning resources

There’s a wide range of educational resources to tap into and strengthen your overall understanding of responsible investing.

You’ll find some excellent resources on the UNPRI website including guides, case studies and webinars. The MSCI website has lots of free content including ESG rankings for funds and other tools.

PIMFA launched its ESG Academy, which is a great resource for self-learning, as is the CFA 'certificate in ESG investing' which aims to deliver the benchmark knowledge and skills required to embed ESG factors into the investment process.

There’s then the ISO 22222 accreditation which is a globally recognised standard covering the best practice of ethical financial planning. In addition, there’s also an increasing amount of research papers readily available too which explore the issues in this field. For example, EY & Royal London have published a recent study which explores the various empirical evidence linking ESG considerations to corporate financial performance.

There’s no silver bullet for research resource and this isn’t something that can easily be outsourced. A strong sense of ownership is needed in this area, particularly to engage your clients.

Client engagement

Before just throwing in some additional questions into your client fact finds, it may be more beneficial to warm your clients up and engage with them on responsible investment themes. This will allow you to flesh out client interests and motivations at an early stage in the advice journey.

Certain events in 2020 have presented a unique opportunity to engage with clients on a number of different ESG issues. Equally, the 17 inter-connected goals of the UN’s Sustainable Development Goals framework can provide you with a sensible starting point for approaching prominent meta-trends such as climate change.

The next UN climate change conference take place in Glasgow this November with the UK assuming presidency at COP26. The drumbeat around this event has started to build and will only get louder in the next few months, presenting a great opportunity to engage with clients on environmental concerns. It doesn’t have to be anything sophisticated, it’s about sensing your clients’ needs from a responsible investment angle before formally integrating into your standard fact finding processes.