How to manage responsible investing within a multi-asset portfolio

Hoy adds that resilient portfolios are those that take into account potential ESG risks and opportunities.

While this does not have to be exclusionary, it can sometimes mean passing up a company engaged in controversial practices.

Using influence for ESG issues is becoming increasingly important to potential investors.Laura Hoy, Hargreaves Lansdown

These types of businesses come with a high degree of risk because they are likely to face regulatory resistance, Hoy says. ESG ratings are a good way to uncover best-in-class investments in order to preserve diversity while still keeping an eye to the future.”

But Hoy adds that ESG-compliant firms are best placed to thrive as the UK’s society shifts to embracing more ethical practices.

She said: “Using influence for environmental, social and governance issues is becoming increasingly important to potential investors. Working to up a company’s ESG profile is a win-win.

"It should benefit investors in the long run, because it means the business will be well placed to thrive as society shifts. In the nearer term it makes the company more investable for a wider range of potential buyers.”

As UK culture moves to incorporating more ethics into financial decisions, the popularity of stewardship is understandable as this involves responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society.

Earlier this month, Olivia Mooney, responsible investment consultant and stewardship lead at Hymans Robertson, commentated on how the use of stewardship by clients and their managers is increasingly being recognised as key in the development of long-term approaches that deliver sustainable value and address climate issues and the transition towards more sustainable economic activities.

Mooney says: “Over the last 12 months we’ve updated our stewardship guidance, tools for clients and expanded our team in recognition that effective stewardship demands resource.

"And we will continue to build on this to ensure that high-quality, well-resourced stewardship becomes the norm.”

Interestingly, Mel Kenny, chartered financial planner at Radcliffe & Newlands, says multi-asset portfolios can slowly start to fulfil stewardship responsibilities.

Kenny says: “They can invest in companies which have the potential to operate in a more responsible way and be part of the change by having influence over the decision-making process as a significant investor.”  

Investment managers need to ensure they are staying up to date with the latest products, research and policy developments in sustainability.Hadewych Kuiper, Triodos Investment Management

However, he argues that an ethical investor with strong values may find such a portfolio problematic.