The role of the adviser in getting investors to understand what active ownership means will become even more important if the Financial Conduct Authority's scheme on environmental, social and governance labels goes ahead, according to this week’s FTAdviser podcast guests.
Speaking on the FTAdviser podcast, Ita McMahon, partner in the investment management team at Castlefield, said that when she speaks to advisers at her firm, they tell her that clients have usually heard about screening and exclusions but they have not heard about active ownership.
But once clients knows about it they are really interested in the idea and want to hear examples of what the company is doing in terms of active ownership.
She added: “Looking ahead, the idea of active ownership is absolutely central to the sustainable fund-labelling scheme the FCA consulted on earlier in the year.
“If that scheme does go ahead, the topic of active ownership will start coming up more and more in conversations with clients.”
This also means it will become even more important for advisers to be confident when talking to clients about ESG terminology, McMahon added.
“What we found over many years of doing this is that one client’s definition of sustainable investing can be very different to the next, so advisers will need to have ESG and sustainability knowledge to decipher a client’s specific requirement and then to be able to match it to the specific funds that makes sense in terms of those requirements."
Carol Storey, climate engagement lead at Schroders, added: “Advisers play a vital role in education, but also as they get more sophisticated communicating the views of their clients to asset managers, we want to hear what they think about various sustainability issues and what they think is important to them.
“The ESG landscape is very noisy, quite nuanced and very complicated, so as an adviser, if you can really simplify that environment and focus on what is key for that particular client, that will be really helpful.”
Both guests agreed that investors and investment managers have many different ways to engage with companies, and with the conversation around net zero and active ownership widening, engagement strategies are becoming more sophisticated.
They also spoke about the different ways to engage with companies depending on the size of the business or the sector they operate in. Where the businesses are also based geographically is also important to how the engagement strategy is structured.
