In an industry characterised by product commoditisation, businesses that move aggressively to integrate these capabilities into their offerings will be able to build and sustain an advantage.
Larger asset managers are probably best positioned because they have the resources to invest in building up this expertise, even though these services are unlikely to generate revenue directly.
Smaller, more capital-constrained organisations might be faced with more acute trade-offs. Whether resources are dedicated to efforts like this will likely depend on leaders’ willingness to go beyond the consideration of short-term, first-order economic consequences.
The asset managers that capitalise on this opportunity will be doing themselves and the planet a service. Climate change is among the most daunting problem mankind faces, and a significant part of the solution lies at the feet of long-term investors, who hold the power to starve businesses whose futures are in question and to provide a bounty to others more likely to thrive.
Asset managers’ role should go beyond providing responsible investing products; it should be about providing climate expertise and hands-on consultation that helps clients transition their entire portfolios, while still generating the returns they need to satisfy all the other commitments they have made.
Asset managers can help meet the challenges that will unfold over the coming decades, if they start embracing phase two now.
Joshua Zwick is a partner in Oliver Wyman’s financial services practice