A recent survey, on behalf of Smith & Williamson Investment Management, highlighted the differences between generations when it comes to ESG (Environmental, Social & Governance) investment models.  

In the older age groups 55% put climate change as their top ESG issue, placing social and governance issues lower down their priority list. When asked what companies should be focussing on, 9% mentioned diversity – even though 30% said they were motivated to align their investments with ESG principles since George Floyd’s death and the Black Lives Matter movement. Furthermore, executive pay was a concern to only 12% of respondents, and strangely only one in three felt business ethics was important.  

Younger generations (Millennials and Gen Z investors) had different priorities; social issues were high on their list. The survey revealed that 45% of these younger investors placed diversity as the leading issue that companies should consider. Furthermore, compared to their older counterparts, more of the younger investors were attentive to the actions of companies in responses to Covid-19 (64%), and were concerned about the disproportional financial and social adversity of Covid-19 on specific groups (62%). 

Regardless of the differing demographic responses, one thing remains clear – the number of investors (of all agesconsidering ESG investment continues to rise. This creates the question of how to accurately know if funds pass the “Ronseal” test, in doing “exactly what it says on the tin”. 

Fund ratings agencies are struggling to find a common method of assessing the key environmental, social and governance practices. Therefore, ESG ratings of the same funds can have marked variations depending on the agencymaking it difficult for both advisers and clients to draw meaningful comparisons and conclusions. Inconsistency and a lack of agreed standards can undermine what should be a simple choice for investors wanting to put their money to work in ways that sit comfortably with their values and consciences. 

Investors are increasingly engaged when it comes to their investments, so having a clear picture of their portfolio’s ESG credentials is vital. Fortunately, behind the scenesthings are making progress towards consistent reporting standards. 

TISA (The Investing and Saving Alliance) is a unique, rapidly growing body with over 200 members from across the financial services industryThey are “developing and delivering strategic policy outcomes and cross-industry infrastructure initiatives that shape the ongoing evolution of the financial services industry, creating a dynamic financial services marketplace that enables the financial wellbeing of UK” – quite the mouthful! 

A standard protocol is required to resolve the current opacity from poor data collection and communication. The recently introduced TISA ‘Good Practice Guide’ should serve as a template for ESG reporting obligations. However, the current environment is holding us back from further development of our True Wealth portfolios (our ESG-tilted portfolio offering). Thankfully, we are fortunate to be working closely with Dimensional Fund Advisers who undertake their own research with typical academic rigour. We are in conversation with themlobbying for ESG funds that mirror existing components within our portfolio range. We will keep clients informed as things begin to take shape and once we feel confident we can add new components. 

We continue to have discussions with our clients about our True Wealth portfolios, with a significant number of them moving across. Thank you for the continued interest, we will keep working on our plans. 

As the removal of restrictions gathers pace, we will be contacting clients soon to offer the option of in-person meetings – for those who would feel comfortable getting together again. We intend to continue offering a range of options to make sure we continue to meet in whatever way clients prefer.