After the transformative year that was 2020, sustainable investing has continued its dramatic evolution.
With growing worldwide concerns of climate change, people are increasingly conscious about the choices they make. From where they shop, to how they invest their money. As a result, we’re seeing an accelerating trend in investors opting for sustainable investment solutions.
In fact, in 2020 almost half (47%) of the world’s investors chose to invest in sustainable investment funds rather than those that didn’t consider sustainability factors according to the Schroders 2020 Global Investor Study.¹
While it’s great to recognise that there is indeed growing demand, sustainable investing is often a freely used term. So, let’s review what it really means – both for you as an adviser, and for your clients.
What is sustainable investing?
Sustainable investing is not only about the profits a company generates but also how it generates them. This involves making responsible investment choices that benefit investors, shareholders, and the community to deliver a positive outcome for everyone.
Sustainable investing isn’t just about protecting the environment, it is about pioneering better ways to do business across the board and seeking positive social and economic effects for the future.
Why do you need to consider this as an adviser?
The FASEA Code of Ethics in Australia, which came into effect in 2020, requires advisers to consider clients’ broader, long-term interests and likely circumstances. This also includes consideration for limiting advice to only sustainable or responsible investments, where it is in the client’s best interests.
These changes now arguably require you to incorporate a client’s sustainability preferences into their suitability assessment. It will not be enough to simply tick a box confirming you’ve asked a client about their sustainability needs; taking sustainability considerations into the advice process is now a requirement that you will need to evidence to comply with these standards. Read more about this here.
How can you work with your clients to provide more sustainable investing solutions?
We’ve compiled 3 simple ways you can take advantage of the fast-growing and highly anticipated long-term trend of sustainable investing.
1. Create the opportunity
Some clients may not have approached you about sustainable investment options so you may not think to include them alongside your practice’s investment strategies. More often than not, your clients aren’t asking because they aren’t aware it’s an option.
As we discovered through our 2020 Global Investor Study, many financial advisers are only providing their clients with information on sustainable investing when prompted by the client.
Offering your clients the opportunity to invest in a more sustainable and ethical way may encourage them to invest more in stocks and funds which align with their values.
What’s equally essential is to ask your clients what is important to them regarding their sustainability preferences – in other words, what does sustainability mean to them? For some clients, they may wish to avoid investing in gambling or tobacco while others may choose to only invest in fully environmentally sustainable companies.
Sustainability means something different to everyone: as an adviser, it is crucial that you form a holistic view of your client’s underlying needs and desires to provide them with truly personalised advice.
As more and more individuals are recognising the importance of purchasing sustainable products and services, it’s important to have an sustainable investment offering. This can provide you with growth opportunities with existing clients and attracting new clients and could also provide your practice with an advantage over competitors who are not offering sustainable investment options.
2. Show the financial results
In the past, investors may have had to choose between their investment returns and their values. But now that the demand for high-performing sustainable investment options is growing, the supply is quickly catching up.
Being able to show the value and high-performance outcomes many sustainable investment portfolios are achieving, may encourage clients to take this new investment path.
At Schroders, our goal is to allow investors to hold true to their values without having to sacrifice their financial returns. As such, active ownership plays an increasingly important role in the sustainable investment space.
3. Walk the walk, don’t just talk the talk
With so many sustainable investment options available and so many terms and jargon to learn, it can be difficult for your clients to know if the companies and funds they are investing in are delivering what they say they will. As a result, many investors are left to question whether their investment choices are truly having a positive impact on the planet.
“People want to see change rather than simply hear of plans to implement it.”
Peter Harrison, Group Chief Executive of Schroders
If you are starting to make your way into the sustainable investment space, you need to be prepared for the tough-hitting questions that your clients will ask you such as “what kind of companies are the sustainable investment funds actually investing in?”.
Transparency has never been more important. Your clients will want to know that their investments are having a positive impact – which can often be difficult to calculate and demonstrate.
But with the right guidance and by partnering with a trusted investment manager, you can be sure that you’ll have access to all the data and insights to answer questions thrown your way.
To learn more about how you can talk to you clients about sustainable investing, read our Practical Guide to Sustainable Investing.
A focus on doing the right thing
As a leading global investment manager, we recognise that we have an important role to play in shaping a brighter future for all of our stakeholders.
Not only are we here to provide strong investment performance through active management, but our active ownership approach allows us to influence the companies we invest in.
And when it comes to sustainable investing, our market-leading research can help you stay one step ahead of the competition, and up to date with the demands of your clients.
Schroders is passionate about supporting adviser practice growth. Our range of client-facing materials can help you communicate the value and integrity of sustainable investment options.
We want to arm advice practices with the information, support, and guidance they need to grow their client base and business. Because ultimately, the more advisers we can support to grow, the more opportunities Australians have to receive quality, life-changing financial advice.
Learn more about Sustainability at Schroders and what it means for the future of your practice.
1 Schroders Global Investor Study 2020