Clients are increasingly demanding greater environmental responsibility from their investments, and advisers need to make sure they aren’t playing catch up.
The bushfire emergency was a flashpoint for responsible investing in Australia, with more and more investors taking an interest in what their money was being spent on.
“We saw, through the bushfires, this thriving consciousness around how people thought about their investments and thought about their impacts and what they could potentially be funding,” Leah Willis, head of client relationships at Australian Ethical, told the IMAP Virtual Adviser Roadshow.
“Once we come out of this the world will have changed dramatically, the way we operate will have changed dramatically, but one thing that will still be there is climate as a real consideration.”
Australian Ethical has tracked an increasing consciousness in how people consume – starting at the supermarket, with the arrival of ethically sourced products, and eventually spilling over into investments.
“$980 billion worth of assets professionally managed in Australia now have some kind of green or ESG or ethical or sustainable overlay,” Ms Willis said.
“That’s almost one in two dollars in Australia that’s now being managed in some kind of responsible fashion.”
And while many products already offer screens against tobacco and armaments, investors are increasingly trying to limit their exposure to fossil fuels investments and are more and more interested in human rights.
“Consumers are demanding and wanting different things to what the ESG providers are necessarily providing,” Ms Willis said.
“We as managers need to go further to understand these concerns and be able to address them in portfolios.”
Key to aligning client needs and values with their investments is understanding the different facets of responsible investing – from ESG and ethical investing to impact investing, which Ms Willis said “will be a space to watch” over the next decade.
“How are you going to lead and guide your clients through this widening consciousness around investment?” Ms Willis said.
“And how will you align your recommendations to the positive impacts that clients are expecting to have on their investments to these critical social and climate issues that they’re concerned about?”
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