Richard Cook, CEO and Founder, Blackfinch Group

The Results Are In

Our adviser network recently took part in a survey on environmental, social and governance (ESG) investing. We aimed to ascertain client demand and adviser readiness for solutions aligned with ESG requirements.

The results showed that over 80% of advisers believed Blackfinch’s commitment to ESG investing was important, or very important, to their clients. However, less than 50% stated that their business was fully prepared to accommodate clients’ ESG focus.

Over 35% responded that they were in the process of preparing. Similarly, nearly 20% stated that while they had made a start on preparations, they would appreciate further advice.

Responding to Clients’ ESG Focus

Advisers’ awareness of their clients’ attitudes to ESG is part of wider change. Across society, we’re seeing a greater social conscience. From recognition of the climate change emergency to the need for social justice and equality, people’s views are shifting.

For many the coronavirus pandemic has crystallised their thinking, with concerns about the collective legacy – what will the world look like in decades to come? Within this, clients are increasingly concerned about the impact of their investments. With a growing interest in sustainability, clients want this to be based on an ESG approach.

At Blackfinch one of our foremost aims is to preserve family wealth for future generations. We work with advisers to help clients create a legacy that will mean a better world for their children and grandchildren. For Blackfinch and our customers ESG is part of that.

Gaining an Understanding of ESG

ESG can often seem difficult to pin down, with no one single definition and many different approaches. But, at its heart, it’s about investing with consideration for the impact a firm has on the environment, on society, and how it’s managed internally.

ESG is key to creating a more sustainable world and to the strong future performance of individual firms. By focusing on ESG factors, investment managers can work to ensure that firms and funds in which they invest are taking a responsible approach, now and in future.

A provider with solid ESG credentials is what’s needed. That means a firm that works with ESG at its core, is transparent on its ESG processes, can help advisers educate themselves and their clients and offers ESG-based solutions.

ESG: Another String on the Provider Bow

One thing ESG doesn’t mean is advisers or clients having to sacrifice any other element of the service and standards they’re looking for in a provider. It remains a given that advisers can look to partner with providers of ESG solutions bringing a solid track record overall.

Advisers can seek out firms offering higher return potential and lower fees and charges, backed by expert yet accessible teams. The transparent approach should be evident in quality marketing materials and good communication. It also goes without saying that providers need to have rigorous due diligence processes.

When viewed like this we can see that ESG is one key component of what firms offer. It also complements and enhances existing processes, bringing greater assurance of integrity.

Establishing Genuine Provider Commitment to ESG

Advisers already have a multitude of things to consider when assessing if a partnership with a provider could be suitable for their clients. How can you know that a provider is the one-stop shop you need, including that their ESG positioning is genuine, embedded in their values and their investment processes?

It’s important to weed out the firms that ‘greenwash,’ only paying lip service to the concept of ESG. As a starting point, advisers can look for providers with a background in ESG investing. They might have expertise in an area such as renewables. Or it may stem from investing in innovative new firms making a positive impact.

Advisers can also look for providers that are signatories to the Principles for Responsible Investment (PRI). A firm that has become part of this United Nations-backed global network and has publicly shown its dedication to ESG investing. It means the provider is working within a community seeking to build a more sustainable financial system.

Education and Transparency around ESG Investing

With complexity increasing across financial markets, legislation and products, it’s important for advisers and clients to have a clear route into ESG.

Providers have a key role to play in providing as much support and education as possible for advisers, and in turn, their clients. Those offering ESG-focused materials to share with clients, from overviews to insights, will be most helpful to advisers.

These policies must explain how the provider assesses potential investments for ESG factors including the screening processes it uses. They should also cover what standards it holds them to, both at point of investment and on an ongoing basis. A company which has a long-term commitment to ESG will be looking at encouraging this in others over the long-term.

Accessing ESG-Focused Products

As advisers navigate the investment landscape, they’ll find many different approaches to ESG investing. This includes how to quantify ESG impact.

Some commonality has emerged on this. Many ESG investors now draw on the frameworks set out by the PRI and the United Nations Sustainable Development Goals (SDGs). The SDGs are a universal call to action, expressing an intent to end poverty, protect the planet and improve the lives and prospects of everyone, everywhere.

The 17 SDGs were adopted by all UN Member States in 2015, as part of the 2030 Agenda for Sustainable Development, which set out a 15-year plan to achieve the goals. They have since become a foundation for many ESG investors. In turn, they’re a critical element that advisers can look for when assessing a provider’s products and ESG processes for clients.

Creating Long-lasting, Sustainable Partnerships

Providers that can deliver, support and educate on ESG in all the above ways will be key for adviser businesses looking to future proof.

When this comes in the form of a partnership approach, it involves a provider listening to and supporting advisers every step of the way. It could include working together to design products from the ground up, so they’re aligned with both adviser and client requirements. It will also mean that the provider can adapt and be flexible, evolving products to continue to meet adviser and client needs.

At Blackfinch we believe symbiotic relationships are invaluable. As the provider takes on adviser feedback, businesses grow alongside each other, with a shared focus on success.

We’ve always worked with this approach and now we offer our fully fledged Adaptations Partnership Programme. It’s a bespoke service for adviser firms, dedicated to growing businesses and achieving advisers’ goals through resource sharing. We’re here to help advisers with ESG and more.

Further Information

At Blackfinch we’re working towards a more sustainable future. As an ESG investor we offer a range of ESG-focused solutions:

• Adapt IHT Portfolios: Flagship Inheritance Tax solution with four portfolios including an ethical option, with ESG factors integral across all
• Adaptation Funds and Managed Portfolio Service: Multi-asset outsourced solutions all aligned with Blackfinch’s ESG principles
• Blackfinch Ventures EIS Portfolios: Investing in innovative new technology firms creating a positive impact through solutions that can change how we live and work
• Adaptations Partnership Programme: A bespoke service bringing expertise from across Blackfinch Group, to provide support for every stage and every aspect of an adviser’s business

To learn more about Blackfinch’s ESG capabilities and work with advisers, contact us:

t: 01452 717 070 w: blackfinch.com e: [email protected]

Capital at Risk.