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A Practical Guide to Sustainable Investing

Investing for a more sustainable world

Publication date:

02 June 2021

Last updated:

18 June 2021

Author(s):

Personal Finance Society

We are hearing a lot about sustainable investment and ESG (Environmental, Social and Governance) considerations recently. It has left some asking about whether this is a significant change in financial advice, or just another passing fashion.


There can be little doubt that we are looking at a permanent shift in the investment market, for three reasons:

  • First, environmental issues are no longer seen as a drag on business, but as a disruptive technology that will open up new markets and stimulate economic activity. A survey by the CBI and PwC in 2020 found that 80% of financial services businesses have set ESG as a fundamental part of their strategic plans.
  • Second, we live in a much more transparent world – the impact of regulation and social media combined means that it is far harder to keep secrets, and corporates’ governance and risk management must be far sharper to manage regulatory risks. The UK Government has put the target of reaching Net Zero by 2050 which has an impact on all its regulatory activity.
  • Finally, and most importantly, investors’ attitudes are changing – research by the UK Government shows that 68% of consumers say that they would tick a box to indicate they would like their investment to be sustainable if given the choice to do so.


Much has been made about the changes to MiFID that will require a specific focus on ESG factors within the advice process, but we should remember that the current requirements for advisers already require ESG factors to be considered as part of the advice process:

  • The FCA’s rules on competence require advisers to be aware of ESG issues, and how to build client preferences into their investment portfolio.
  • The FCA has also said that “clients’ objectives… should be explored and considered by advisers, regardless of whether they are financial or non-financial goals” – giving the FCA the right to intervene if, at some point in the future, ESG issues are considered to have been neglected.

So everything points to ESG issues being an integral part in the advice process, now and into the future. This guide gives strong good practice guidance, not just about the technicalities of an ESG approach, but also about how to manage conversations about ESG with clients.

Read 'A practical guide to Sustainable investing' Good Practice Guide (PDF)

 

This document is believed to be accurate but is not intended as a basis of knowledge upon which advice can be given. Neither the author (personal or corporate), the CII group, local institute or Society, or any of the officers or employees of those organisations accept any responsibility for any loss occasioned to any person acting or refraining from action as a result of the data or opinions included in this material. Opinions expressed are those of the author or authors and not necessarily those of the CII group, local institutes, or Societies.