This week we held our first SPOTLIGHT: Conscious Investing online workshop and what a success it was! The idea of the workshop was to cut through the, sometimes deafening, noise that surrounds ESG and all that comes with it. To do this, we teamed up with a number of experts who each shared different viewpoints and analysed different areas of ESG. Read more about each session below…

Fidelity’s Max Palmer kicked the morning off by talking through the importance of decarbonisation considering current climate trends and how investors can play a part in achieving the goals of the Paris agreement. One of the key discussion points was how the transition to net zero by 2050 means striking a careful balance between physical risk (i.e., natural disasters brought about by climate change inflicting financial and human costs) and transition risk (industry spending to develop and adopt newer technologies to achieve carbon neutrality). The upshot is that the sooner we start on the transition to net zero, the more achievable it will be. Think about saving for retirement – it’s much easier to accumulate £1m over 50 years than 5 years. Max continued by outlining how Fidelity’s investment team integrate the drive to net zero within their sustainable investment funds, detailing their work on internal ratings, stewardship, engagement, and voting. The session was rounded off with an outline of Fidelity’s internal and external reporting methods.

Next up we had Kate Capocci from Evelyn Partners talking us through how ESG funds are researched, selected, and blended as part of a diversified portfolio. One of the key discussion points was the use, scope, and reliability of data and how that can be interpreted by portfolio managers; and in turn how that can be effectively communicated to investors. Kate also outlined some specific risks within sustainable investing, and some of the compromises that portfolio managers have to account for in trying to construct a sustainable solution.

Etcho were up next – their work involves developing a sustainability impact tool which rates companies and, in turn, investment funds on various sustainability metrics. Co-founders, Liall and Charlie discussed the potential surprises that one may find within an ESG fund under the current rules, like big oil conglomerates and large retailers who are not exactly well-renowned for their treatment of employees. They then told us further about the confusion within ESG at the moment regarding terminology and acronyms, and the steps they are taking to help clear this up in easily communicable reports for financial advisers.

Royal London then talked us through the various pieces of legislation around ESG and wider advice. Ryan Medlock discussed the recent Consumer Duty rules and upcoming sustainable fund labels following the FCA consultation paper on Sustainability Disclosure Requirements. Sadia Ghani then told us all about how sustainable investments can be built into advice propositions, including some helpful hints on how to segment your ESG client bank to ensure suitable and understandable strategies are being recommended to end clients in line with Consumer Duty.

And finally, we had Mike Appleby from Liontrust to wrap up by discussing how change is driven within the economy through advances in science and technology, business processes and developments within society and government; and in turn how this all links to climate change, which will provide plenty of new investment opportunities for businesses helping to develop new products and technologies in working towards addressing soaring global temperatures. Mike then went on to outline how individual firms can build efficiencies (recycling; lower energy use) into their own business models both to cut bills and emissions; and how Liontrust factors this into their own asset selection process.

If you missed it you can catch up here.

Alasdair Wilson – Investment Specialist