Embracing Responsible Investments
Environmental, Social and Governance (ESG) themes represent the largest current growth area in both investment management and in financial advice. For example, asset manager Blackrock predicts that the percentage of global AuM managed with an ESG focus will increase from c.8% in 2019 to c.28% in 2029.
What is Responsible Investment?
Responsible Investment is a strategy or practice to incorporate Environmental, Social and Governance (ESG) factors in investment decisions and ownership activity. But, do ESG funds bring in lower returns? According to Claudia Quiroz, Investment Director at Quilter Cheviot, it is possible to do good while earning an investment return, “consistently we have outperformed both the benchmark and the peer group. One of the important things is to understand is that the peer group is not the green fund, it is whatever was supposed to generate returns for the moderate client.”
So, what’s the size of the opportunity?
It’s becoming extremely apparent that there is a shift in attitudes towards responsible investing. In addition to the figures that Blackrock predict, research from The Economist Intelligence Unit (EIU) found that 76% of younger generations in the UK say it is increasingly important to consider ESG factors when investing, compared to 37% of older generations.
Quilter’s own research from Boring Money in April 2020, found that 25% of clients say that ESG factors are ‘very important’, even going so far as to say that they would ‘definitely’ accept lower investment returns or higher risks if those were necessary trade-offs.
How are we making ESG investments accessible to clients?
This new ESG line will now include two new funds - Quilter Cheviot Climate Asset Fund and the Liontrust Sustainable Future Defensive Managed Fund. The Quilter Cheviot Climate Asset Fund will be added as a Moderate solution and the Liontrust Sustainable Futures Defensive Managed Fund will be added as a Balanced solution. We’ve decided to focus on Balanced and Moderate as they are the two most popular client risk profiles..
Source: Quilter Update Jan 2021