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Advising clients on sustainable investing

What advisers need to know?

Discussing sustainable investing with clients

Sustainable investing was gaining popularity before the coronavirus pandemic, but the outbreak has pushed the demands further up investor’s agendas. There are many factors that advisers and investors need to be aware of when investing sustainably including issues such as ‘green washing’, where funds can appear more ESG friendly than they actually are.

The Financial Conduct Authority (FCA) has now identified a number of priorities which will set out the regulator’s future work on green finance. The FCA will request issuers to implement climate change disclosures, integration of climate change risk and implementation opportunities into regulated firms’ decision-making processes, as well as greater access to green products for customers.

In a bid to stop ‘greenwashing’, the Sustainable Finance Disclosure Regulation (SFDR), effective on 10 March 2021, will see financial market participants and financial advisers disclose how they integrate ESG factors into their investment and risk management processes.

Potential questions for the fact-find process

While it is not mandatory for sustainability issues to be considered under the current suitability regime, it is certainly good practice to take them into account within the fact-find and annual review process. If you do want to ask clients some questions on this area, the following suggestions may be a good starting point:

  • How important is it to you to invest in companies that take a more responsible or sustainable approach to producing or delivering the products and services they offer?

Or, if you want to ask more specific questions on the three pillars of ESG investing:

  • How strongly do you feel about environmental issues when investing your money – factors such as climate change, resource depletion, waste and pollution?
  • How strongly do you feel about social issues when investing your money – factors such as employee relations, working conditions and human rights more generally?
  • How strongly do you feel about how a company is run when investing your money – factors such as executive pay and board diversity, political lobbying, bribery and corruption, and the company’s tax strategy?
  • Are there any particular companies, industry sectors or countries that you wish to avoid when investing your money because of ethical concerns, religious beliefs or other values that are important to you?

The regulatory backdrop and the implications for advisers is considered further within our Sustainable Investing and the Advice Process guide.

Do your clients understand ESG investing?

In this client-friendly guide, we aim to decode the concept and some of the complexity around sustainable investing, to help you and your clients have better discussions around ESG.

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Your guide to sustainable investing

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Sustainable investing glossary

A common issue cited with sustainable investing is a lack of clarity over the language used. Our glossary defines some of the more frequently used terms in this field of investment.


Sustainable Investment Finder

Our tool is designed to make the process of selecting sustainable funds easier. Take a look at how it could help to identify potential fund solutions, whatever a client’s sustainable outlook may be.

Important Information - Please note that the value of investments and the income from them can go down as well as up so your client may get back less than they invest.

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