ESG education a must for advisers

AXA IM head of ESG research and active ownership Yo Takatsuki said advisers would need to become more adept in coming years at discerning what the most suitable ethical funds were for a clients’ values and financial goals.

“Funds that have been established to target specific social and environmental objectives, often called impact funds, are becoming far more ambitious in their investment goals. They are attracting sophisticated investors who expect very clear and detailed reporting, both quantitative and qualitative,” Mr Takatsuki said.

“As client demand grows, advisers need to familiarise themselves with responsible investment options to ensure they are offering clients products that are value-aligned, while also achieving strong financial returns.”

Mr Takatsuki said the COVID pandemic had highlighted the need for investment in enterprises that could benefit humanity and driven more interest in ESG options.

“The developed world had almost started to believe infectious diseases had been overcome. However, the pandemic has highlighted that preventing and addressing such problems involves ongoing investment in entire systems – not just in the high growth, high-return aspects,” he said.

The comments come after the release of the Responsible Investment Association Australasia's (RIAA) Financial Adviser Guide to Responsible Investment, following increasing client demand for ethical investing options.

“The rapid growth in responsible investment has been driven by client demand and strong investment outcomes, with clear evidence that responsible investments deliver stronger risk-adjusted returns,” RIAA chief executive Simon O’Connor said.

“The regulation of advice is also catching up. The new FASEA Code of Ethics requires advisers to consider the broader long-term interests of their clients, arguably requiring advisers to consider responsible and ethical investments if they are in the clients’ best interests.”

Mr O’Connor said that by accessing the guide, advisers could strengthen their knowledge in the ESG arena and deliver the best advice to clients.