Don’t window-dress your ESG credentials, advisers told

Ahead of the ESG Summit 2023 (hosted by ifa’s sister brand InvestorDaily), Ethical Investment Services financial adviser Adam Carey told advisers to “be authentic” and have a thorough understanding of ESG products.

“If you try to window-dress your ESG credentials, it might work with some clients but it’s short-term thinking,” Mr Carey told ifa.

“You can’t just treat this as a service line and say you’ve got a couple of products with ESG in the name and not understand it. You have to live it, understand it, read certain things, and at least know what a sustainable development goal is, what an IPCC report is, and be across the various co-ops that we have to deal with.

“You don’t need to intricately understand it, but you need to know enough to be able to have a sensible discussion with clients around that and work through any concerns they might share as part of the engagement process.”

To demonstrate authenticity, advisers need to “live their principles”, Mr Carey said, by practising environmentally friendly habits in their everyday lives.

For example, Mr Carey said he has solar panels on the roof of his home, along with water tanks, and battery, and has ordered an electric car, which enables him to conduct “deep” conversations with his clients around ethical investing.

“Clients want to see that it’s in yours and your organisation’s DNA,” he said.

Becoming an advocate would also demonstrate authenticity to clients, and speaking at events like the ESG Summit to highlight the importance of ethical investing is one way of doing that, Mr Carey added.

Indeed, Mr Carey will join a panel of speakers at the ESG Summit and speak about how he seamlessly implemented ESG advice into his business offerings, and provide tips for how other advisers could integrate ESG investment into their client conversations.

Recognising greenwashing is also critical for advisers as the Australian Securities and Investments Commission ups the ante on its crackdown on companies that engage in it.

Mr Carey explained that advisers and analysts in his practice scrutinise the complete list of holdings of a fund, including managed funds.

“If there are things in there that we don’t like, we will discuss it with the fund manager,” he said.

“If we still don’t like them, we just don’t approve them. It’s as simple as that.”

For example, Mr Carey said, a managed fund that had pitched to Ethical Investment Services had implemented a robust process to understand their sustainability credentials and the carbon intensity of companies they were investing in.

However, the advice practice decided against approving it because it invested in carbonated soft drink and fast food companies, he reasoned.

“The big data providers use big data as a model to analyse and get to this answer,” he said.

“But while we use big data to do a first pass filter, we apply common sense thereafter. It’s very bespoke and hands-on that requires a lot of product knowledge.”

Recognising and filtering companies that engage in companies is not a set-and-forget proposition, Mr Carey warned, as funds may stray.

“A year or two after you’ve approved them, they might invest in something that is not as ethical. We have divested from funds that have done that,” he said.

“You’ve got to keep on top of them in terms of the stocks they may add later on in their portfolios. It’s a continual process. You’ve got to know your product and you’ve got to keep on top of it.”

To hear more from Adam Carey about his approach to providing ESG investment advice to his clients and how you can follow his footsteps, come along to the InvestorDaily ESG Summit 2023.

It will be held on 23 March at Aerial UTS Function Centre, Sydney and 29 March at Grand Hyatt, Melbourne.

There are only a few tickets remaining so click here to buy your tickets don’t miss out!

For more information, including agenda and speakers, click here.