Using generative AI to simplify ESG advice

According to a report produced by Deloitte for Iress, Advice 2030: The Big Shift, Australians have become increasingly interested in values-based investing in recent years, with the market valued at $1.3 trillion as of 2022.

While it can be challenging for advisers to navigate the complexities of clients’ environmental, social and governance (ESG) values in conjunction with meeting their financial goals, the report suggested advisers utilise new technologies to simplify the process.

Given that generative AI is expected to disrupt at least 26 per cent of the economy, with financial and insurance services expected to be particularly impacted, according to the report, it suggested that advisers should look to leverage this technology to improve their efficiency and increase time advisers can spend with clients.

The report said that advisers looking to service these clients should “incorporate technology such as Gen AI to reduce their time burden in sourcing and validating ESG investments”, allowing them to prioritise time spent with clients.

Furthermore, advice firms could also consider integrating ESG investment screening tools and robo-advice software designed to balance “social impact with financial goals” to improve efficiency and reduce time spent on reporting.

However, the report also recognised that advisers will still need to complete a comprehensive ESG assessment with their clients and provide regular oversight to ensure they continue to meet the complex needs of their clients and avoid unintentionally investing in products that don’t meet their values or that are engaging in greenwashing.

The report also noted that operating within the ESG space comes with additional legal complexities, such as “regulatory ambiguity, with changing tax laws, regulations, and financial market conditions”, posing additional challenges for advisers.

Greater reward for service?

According to the report, clients in this category tend to be younger and willing to pay a higher fee for services that meet their needs. As such, advisers willing to put in the time and effort to meet the demands of these clients may be able to capture the interest of Australia’s emerging affluent demographic whom they could potentially hold for decades to come.

As working in this space will likely require advisers to cultivate specialised skills, education, and technology to meet the needs of their clients, the report said advisers may be able to charge a higher premium to “align ESG objectives with investment goals, risk tolerances and individual circumstances”.