Tricky issue of client suitability for ESG investments

By George Prior

As global investors become increasingly focused on environmental, social, and governance (ESG) investments, one of the world’s largest independent financial advisory and asset management organizations is partnering with a pioneering profiling tool to ensure clients’ personal suitability for this kind of investment.

deVere Group says its partnership with EnlightenESG will enable it to better understand clients’ attitudes to ESG investing and to ensure greater transparency around the intersection of suitability and sustainability.

James Green, deVere Group’s Investment Director, says: “Clients are increasingly seeking to align their investments with their values, and support companies that are making a positive impact on society and the environment.

“ESG investing allows clients to invest in entities that are helping the world transition to a fairer, more diverse and sustainable future, while also generating the appropriate financial returns.

He continues: “ESG investing can be a suitable investment strategy for many investors, but it may not be appropriate for all.

“Whether or not ESG-orientated investments are suitable for a particular client will depend not only on their individual investment goals, risk tolerance, and financial situation, but also on their core values.

“And with something so emotive and fundamental to all our lives, it can be easy to get caught up in the debate or drowned in a tidal wave of opinions and, as consequence, lose sight of what sustainability really means to our clients.”

EnlightenESG, a groundbreaking profiling tool, addresses this issue by personalizing the sustainable investment requirements that help investors and their advisors make informed sustainability decisions in the context of suitability.

“EnlightenESG will help us to engage our clients and to truly understand their sustainable preferences and in time ultimately better match their ESG views to their investment goals,” explains James Green.

Thanks to deVere Group’s resources, scale and global presence, it hopes to become a key actor in terms of education around sustainable investing.

Before using the tool with clients, deVere trialled it in-house to engage with the technology themselves to understand the process, the data it provides, and what it could potentially teach the firm on how it could help its global client base.

As part of onboarding EnlightenESG into the firm’s relationships with clients, deVere Western Europe profiled over 75 employees across its European offices and engaged with EnlightenESG to help interpret and understand the results.

The Group analysed individuals’ attitudes toward sustainability and ESG as well as how the Group scored as whole and in the context of the entire EnlightenESG ecosystem.

“We noted our staff are more focused on ESG than the EnlightenESG index average, the data also highlighted our understanding of the long-term nature of ESG investing,” comments the deVere Group Investment Director.

“As is often the case with new and evolving investment opportunities, the market can over-estimate the short term and underestimate the long-term opportunities.  Our EnlightenESG results demonstrate that we have a good understanding and education around these critical points.”

Of the partnership with deVere Group, Simon Lowans Chief Marketing Officer at EnlightenESG says: “We are thrilled with the modern and forward-looking approach that the team at deVere are taking towards sustainability.

“EnlightenESG technology not only documents and allows for a repeatable and consistent process, the technology also loves to learn!  It is the continuous learning within the technology that helps frame and understand the societal norm across the ESG spectrum.

“The continued growth in our EnlightenESG user base is helping the profiler, and as a result our users, to better understand how clients score relative to the universe average or societal norm.   We have always said EnlightenESG can only be built for individuals if the data itself is powered by individuals.”

The EnlightenESG partnership underscores deVere’s ongoing commitment to sustainable investing.

Ahead of COP27, the international climate summit, last November, deVere Group CEO Nigel Green told media:  “Climate change is the greatest risk multiplier to our planet, to our communities, and to our way of life.

“Joined-up planning followed by urgent action is essential.  But this will not only take political and social will. It will take trillions of dollars.

“There needs to be unprecedented levels of cooperation between financial advisories, insurance firms, banks, wealth and asset managers, investment companies, fintech groups, banks, auditors, amongst others, to help unlock and mobilise the trillions of dollars of private finance that is urgently required.”

deVere Group is also one of 18 founding signatories of the UN-backed Net Zero initiative, the international alliance of powerhouse global finance companies that will help accelerate the transition to a net zero financial system.

James Green concludes: “EnlightenESG will become an invaluable tool to determine a client’s sustainability values and helps advisors map clients to a sustainable investment, where appropriate.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.