Roadmap to ESG series - Part two: Exploration

Welcome back! It’s the second part of our roadmap to ESG series where we help financial advisers on their way to ESG success. We’re ready to dive into the exploration stage (one of the critical steps we mentioned in part one) and, specifically, a fundamental area you need to consider before you formulate an ESG approach.

So let’s ask you a question: How aligned to ESG principles is your firm really?

It may be that you place higher importance on the need to provide clients with ESG investment options but haven’t spent a huge amount of time considering what happens within your own firm. This is understandable but there are a number of benefits to spending time thinking about your own operations before you commit to a strategy for clients.

Why you should make time for exploration:

  • To gain a better understanding about the impact your business has on the environment and how partnerships with third parties can lead to improvements.
  • To focus on diversity and inclusion, both within the workplace and with clients.
  • To formulate clear ideas about how you want your firm to be regarded within the community.
  • To better communicate your approach to clients who may ask for your firm’s credentials on ESG-related matters.

The need for improvement

“We could save a huge chunk of the Amazon rainforest if we could move away from paper to electronic mandates.”

Adrian Murphy, Murphy Wealth

When researching advisers for this series we heard so much frustration around the amount of paper and energy that is wasted. As a customer of these services, are you voicing your frustrations?

In March 2021, NextWealth published its ESG Tracking Study Update which analysed 23 platforms. It found that platforms that require a paper form signed by a client for fewer than 10% of processes almost doubled within six months, most likely as a result of the pandemic, hailing these companies ‘digital process champions’.

The report also recognised the ‘gamechangers’ – firms that have reduced paper processes by at least a quarter since March 2020. These include 7IM, Quilter (Old Mutual Wealth), Parmenion and Standard Life Wrap.

Clearly there are huge improvements being made and advisers have a role to play in ensuring the momentum continues, for the good of their own businesses as well as the environment.

Doing the right thing

According to the Financial Advice Business Benchmarks 2021 report published by the Personal Finance Society and NextWealth, philanthropy has long been a focus for financial advice firms as a way to give back to the communities in which they operate.

In the report, two in five (41%) of firms said they take part in philanthropic activities. The most common means to do so is via a named corporate charity, firm-wide volunteering and matching employee donations. A similar number (42%) of firms that support philanthropy undertake pro bono work.

As we see ESG move further towards the norm rather than a specialist area, NextWealth research shows virtually all (98%) financial advice professionals are now using ESG, ethical, sustainable or impact funds or portfolios at least to some extent, compared with 89% a year ago.

"People want to do the right thing – to be seen to do the right thing. ESG is not a fad or a con – it’s the long-term direction of travel.”

Alex Reynolds, Advies Private Clients

Thinking about your own firm’s philosophy and approach to matters that impact the environment, working practices, social diversity and philanthropy will set you up for the next step ahead.

Next up - the strategy planning stage

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