FT Adviser (25/03/2019) – Investors often assess ethical strategies differently to their financial advisers, which is causing confusion in the sector, the head of responsible investment at Columbia Threadneedle Investments has claimed.
Speaking at the Columbia Threadneedle CIO breakfast on Responsible Investment last Wednesday (March 20), Ian Richards, head of responsible investments, said the nature of ethical and environmental, social and governance investing, and the lack of definition in this space, was causing a lot of confusion for financial advisers.
Ethical investing is the practice of applying ethical principles as the main deciding factor when investing. But there are a variety of strategies and exclusions defining why each particular investment is considered ethical.
Mr Richards said: “One of the biggest challenges is if a client decides they like a particular ESG strategy, then it turns out afterwards that they are assessing it using a completely different framework.”
Ricky Chan, director and chartered financial planner at IFS Wealth and Pensions, agreed a lack of clarity around ethical investing has caused problems for him.
He said: “The main problem is that there is no black and white definition for what ‘ethical’ means, so clients usually have their own perception of what this means and how these investments work in practice.”
During his time as a financial adviser at Co-op, he said he had clients asking why he was investing in a certain company despite negative press coverage of them.
“Clearly there was a misunderstanding here in terms of how the ethical criteria and mandate worked, and [clients] hadn’t realised that for example the fund’s ethical mandate enables the fund manager to actively engage in shareholder meetings to change a company’s behaviour and remove poor practice,” he said.
Full article link: https://www.ftadviser.com/investments/2019/03/25/lack-of-definition-causing-problems-for-ethical-investors/
