Alternative Investments/ESG: How To See Through The “Ethical Veneer” (Bancroft Wealth)

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Bancroft Wealth, a flat-fee wealth manager, advises investors to be wary of abuse of the ESG label.

Keir Ashman, pensions and investments specialist at Bancroft Wealth, points to the increasing demand for sustainable investments and says investors should be discerning in the choices if they want both return on investment (ROI) and return on principles (ROP). (WealthAdviser)

According to data from audit firm Deloitte, as quoted by CNBC, the share of global investors that have applied ESG criteria to at least a quarter of their total investments has jumped from 48% in 2017 to 75% in 2019.

“And where there’s an increase in demand a flurry of supply is sure to follow,” says Ashman. And a lot of that supply may be just carrying an ESG tag. That’s different from a sustainable product that has been built from the ground up and is truly ethical with the right measures in place.

Investors beware of ‘greenwashing’

Alessandro d’Eri, a senior policy officer at the European financial watchdog ESMA, told CNBC that there is a “mismatch between the expectations of investors in wanting more and more to invest in ESG type of products and the actual availability of products that are truly ESG compliant or sustainable.”

In these circumstances, investors should tread carefully down the ESG path. Here’s a list of checkpoints advised by Bancroft’s Keir Ashman:

  • Look under the bonnet – is it really an ethical product or has it been simply branded as such?
  • Does the fund use independent sustainability ratings such as Vigeo, FTSE Russell, etc?
  • Is the portfolio just a tweaked copycat, or is it based on a genuine ESG philosophy?
  • Are asset managers able to report on both financial growth as well as progress on sustainability challenges?
  • Is the portfolio completely transparent, or do they reveal just the names of the top contributors?

An adviser may help

“This may sound complicated, and it does require more work than simply picking an investment option with an appealing label, but it’s easier than it sounds when working with a qualified and unbiased adviser that can make sure your wealth goals are supported by the right investment choices,” says Ashman.

Related Story:   iShares Launches Europe’s First Govt Bond Climate ETF                                               

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