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5 ways ESG can be used to exceed client expectations

by on 03·03·2022

Before we get on to the matchmaking part,  let me clarify what I mean by “sustainable investing”, which may or may not be the same thing that you call ESG. In my view and in the context of this article, sustainable investing is an umbrella term that covers all of the styles of investment – ethical, responsible, sustainable, impact, thematic, ESG – that in different ways consider environmental, social or moral challenges and/or good business practices when selecting the companies that they do (or don’t) invest in. Many people in finance use the term ESG in the same way. It’s important that we avoid confusion.

As a sustainable investment specialist supporting various IFA firms, I’ve found that advisers worry about ensuring that a sustainable investment solution is a suitable match for their clients’ financial needs and values.  This obviously requires a good understanding of both the investment and the investor.

With most IFA businesses operating some form of Centralised Investment Proposition to manage risk and save time, there is a worry that opening up the Pandora’s box of sustainable investment preferences can lead to all sorts of complications. In theory, it could; but it really doesn’t have to be that way.  Let’s take a quick look at understanding the key attributes of sustainable investment solutions and the main sustainability needs and preferences of investors. Hopefully, we can enable matchmaking with confidence!

  1. 1.    Understanding what makes sustainable investment options tick

An ESG, Responsible or Impact fund will each have a good few things in common; there’s quite a strong possibility that they will share promotional material featuring the words people and planet, environment, health and diversity, together with pictures of trees and solar panels.

But there are key differences in how and why they do or don’t invest in certain types of business. It is these differences that will make them more or less attractive to certain types of investor.  Understanding this will help you avoid greenwashing and manage client expectations.

As an example, some funds/MPS will apply ESG factors to stock selection from a risk management perspective, with the view that this process will improve prospects of sustainable long-term growth.  This approach may mean that there are no exclusions of certain sectors, such as oil and gas, and instead a focus on companies who are considered to be leaders in their sector. You may decide that this is a sensible core approach for clients, many of whom may be perfectly happy to accept your recommendation.  This option could be considered as the one you would take home to Mum and Dad, but it might not be the one that everyone gets excited about.

You might therefore also consider a more impact focussed solution, perhaps because some of your clients will appreciate closer alignment with personal environmental and social values. You might also be more inclined to swipe right for this kind of strategy to differentiate your firm from the growing trend for ESG to just become business as usual. 

An increasing number of clients are telling their advisers that they are concerned about the environment, climate change and companies who don’t behave well. Despite their awareness of these issues, this doesn’t necessarily mean that they are aware of the ways in which their investments could work towards tackling them.

You should therefore highlight relevant investment features such as exclusion and positive selection, divestment and engagement, proxy voting, UN SDG alignment, best in class stock selection and carbon reduction,  so that clients can decide if these attributes matter to them.

If you need some help with getting up to speed on these matters, just ask! Overstory Finance is working on a training session for this purpose.

  1. 2.     Exploring your client’s needs

Figuring out your clients’ sustainable investment profile shouldn’t be any more complex than determining their risk profile.

While an investor may express all sorts of values, concerns, causes and preferences, I think it’s fairly easy to place investors into five broad categories when deciding what type of sustainable investment solution will suit them.  Personally, I sit between categories 1 and 2.


Investor Traits

Possible Solution


Has specific values/ causes – the active investor. May put values ahead of returns.

Depending on the investable amount, a specific ethical or thematic fund(s), an impact portfolio or a bespoke DFM.



Some awareness/interest in  environmental and social issues. Keen to do the right thing generally – to be a good parent and a good citizen. Requires a certain financial return also.

Likely to suit a CIP with a blended sustainable investment strategy, incorporating some or all of the following approaches - exclusions, ESG considerations, sustainable themes, engagement and impact reporting.


Not particularly engaged with environmental and social issues. Doesn’t want to be overly involved with complex investment decisions or take excessive risk.

May suit your sustainable CIP if it’s deemed to represent the new normal, the direction of travel, without being overly concerned with the nuts and bolts.


Favours new ideas, trends and technology but is also seeking strong returns.

Likely to be attracted to thematic and positive selection funds and portfolios, designed to benefit from the transition to a cleaner, greener, healthier society/ economy.


No interest whatsoever in any form of sustainable investing.  Happy to invest in any company or sector that will pay the highest return.

Still needs to be offered the option of ESG integration, as this is often intended to optimise company profits and shield against business risks.


There are various methods you can adopt to ascertain which category your client fits into. 

Asking a couple of questions as part of the fact find is an increasingly common approach, although I am not sure how effective this is at really engaging either adviser or client with the subject.

Some people prefer to approach the subject more organically, as part of general discussion. All sorts of things could come up in the fact-finding conversation that could quite readily lead into a conversation about sustainable investing.  I’ve listed a few below:

  • Children and grandchildren.
  • The weather!
  • Replacing the car – electric or not?
  • A hobby that involves the outdoors such as sailing, skiing, hiking, cycling.
  • A passion for travel to places impacted by climate change.
  • A professional or personal interest in science, engineering, construction, transport, energy, farming and food production.
  • Charity work/ fund raising.
  • Any workplace activity relating to sustainability and net zero. Companies and employers in many sectors are carrying out related projects – educational establishments, local authorities, retailers, manufacturers etc.

The trouble is, we already have so much ground to cover in order to complete the KYC process.

For this reason, I personally favour sending the client a pre-meeting information pack and simple questionnaire, call it triage if we must. Having worked previously as Compliance Manager and Supervisor monitoring the delivery of a Defined Benefit Transfer process, I witnessed in a very hands-on way how the implementation of a triage pack improved the content of files, understanding of client motivation and suitability of advice.

The guide informs the client in advance in an unbiased, user-friendly way about their sustainable investment options. The questionnaire asks them to express any personal values and concerns they wish to align their investments with and records what impression the various types of sustainable investment have made on them.

This achieves the following:


1. A client who already knows which features of sustainable investing they have to choose from and is less likely to misunderstand the capabilities of what they are investing in.


2. An adviser already informed about what the client is interested in, both any personal environmental, social and moral concerns and causes and the sustainable investment strategies that have caught their eye.


3. Opportunity for the adviser to prepare for any specific issues the client has raised in the questionnaire. You can check if you have a ready solution that swipes left on deforestation and right on electric vehicles, for example.


4. Adviser understanding of what motivates the client to invest sustainably, which will really help you offer the right solution in the right way.   


5. Time to focus on the really important business of ensuring that the client understands any risks and compromises associated with their sustainable investment preferences and to prioritise/ manage any conflicts. Occasionally, you will be asked for a 100% vegan/ windfarm/ or Greentech start up solution and this is where you can counsel that this might not be the perfect financial match!

The final stage of the matchmaking process is to explain that the perfect investment solution that ticks all the boxes is as hard to find as the perfect partner. If your sustainable investment solution looks like its picture, pays its way, makes the client feel good and is liked by their friends, then we have a great outcome!

Overstory Finance is happy to create a Client Sustainable Investment Guide and Questionnaire for your business.

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