EXCLUSIVE INTERVIEW
Simon Holmes Director and Portfolio Manager in the Multi-Asset team BMO Global Asset Management
ESG considerations appear to be on the radar of investors in a much more significant way than they were even two or three years ago . What do you believe has caused this shift ?
Several factors have combined to propel ESG considerations to the forefront of investing . There has been a growing public awareness of the collective impact that our individual actions can have on others . Broadcasters , such as David Attenborough , and campaigners , like Greta Thunberg , have brought environmental problems to the fore , while the COVID-19 pandemic has highlighted health and social issues . Increasingly people want to ‘ do their bit ’, and this often starts at home with a desire to avoid harm and to seek to do good when acting as consumers or investors . This has also been reflected at the national and international level . International treaties aiming to manage environmental damage have been part of the backdrop since the 1980s , with the Paris Climate Agreement currently the most prominent . More recently , governments are seeing opportunities to align fiscal stimulus with an environmental agenda , which will result in opportunities for investors , while regulators are driving change through the introduction of sustainability-related considerations explicitly within investment terminology and when working with clients . Finally , strong relative performance has pushed sustainabilityorientated funds onto the radar of the general investor , as well as those with a focus on ESG issues .
What do you think are the biggest challenges facing advisers in 2021 ?
Regulatory change is driving advisers to integrate sustainabilityrelated considerations into their entire investment process , including the assessment of client suitability , building an appropriate investment solution , and subsequent client reporting . This amounts to a significant re-engineering of their current work practices . The move to ‘ sustainable ’ brings with it a tsunami of new terminology and considerable scope for misunderstanding on behalf of their clients . Advisers will need a clear understanding of the range of investment approaches to support their clients in building an investment proposition . We believe that product providers , like ourselves , have a big role to play here , and we ’ re committed to doing our bit .
Building an investment solution that represents good value for clients remains a challenge , particularly one that includes active asset allocation and stock selection , diversification and risk management , while being clear on the risk target and at a reasonable cost . Our Universal product range was designed to meet this need and has been extended to the Sustainable Universal range to incorporate sustainable investment .
THE MOVE TO EMBED SUSTAINABILITY INTO THE INVESTMENT PROCESS ALLOWS OPPORTUNITIES FOR THOSE ADVISERS WHO ARE ALREADY COMFORTABLE AND COMPETENT IN BUILDING AND ADVISING ON SUSTAINABLE PORTFOLIOS TO TAKE ON NEW BUSINESS .
And the biggest opportunities ?
Across the investment industry , there has been , at times , too large a focus on short term results of underlying companies , at the expense of longer-term objectives . Increasingly , we see a recognition by investors that attractive returns can be found through allocating to companies that are well governed , with a sensible , long-term strategy that considers all stakeholders - this will also align well with a sustainable investment framework . Identifying such companies that are also well placed to benefit from the large and growing public investment in thematic areas , such as combatting climate change through efficiency and clean energy , offers a significant and long-term investment opportunity . The move to embed sustainability into the investment process allows opportunities for those advisers who are already comfortable and competent in building and advising on sustainable portfolios to take on new business . The additional layer of sustainability / ESG-related reporting also offers scope to advisers to build beyond their core existing domain of investment knowledge , which could enhance their credibility in the eyes of clients .
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