It’s completely unimportant if this one thing we thought was good for the environment turns out not to be. Nobody will judge you for getting the detail wrong with hindsight. Where they will hold you accountable is whether you played your part in the system that can actually make a difference.
“Yeah, but I will still wait for the regulation because someone will judge me.”
But, with a principles-based regulator, the regulation is already here. In both [the Financial Conduct Authority's] Product Intervention and Product Governance Sourcebook and the Conduct of Business Sourcebook, you are required to gain sufficient manufacturer and client information.
You need to understand the individual client or target market client’s risk profile, needs, objectives, and importantly their preferences. I do not think you need to be explicitly told that sustainability is one of the preferences.
With all the coverage on the TV, Internet and social media, it is implausible that, right now, the client does not have a preference on this issue, and advisers should start using the tools available to understand those preferences in a robust and consistent way.
Everyone has a view
Everyone has an opinion and naturally you will believe that mine is worse and less informed than yours. The system does not require everyone to put all their money in the one investment that saves the planet.
Indeed, if that happened it would break the system. It is entirely okay for those people who don’t have a preference to largely ignore sustainability or environmental, social or governance factors in the selection of their solution, just as those who feel strongly about it deserve to have their preferences respected and considered.
This second group will be enough to turn the dial, and we can already see that companies and asset managers are leading this and making changes in anticipation.
Yet sustainable investing needs to be sustained. It cannot be a fad.
It is not going to work if investors are ‘going green’ for performance reasons or short-term social pressures, and then switch back. The movement of capital needs to be permanent if it is going to drive the lasting change that’s needed
With the Retail Distribution Review, the sunset clause and Mifid, we knew change was coming years in advance, but as an industry we mostly carried on as we were until the last minute.
This was partly driven by the view that: “If other advisers aren’t doing it why should I?” It was partly driven by seeking out commercial advantages, and to see if the proposed legislation or regulation changed.
