The “engagement” approach prompts another question: would you prefer a fund manager to actively hold its investees to account and push for change, on say carbon emissions, health and safety standards and environmental pollution; or would you prefer companies to be excluded, and give up on that investor power?
That investor power has been proven to get results, from even the largest global fossil fuel producers and polluters, but not always. So again, the client has a choice to make, and their view will be a helpful guide for your investment recommendations.
Lastly, 'positive investing'. This is perhaps the easiest to explain to clients: would you like to focus only on sectors that clearly boost sustainability in the economy, such as solar panels, electric cars, etc?
Most long-standing actively managed ESG funds have some blend of screening, engagement and positive investing, but there are newer funds that focus on only one of these approaches.
In short, one possible answer to the entirely reasonable question of “What’s wrong with a fag and a drink?” is “Absolutely nothing, if you enjoy them.
"But investment decisions are another matter. Would you feel at ease enjoying a comfortable retirement, knowing that you’re profiting from lung cancer and cirrhosis of the liver?
"Because there’s an alternative route to that comfortable retirement that leaves the world in a better state for your grandchildren. Shall we have a chat about it?"
Tanya Pein is an IFA at In2 Planning who specialises in sustainable investment
