Jon Smith, Manager of the Casterbridge Sustainable Impact Portfolios, takes a closer look at the changing regulations around Environmental, Social and Governance (ESG) investing and how we can help you embed ESG into your investment process…
What are the regulations?
Regulatory changes due to be implemented in 2020 mean financial advisers need to be much more proactive with their clients when discussing Environmental, Social and Governance (ESG) investment options as part of their fact-finding process. ESG views expressed by clients will need to be examined directly alongside their financial objectives to determine the most suitable service for each individual.
How can Casterbridge help?
It’s clear these regulatory changes will ensure more clients are encouraged to start thinking about ESG when making investment decisions. At Casterbridge Wealth, we are jointly responsible for suitability as we believe that this aligns our offering with yours and provides the client the best service. We have put together an Impact Questionnaire that provides a framework for discussion around this topic, as well as examples of ESG considerations. The questionnaire can be ‘white labelled’, so that it directly forms a part of your fact-finding process.
Where appropriate, we would be more than happy to discuss these regulations in further detail and assist in any way that we can.
Whilst regulators are yet to publish their classifications for sustainable investing, we have chosen to adopt the classification structure of the European Sustainable Investment Forum (Eurosif). The chart below highlights how we interpret these classifications, and where our portfolio services sit.
Considering ESG factors is not new – Bespoke and Hardy Portfolios
Our traditional Bespoke Portfolio Service and Hardy Managed Portfolios have always incorporated ESG factors into portfolio construction, and we have recently formalised the investment process of both portfolios to align with ‘ESG integration’. This means that we do not explicitly exclude any investments. Instead, decisions are based on a systematic process and appropriate research sources, with the aim of making investments in sustainable companies that will survive all market cycles. Our particular focus is on Governance, as we believe that this is the key to capital preservation. ESG Integration also aligns with our investment themes of Innovation, Demographics and Global Growth.
Casterbridge Wealth Sustainable Impact Portfolios
Our Sustainable Impact Portfolios are aligned to ‘Sustainability Themed’ and ‘Impact Investing’ classifications and are designed for clients who hold ESG considerations as a core target alongside financial objectives.
- Sustainability themed: Incorporates ESG-related issues with a focus on the development of sustainability. Investments are required to incorporate ESG analysis or use a screening tool in order to be counted in this approach.
- Impact investing: Seeking to make a social and environmental impact on the world alongside a financial return for investors.
The portfolios focus on investments believed to be making a positive contribution towards society and the environment. We are advocates for the United Nation’s Sustainable Development Goals and believe companies that follow these principles are not only improving quality of life but will also outperform the market in the long run. We will not explicitly exclude any asset or sector from our investible universe. Instead, we aim to hold funds that focus on identifying companies making a meaningful and sustainable impact on the world.
Our Bespoke Portfolio Service can be considered suitable for clients who have explicit ‘exclusion’ criteria.
- Exclusion: Exclude specific companies/sectors/countries based on personal beliefs or ethics.
As a fully ‘discretionary’ service, we can offer clients the ability to invest within our models and exclude any direct investments they may be averse to. Examples can include Tobacco, Oil and Defence sectors, or countries with poor governance. Exclusion criteria tends to be unique to each individual investor and, as such, specific client requirements can be discussed between the Financial Adviser and the dedicated Investment Manager.
For more information on the above changes or anything else Casterbridge related please don’t hesitate to contact one of the team Contact Us
You can get much more information on our Sustainable Impact Portfolio range here
Part 3: ‘How to meet clients’ ESG objectives’ – Coming out next week…
This update is for information only and does not constitute advice or a recommendation and you should not make any investment decisions on the basis of it. The views and opinions within this document are those of Casterbridge Wealth at time of writing and may change without notice. They should not be viewed as indicating any guarantee of return from an investment managed by Casterbridge Wealth nor as advice of any nature. Past performance is not a guide to the future. The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.