It's fair to say that the last couple of years will not be remembered for the fondest of reasons. But it will be looked back upon as the period when responsible investment started to establish itself within the mainstream.
The response to the pandemic, the sharper focus on a variety of social and governance issues and a broader awareness of the ongoing climate crisis has undoubtedly led to heightened client interest. This has ultimately led to a greater demand from consumers and society for responsible investment. In addition, advice firms are starting to proactively integrate various responsible investment considerations into their advice processes and investment propositions as clarity around regulation and standard labelling starts to emerge. But for responsible investment to be truly embedded within the status quo, it needs to be done so in a way which isn't disruptive.
The industry's response and responsibility
We've witnessed a flurry of net-zero commitments across the industry and we're continuing to see a raft of new product launches hit the market. Having a vast range of ‘responsible' options now available is welcome news and reflects this shift into the mainstream. However, this can involve switching and potentially comes at a cost to the consumer.
These barriers will ultimately get in the way of many consumers taking the step to invest their pension savings responsibly. And while we can all accept that the majority of consumers will never suddenly want to in invest in the likes of a Guatemalan social impact solution or a concentrated sustainable transition solution, we also can't afford to let responsible investment become an exclusive and expensive club. Asset owners should be making responsible investment easier for consumers and that means baking responsible investment considerations into their standard offering at no extra cost.
Now is not the time to sit back and do nothing. So, whether that is implementing specific environmental, social and governance (ESG) integration techniques into investment processes, adopting environmental operational targets or by exercising their stewardship responsibilities, asset owners can use the money they look after for the maximum benefit of consumers.
Responsible investing as a default
Implementing these actions and measures doesn't have to cost the world and can be offered within existing investment solutions and offered as standard. Consumer preferences towards responsible investment are continuing to evolve. There is evidently a much stronger desire across society of retiring into a world worth living in and this should be reflected across default and flagship investment solutions.
All of us within the industry have a role to play here from regulators to asset managers and asset owners to the financial advice community. In what is defining itself as the decade of action, we all have a role in ensuring that this is a journey that no one is priced out of.
To read our latest research exploring whether all the activity we're seeing in the market is just a trendy phase, or if it's the start of things to come click on the link below.
This article is funded by Royal London