Posted on: Thursday Feb 4th 2021
Article by: Kait Moreau
In short, investors and advisors are both open to RI, but neither is consistently starting the conversation about adding these products to investors’ portfolios.
Beyond finding the right investor fit, education for both investors and advisors will be important to RI growth in Canada. Among investors who are interested in, but not yet using RI, knowledge is low. Among advisors, familiarity is frequently based on their experience helping clients who have asked for RI. There are a few key areas that advisors and investors can benefit from learning more about:
How Responsible Investments are constructed
It’s common to hear a responsible investment questioned or dismissed because of the inclusion of companies such as Amazon or Walmart. Describing the ESG rating system and how ratings are assigned will help address these knee-jerk objections. Additionally, explaining the different approaches (ESG integration, negative screening and impact investing) will clarify how RI products differ from one another. RI products that tout their values in their brands tend to be easy to understand; Green Bonds, Fossil Fuel-Free or Women in Leadership are fairly self-explanatory. ESG integration, however, can require more explanation.
RI categories and how to choose the right fit
Beyond understanding the composition of RI, another key task is navigating the growing number of investments options. Broad-based ESG funds can be disappointing to those with specific investing goals, such as being fossil fuel-free, or promoting diversity and inclusion. For advisors in particular, training and education, and wholesaler support will help them build their own knowledge and support their investors in adopting RI that fits their goals and values.
RI doesn’t need to mean giving up performance
There is a lingering perception that responsible investing may lead to under performance. Performance dimensions are critical to advisors when reviewing any investment, and RI is no exception. We know from our Advisor Perception Study that strong performance leads to increased sales with a provider; so, to sustain advisor buy-in, performance certainly matters. There is growing evidence that RI is currently outperforming benchmarks and traditional funds; these results should help to persuade advisors who have reservations about this category take a second look.
Tags:
Industry Trends
04/07/25
Environics Research
Industry Trends
03/27/25
Derek Leebosh
Social Values
03/25/25
Thais Saito