TheroadtoESGintegrationislong.Doyourclientsknowhowfaryou'vecome?
Greenwashing is easy. Getting away with it is not. With the introduction of SFDR and other oversights, investment managers need to be transparent about their ESG strategy, their responsible investing goals and where they fall short. And the efforts of some high-profile names have left much to be desired! But what if you're underplaying your green credentials? What if you don't know how to promote them?
For many managers, it's not about whether they are exaggerating their green credentials, it's about whether they are successfully promoting those credentials. Do clients know how your ESG goals can help them and the causes they care about? And have you worked out how to support your claims?
Clients are (rightfully) a suspicious bunch.
Investors are going to have a few questions for you when it comes to your ESG strategy and capabilities:
- How seriously do you take responsible investing?
- What resources do you dedicate to it?
- How does it affect your decision making?
- What targets do you have in place that will improve your impact and your returns?
And, most importantly ...
- What does this mean for me and my investments?
You know you can answer these questions, but do your clients?
Work on your messaging
First, make sure everyone is reading from the same script. What are the main takeaways for investors when it comes to your ESG strategy. Get your senior managers and ESG team agreed on 3-4 key points – produce interviews, quotes and social-media posts around these.
What do you believe, in terms of how responsible investing can help both clients and the world around us? What do you believe is the best way to implement these changes? And how are they reflected in the outcomes across your business and investments?
In a crowded field, there's a noisy gang of greenwashers shouting their 'deeply held' believes from the nearest rooftop. So work out what sets you apart, stick to it and make sure you have the people, processes and results to back it up.
Promote your people
There are people in your company transforming portfolio companies into the businesses of tomorrow. Make sure they are front and centre when talking to clients and producing materials. Put their names to thought pieces and blogs that demonstrate both their knowledge and achievements. And make sure their bios and titles state clearly their roles in terms of either their ESG function or part in a wider ESG team.
Integrate, integrate, integrate
Yes, we want to demonstrate how ESG is integrated into the investment, portfolio monitoring and engagement processes. But, more importantly, we want to explain why this is done and what it achieves. You aren't going to demonstrate your commitment to ESG by detailing every aspect of your analysis and scoring system (though you will need to do this!). What will stick in the minds of investors (however) is what you believe to be the outcomes of this process and why these are important.
What does your process achieve in terms of outcomes? Lower long-term risks for investors? Does it add to the growth prospects of the fund? Can it help create more sustainable outcomes for portfolio companies?
And remember to demonstrate that sustainability runs throughout your operations. Where are you making environmental, social and governance improvements in your own business?
Conclusion – If you've got it, flaunt it
Let everyone know how you are building businesses for the future, businesses that will generate risk-adjusted returns for investors and, at the very least, 'do no harm'.
As long as you never overstep the line and continue to articulate how you can improve your ESG offering, there is no harm in letting clients know that your portfolio companies can both help them make strong risk-adjusted returns and create a more sustainable world.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
