Februar y 2020
ESG ROU N D TABLE
CONSIDERING RISK AND ESG When IFA Magazine hosted an ESG roundtable back in the autumn, the discussion turned inevitably to the risk implications of ESG investment.
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hen IFA Magazine hosted an ESG roundtable back in the autumn, the discussion turned inevitably to the risk implications of ESG investment.
When you ask clients if they’re interested in ethical investments, they want to know the trade off, either added risk or reduced performance. It’s a difficult conversation to have with them and get them to understand if they’re taking on extra risk. Julian Barnard, Principal at Barnard Lee Associates, noted that it’s something Mark Carney, Governor of the Bank of England has been talking about. “From a risk profile, if companies haven’t embraced some sort of positivity towards it, they’ll have to in the future. From my perceptive, I’d always put impact investing as riskier than ESG, that’s because you’re screening out a whole lot more stuff, you’re probably going into smaller companies and into a bigger risk dynamic.
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Belinda Thomas, partner at Triple Point, commented that Triple Point approach impact investing through their EIS product, as such “this entails investing in smaller companies to be eligible for the associated tax breaks.” “Of course, it’s a different risk profile than investing in the equity of a FTSE 100 stock, but as advisors you have the ability to step outside only investing in large cap equities and look at other ways of fulfilling the investment needs of your clients, such as using EIS for the private equity part of a portfolio. “When we are targeting smaller businesses, as part of our Impact EIS Service, we target both financial reward and impact. The higher return the more impact created; if they don’t make a return then they won’t have a good level of impact.” Julia Dreblow, Founder of SRI Services, also focused on impact. “A lot of impact funds do invest in smaller companies and sometimes they will do better than other
I FAmagazine.com
