Assets are growing heavily in SRI (Socially Responsible Investment) category. People are getting more and more aware of the responsibility that they are bearing while investing capital. People are also getting increasingly concerned of the environmental state of the globe. Profit is no longer the only driver for individual investors. According to Global Sustainable Investment Review 2016 there has been 11.9% compounding annual growth rate between 2014 and 2016 in Global SRI Assets. The total breached 20 trillion euros during the two-year period. In Europe, 52.6% of total managed assets can be categorised as SRI compliant already in 2016 and the number is not assumed to decrease.
These numbers emphasize the fact that we are around a topic which is significantly important for investors. What is important to investors should be important to asset managers given the fact that those requirements can be converted into business opportunities. However, according to Morgan Stanley’s and Bloomberg L.P’s research “Sustainable Signals – The Asset Manager Perspective (2016)” this potential is yet to come since 34% of the asset managers of the sample haven’t implemented any SRI products or services. Though, 19% of the companies in the figure are planning to incorporate those in the future.
If we take a closer look of the asset management companies which have engaged the SRI services, we can see that the SRI offering is a product driven business. 59% of these companies are serving ETFs and 58% are serving mutual funds with themes concerning SRI such as ESG (Environmental, Social and Governance), impact investing, thematic investing or negative value exclusion-based investments. Most likely this is the most cost-efficient way of handling client masses but is it seriously enough for discretionary asset managers? Are we meeting client expectations by simply wrapping SRI themed products into the client portfolio? Probably not. As an example, if a client walks to meet his financial advisor and says that he wants to minimize his investments regarding weaponry or tobacco, should the advisor allocate client’s wealth into ETFs? As a client, I wouldn’t be happy about it.
Therefore, to meet client expectations, these matters should be on the underlying security level. By allocating securities and products clearly, bespoke and satisfying customer experience can be achieved in terms of SRI or any other value-based investment strategy. That way client’s values can be genuinely mirrored to the assets that he is investing in. Who could refuse from that kind of an offer?
With FA Solutions you can connect to the leading market data providers and take the advantage of allocating securities in a superiorly detailed level. This data allocation can be then utilized for client specific investment planning, rebalancing, and other functions under FA Solutions umbrella.
When your clients care, why wouldn’t you?