This month sees the launch of the EnlightenESG profiling tool, backed by Pacific Asset Management (PAM).
The initially free, independently managed tool aims to educate and guide financial advisers and corporates in assessing the ESG preferences of their clients and employees. The aim is to bring personal sustainability context to the already well-established risk profile and suitability framework.
EnlightenESG was developed by PAM with independent ESG specialist, Gordian Advice’s Nick Spencer and the Financial Planning firm Fidelius Group. The profiler aims to help advisers and their clients understand what sustainability, in investing terms, means to them. The tool personalises the sustainable investment requirements and helps investors and their advisers make informed sustainability decisions in the context of suitability.
The technology behind the tool is designed so that it will be able to constantly learn from the collective inputs and adapt as the world and people’s views change. By using this form of big data, over time the profiler will continuously learn to provide advisers and individuals personalised results relative to the broader universe.
Using a comprehensive series of questions, advisers can map a sustainable investment profile to each client within the tool. The tool can distil how clients express their sustainable goals, whether they are interested in a particular area of sustainability and highlighting their tolerance to different risks associated with their decision making.
EnlightenESG will also provide a constantly evolving repository for well-curated, unbiased and educational views on sustainability, which will be guest-curated by independent and objective editors. The aim is to help advisers to stay on top of the constantly changing ESG landscape and steer them towards the best way to spend their ESG time with clients.
The profiler uses an in-depth framework of questions and an AI scoring rubric designed to identify three areas of motivation to generate a personalised “EnlightenESG score”. The areas of motivation are: Lifestyle – how do clients incorporate sustainability in their day-to-day choices; Policies – how do clients feel about ‘big picture’ sustainability issues; E, S and G and What ifs – how do clients feel about taking a sustainable investment versus a conventional investment.
The answers to these questions enable the tool to determine a client’s sustainability “type” and helps the adviser map clients to a sustainable investment, where appropriate.
Following the profiling process, advisers will receive two separate reports, one for use directly with clients, and one to use within their business.
The tool has been built from the ground up with security at the forefront, is fully GDPR compliant and utilises two-factor authentication and anonymised data.
Commenting, Matthew Lamb, CEO of Pacific Asset Management, says: “EnlightenESG is our open commitment to ensuring that sustainability meets suitability. As asset managers we are very good at championing the benefits of our own products, often through a fog of financial jargon but we mustn’t forget the implications of that to the ultimate consumer of our product. EnlightenESG’s aim is to protect and inform advisers and clients by helping them to make better choices, through intelligent profiling of appetites and attitudes towards sustainability. In the process, it also supports the continued adoption, and in our view, the overall sustainability and longevity of positive investing.
“The ESG universe is constantly evolving and new regulation and a lack of a standardised nomenclature is making this area of investment increasingly confusing for investors and financial advisers. With EnlightenESG, we wanted to build a framework around this which advisers can use to help navigate this complex area. ESG should not be dictated by providers. It is not about delivering a pre-defined outcome and we believe an educational approach is better than a proscriptive one. It’s an opportunity for the end consumer to say what does ESG mean to ME!”
Nick Spencer from Gordian Advice says: “There is a growing awareness across society of the importance of overseeing (governing) the environment and social factors within our economy – E, S and G. Investors want to see these factors reflected in the investment choices that they make. However, like the different lifestyle choices that people make, investors differ in the degree and focus with which they want these factors included in their investment portfolios.
“Good advisers want to understand their clients’ perspectives and requirements, particularly in these emerging areas of E, S and G. However, advisers and clients face a blizzard of industry jargon that fails to address these factors in relatable terms. The ESG profiler uses everyday examples to understand an investor’s views and their lifestyle choices on environmental, social and governance factors along with their willingness to engage in trade-offs. By comparing their responses against peers, the profiler creates a sustainability profile that the adviser can review with their client. But more importantly, it enables advisers to discuss, in everyday terms, what matters to their clients. And using that discussion in the context of their client’s broader financial goals, enables the adviser to integrate their client’s sustainability preferences into their suitability needs.”
Ian Fowler, COO of Fidelius Group says: “Clients are increasingly expressing a preference for ESG investing and we need to provide holistic financial planning that considers those ESG preferences in the context of their other needs and requirements. Does an ESG preference outweigh the likelihood of hitting a targeted return?
“We know how valuable risk profilers can be to help us ensure attitude to risk is understood consistently across the business. Through a number of fascinating workshops with stakeholders across our business, the Enlighten ESG team have listened carefully to our advisers’ and our clients’ needs. They have created a tool that will help financial planners in their client conversations and provide valuable oversight to the business from a systems and controls perspective.
“EnlightenESG is a game changer that will support us in providing holistic financial planning to our clients as they make decisions about the role ESG investing plays as part of their socially responsible lifestyle. It’s great to have been part of the project team.”