TWM Articles from New Access – an FNZ company

WealthTech Views ESG Report: The view from New Access

Article from The Wealth Mosaic's WealthTech Views ESG Report. Written by Vincent Jeunet, CEO at New Access

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Our core-to-digital solution suite includes an advanced and comprehensive wealth management core banking system (Apsys), a portfolio management system (Equalizer) and a digital client lifecycle management platform (Banker’s Front). Through our offer, we are proud to empower private banks, wealth managers, advisors and asset managers towards their successful business growth....

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by New Access – an FNZ company
| 03/11/2021 06:00:00

How are ESG issues impacting the wealth management sector today? What has been achieved so far, what are the opportunities and threats, and what is still to be done?

Over the past several years, ESG investing has received a lot of attention. Interest from investors in sustainable investment products continues to grow in 2021, and ESG investing is steadily moving into mainstream investment strategies across major financial markets. While in the past, the general perception over ESG investing was mainly with screening out stocks and therefore reducing opportunities, investors’ portfolios are now increasingly incorporated by both financial and non-financial data, and interest in ESG investment products is massively increasing.

According to different studies, investment in sustainable finance will continue to accelerate to finally represent 30% of the total amount of AUM globally in 2022. The current COVID-19 crisis has also acted as an accelerator for ESG investments and pointed out the essential need for wealth managers to manage social and environmental challenges. There is no doubt that ESG factors are impacting the wealth management sector today, building new investment strategies that wealth managers must be ready to cope with. Thankfully, wealth managers have started changing their practices to meet the new ESG needs, opening a new world of opportunities for them when offering ESG investments and differentiated services.

Challenges & Opportunities with the rise of ESG
As with all new trends, threats and opportunities are brought to the table by this accelerating interest from investors in ESG investments.

Private banks and wealth management firms will have the opportunity to positively influence the dialogue with their clients, and a well-managed ESG investment strategy will radically help them reinforce customer loyalty and secure long-term relationships.

From a New Access perspective, this will allow us to show our expertise and provide wealth managers with more tools, technology, and solutions, to help them deliver strategic asset allocation in line with their investors’ ESG requirements.

Some risks and threats around ESG investing also need to be considered. ESG experts seem to point out education as the biggest challenge, claiming that every stakeholder must develop a better understanding of what good governance means and how they can best address ESG issues such as climate change, social inequality, and discrimination, etc.

The other major challenging component linked to ESG investing is the more practical aspect of the scoring methodology used. Although recent industry and academic studies have shown the ability of ESG investing to improve risk management and to be equally profitable to traditional financial investments, the complexity around ESG performance measurements remains. Indeed, ESG scoring is still in a transition phase. We have observed a considerable disparity between different ESG providers' scoring, with ESG ratings having significant variations from one ESG provider to another.

The main challenge now is that there are no specific regulations linked to an investor’s ESG preferences collection method, so this area is considered a field where investment companies can differentiate themselves. That being said, it appears evident that the banks and wealth managers that can provide their customers with the most scalable and comprehensive ESG services will achieve more success. In this regard, through our solutions, New Access can help private banks and wealth managers achieve their strategic objectives in this area.

In the future, ESG will definitely be much more embedded in the investment process
It is clear now that customers are more interested than ever in having their portfolios reflect and support the causes and issues they care about. Therefore, it is the role of wealth managers to make sure that they keep talking to their clients both from an ethical and risk management perspective. They will also need to give their investors a clear picture of how they will help drive sustainable investing strategies.

For the future, it is clear that ESG cannot be a separated component of an investment strategy and instead will become completely integrated into the investment decision process.

Software vendors will have to endorse the responsibility of supporting financial institutions to cope with these new investment trends, providing them with the tools they need to be as efficient as possible. New Access is and will be there to face these new challenges along with private banks and wealth managers.

What solution(s) does your company offer the market that addresses ESG issues, and how do they help wealth management firms manage their increasing obligations in this area?

New Access is a leading provider of modular and scalable core-to-digital solution suite, making it a great partner for private banks and wealth management institutions.

As a software provider, we have observed for some time now that investors were rapidly increasing non-financial factors such as ESG into their investment process in identifying threats and growth opportunities. To support this trend, New Access can enable financial institutions to implement ESG factors into their banking processes and investment calculations.

New Access provides the market with a complete Core-to-digital solution suite ready to integrate ESG non-financial factors into any algorithms, allowing private bankers and wealth managers to incorporate ESG content easily and seamlessly into their investment processes. Our open API enables a perfect connection with any third-party ESG data providers and ensures a fully enhanced and configurable user experience. From our APSYS Core Banking System to our Equalizer PMS, and our Banker’s Front Digital CLM Platform, we can integrate and connect with any ESG sustainanalytics data providers. Also, our solution suite allows wealth management firms to realize and customize their own ESG scoring algorithms or make usage of market standards.

Overall, our complete Core-to-digital solution suite enables private banks and wealth managers to check and control the Environmental, Social, and Governance impact on every step of their investment process.

This article was originally part of our Wealth Tech Views ESG Report. Click here to access the full report.