The consideration of Environmental, Social, and Governance (‘ESG’) issues is not new for wealth managers; however, in recent years, it has moved from being a peripheral concern to being a critical component of investment decision-making. The shift in attitude has been caused by a wide range of factors, such as the increasing awareness of climate change, the apparent benefits strong corporate responsibility has on company performance, as well as the realization that the next generation of investors take these issues very seriously and therefore wealth managers must respond to remain relevant.
The headline figures of investment in ESG are impressive, with current claims in the market that over $40 trillion has already been committed into funds and companies in this area, and projections state that this could reach $140 trillion globally by 2025, thereby representing over one-third of total assets under management. However, as you will read in our foreword by Robert Rubinstein, all is not as it seems. This is highlighted by the increasing concern of ‘greenwashing’ due to ambiguous definitions of ESG, with companies included in ESG portfolios that are deemed by some not to meet valid ESG criteria. Also, some commentators point out that with all this money ‘invested’ in ESG, why are there still so many environmental problems across the globe. One could argue that wealth managers are doing the best they can with the tools they have at their disposal; however, it is clear that there is considerable room for improvement. And this is where technology comes in.
In this report, The Wealth Mosaic has gained insights from technology and data vendors that are focused on helping wealth managers in a wide range of ways in this area; from client suitability tests, incorporating ESG into portfolio construction, ESG reporting, news and analytics, and sourcing reliable ESG data to make investment decisions against. It is therefore clear that although there remains a lot more to do to improve ESG investing, there is real momentum from all participants, and technology has a crucial role to play in making things better.
Commenting on the publication of the report, Simon Ramery, the Co-Founder of The Wealth Mosaic, stated, "ESG has become one of the hottest topics across the globe, and it is clear that the wealth management industry, by overseeing the allocation of capital across the world, has an enormous part to play in this area. What is highlighted in this report is that although the headline numbers of investment in this area appear impressive, there is still a considerable amount of work to do. What is encouraging, though, is that the greater use of technology is going to make a significant impact in improving the situation, and there are companies working hard across the globe to ensure this happens as fast as possible."
The Wealth Mosaic would like to thank Robert Rubinstein for his insights, and the contributors from the nine technology vendors from across the globe that participated in the report: aixigo (Germany), BITA Risk (UK), Etops (Switzerland), InvestCloud (US), New Access (Switzerland), Objectway (Italy), OWL Analytics (US), Refinitiv (UK), and SwissQuant (Switzerland).
You can access and download our free report by clicking on the image below.
