Further, it is vital that advisers engage in open and honest discussions with their clients, to ensure that they completely understand their position and their preferences. Similar to committing to conducting thorough research, this approach will ensure that there is no misunderstanding when it comes to clients’ ESG preferences.
It is also important to stress to the client that ESG-tailored retirement strategies should remain as flexible as possible. After all, the role of the adviser is still to ensure that clients are able to achieve the strongest outcomes at retirement.
So, committing to regular reviews of one’s retirement plan is absolutely crucial. In doing so, advisers will be able to identify potentially risky areas and underperforming investments.
This will, in turn, ensure that clients remain on track to a financially secure retirement while ensuring that the strategy remains in keeping with their plans.
Looking to the future
Evidently, there is a clear demand for greater emphasis on ESG, both in the investment strategies of pension funds and in individuals’ retirement strategies. However, it is important to acknowledge that ESG preferences are still relatively new terrain.
While advisers do consider ESG criteria for their clients’ retirement strategies, research from Aegon and Next Wealth revealed that more than half (52 per cent) admit that they only consider it upon the client’s request.
This suggests that perhaps advisers require greater support when it comes to developing ESG retirement portfolios.
Further, just 3 per cent of advisers are able to apply a strict ESG screening approach when selecting funds. As such, the financial services industry should ensure that there are mechanisms to facilitate best practices when it comes to ESG investments.
For example, regulatory bodies, and indeed the UK government, must do more to improve the standards to help companies better adopt ESG approaches to investing. Currently, businesses, schemes and advisers are left to determine their own approach to ESG investments.
While evidence suggests that companies are willing and able to develop new and innovative methods to embrace ESG, some smaller advice businesses may ultimately lack the capacity to conduct thorough enough research, and in doing so may struggle to fulfil the need for ESG investment approaches.
Accordingly, it should be mandatory for pension schemes, as well as investment and fund managers, to clearly publish the environmental and social impact of their investment strategies. Doing so will make it much easier for advisers to identify schemes or investments that suit clients' ESG preferences.
