Many fund houses have tried to square the imprecision circle by narrowing the focus of the ESG funds they bring to market, focusing perhaps on the environmental or the social, rather than claiming to focus on all three.
But a fund house pursuing such a strategy risks either capturing only a slug of the potential total ESG client base, or having to launch funds for each segment of the market, risking having some sub-scale funds within their range.
The alternative is to narrow the scope, and pursue just one part of the potential client base, but have that client base sceptical because other funds within the business do not pursue the strategy they like.
And for the wealth managers who operate in this space, there is an increased awareness of the bespoke perspective or priorities of each client.
This is prompting complicated conversations for some, as a client sees the portfolio that has been constructed for them and signals their disapproval of some of the holdings.
If such disapproval gets expressed by either a large number of clients, or a small number of high-profile individuals, it can cause substantial reputational damage to the firm.
This is moving wealth managers towards favouring the creation of ESG portfolios that are bespoke for each client – that is more time consuming for the adviser and wealth manager, and bespoke wealth management tends to come with higher fees for the client, creating another awkward potential conversation for the wealth manager.
So, the Baillie Gifford spat with Thunberg may be just be a glimpse into the future for those firms that aspire to be active in the ESG space, creating a rare case of 'seller beware' in our industry.
David Thorpe is investment editor at FTAdviser
