Reading our previous article, you well know by now that digital transformation is currently at the forefront of the wealth industry digital agenda as wealth managers approach the rest of 2021, and far beyond. To effectively drive customer experience, whether B2B or B2C, firms are sailing off to digital.
You may wonder then, what are we debating here? Why writing another piece on it? Well, here’s the thing with trends, there’s always another one right around the concern, and it cannot be left behind.
There actually is a trend that is – above all others – affecting the wealth management. Not surprisingly, we are talking about ESG investing.
ESG, over and over again
Truth be told, it would be a huge mistake to reduce ESG investing to “just a trend”. Environmental, social and governance are all issues people are turning to with a renewed sense of purpose. Indeed, ESG is rather seen as a transformation firms need to promptly detect, understand, address to – especially throughout the asset allocation phase -, an opportunity for growth, increasingly reshaping the wealth investment philosophy, culture and conduct.
A large step towards ESG commitment has been to implement a paperless policy. The impact of wealth managers’ paperwork is costly to both the firm and the environment. Making the shift to digital not only significantly reduces the number of trees cut down each year, but can improve the efficiency, speed of delivery and security associated with paperwork.
As firms are looking at how to align their business model and vision with the ESG offering to provide to their clients, in the next normal we’ll be witnessing a growing concern towards the apparently “look how green I am” firms. Demand for companies to play a more active role in social change is already leading to the urge to designate a person who’s in charge of all ESG related matters. The role of the Chief Sustainability Officer has never been more important to drive strategy and change.
However, before wealth managers can finalise their long-term strategies, they must wait to see the regulatory roadmap unfold.
All eyes are on the FCA to see whether they will follow in the footsteps of the EU or carve a different path. The feeling among wealth managers is that while client demand is bringing attention to ESG, ultimately, regulation is what will drive and shape their ESG offering. While un-regulated, each firm will create their own unique ESG offering. With no clear definition of what ESG is, the door to greenwashing remains ajar.
What to expect
According to Objectway’s research Setting the Digital Agenda for the Next Normal, one of the major hurdles in firms’ ESG strategy is how to best demonstrate their ESG culture to clients. This data is food for thoughts.
Is assembling a product or solution that is ESG compliant enough? The simple answer is no.
ESG is no longer just a products’ affair, living in a world taken by the digital tools and media, ESG has gone well beyond the investment community and into the consciousness of the mainstream public, which means everyone drawing near you. More than ever, it is growing into an issue of corporate reputation.
Nowadays, people approach companies that care about the environment, prioritise diversity and inclusion and build an employer brand, where individuals come first. Your product and reputation go hand in hand. Therefore, ESG must become a mission of your brand as a whole, not just the products you offer.
Bridging the gap between ESG offering and ESG communication might be the key differentiator helping your company appear more trustworthy and your corporate reputation jumping to the very next level.