Brighter’s Greener Finance Strategy

Brighter’s Greener Finance Strategy

The Pensions Schemes Act 2021 places new duties on pension trustees to ensure that they are selecting fund providers that are proactive in developing products that recognise the Environmental, Social and Governance requirements that are needed to reach reduced carbon emissions and a more sustainable future by 2050.

Providers are now competing to take the lead on the ESG space with products coming into the market that fit with clients’ emerging awareness about this important area. More and more people, now looking for a pension or investment, are keen to know where funds will be invested, how they will be used and whether the funds are backed by companies that have suitable governance around the climate and social issues of the day.

Advisers themselves need to keep pace with these changes by ensuring that they are equipped with the knowledge they need, not only around their client’s preferences for ESG but what they can reasonably offer in terms of their own due diligence processes. In effect, advisers need to be able to say what investments they can professionally advise upon and which ones they cannot.

ESG selection criteria to assist client with fund selection

We have chosen to use the framework developed by Square Mile Investment Consulting and Research Ltd as their definitions of ESG can be easily interpreted and aligned to fund selection choices using our risk -based selection processes.

How will we determine the type of investor our client is?

Clients will be automatically provided with the SM criteria for ESG fund selection to determine which type of investor they consider themselves to be. The criteria are simple to understand and do not require long and in-depth questionnaires in order to establish the social and behavioural constructs of ESG investment; an area that we believe is out-with the professional expertise of financial advisers.

Whilst financial advisers are getting geared up to assist clients in pursuing funds that are ESG mindful, they must reach a balance between recognising client needs around this area without delving too deeply into social and behavioural aspects of ESG investment that may not enable them to provide a client solution at the end of it.

The choice of Square Mile’s approach to selection of client preferences around ESG criteria meets the needs of our clients and enables us to operate effectively within our due diligence framework.

The process we will follow

  • Discussions with the financial adviser will be based upon the client’s responses to the financial planning section of our Fact Find.
  • Every client will be provided with a guide to the ESG criteria when they meet with the adviser and have indicated that environmental and social factors is an area they would like to explore.
  • Clients will be requested to select the type of investor that they feel they are –Traditional or leaning towards ESG investment.
  • Clients who select investor ESG choices e.g. sustainable, ethical/exclusion, responsible or impact will be directed accordingly within our volatility risk framework.
  • Clients that select fund choices around ESG parameters, not supported by our providers or our due diligence/PROD Matrix, will be directed towards appropriate discretionary fund managers.

Full details of our ESG process can be discussed with our financial adviser team when you meet with them to discuss your financial planning needs.

Here’s Josh and his trusted financial adviser, Ross from Brighter Financial Services. Over the years they have discussed Josh’s personal plans, what he wants for his future and whether he sees any financial problems that may prevent him from getting there. He has always enjoyed these useful chats.

Josh knows Brighter has his best interests at heart and it’s been exciting for Josh to see his savings grow each year. Josh feels secure that the team at Brighter keep an eye on the markets and protect him from extreme losses.

Brighter’s Client Exchange portal has always been a helpful tool for Josh when he was too busy for a meeting. He has used it to update his fact-finds and provide current information to the team at Brighter.

But today the world is changing…and so are Josh’s views and values. He has become concerned about the environment, the impact of carbon emissions and other global injustices. He doesn’t want to think that his money is invested in companies that don’t align with his moral outlook on life.

Josh isn’t sure that Ross will be able to help him when thinking about where his funds are invested. But today, Ross will put him at ease.

Brighter are on the ball when it comes to ethical pensions and ESG options are very much front and centre when presenting clients with solutions.

They believe that, just like the pension providers, they too, have a wider responsibility to ensure that governance across their adviser services includes considerations towards the reduction of further impacts.

Brighter will look at any information that pension providers are offering with regards to climate change and social responsibility This information is then presented to clients when they are considering a pension or savings plan.

That’s why when Ross meets with Josh he will show him Brighter’s process for ESG considerations and will discuss with him the options he may like to consider. Ross can then use this information to develop the right financial plan for Josh

Get in touch today to find out how Brighter can make your world a happier, more sustainable place. T: 01422 832100