Confident conversations. Incorporating ESG into the advice journey

Financial Advisory

13 October 2022

ESGFCAFinancial AdvisoryGreenwashingPortfoliosWinning Advisers

Expert: Liam Setna Investment Director, Quilter Facilitator: Roderic Rennison, Catalyst Partners Ltd


  1. Client assessment is a key area for advisers to focus on in relation to ESG preferences
  2. According to the FCA, financial advisers should “take sustainability matters into account in their investment advice and understand investors’ preferences on sustainability to ensure their advice is suitable”
  3. A balance needs to be struck between how clients may feel about investing in certain areas, and a more restricted investment approach
  4. When it comes to asking the right questions, ask a manageable number, avoid binary yes or no responses, ensure questions are understood, and avoid biased, leading or mis-leading questions
  5. Managing “greenwashing” risks is an important part of the advice process



There is an expectation that sustainability preferences are already factored into your advice. Specific rules will be developed and introduced, such as FCA DP21/4 1.11 Sustainability Disclosure Requirements and investment labels, which states: “We are also exploring how best to introduce specific sustainability-related requirements for these firms and individuals [financial advice firms]… a key aim will be to confirm that they should take sustainability matters into account in their investment advice. We will develop proposals on this in due course…”

Objective: Look beyond the name: what is the investment actually designed to do?

Strategy: What is the strategy to achieve the objective?

Characteristics: Do the underlying investments reflect the strategy?                                                                                                                              

Key takeaways:

  • There are a number of useful items for monitoring and reporting. These include: exclusions and product involvement, carbon footprint, and ESG alignment
  • Regular ESG reports provide evidence of investment manager’s activities. It is important to understand the data they produce
  • Questions to ask may include: What is your definition of involvement? What is your list of exclusions? Has this created an unbalanced portfolio with a lack of diversification?
  • There needs to be comprehensive end to end investment processes
  • The advice journey needs to be supported by tools, processes, guidance, and investments available to assist advice firms. These include: client questionnaires, client descriptions, suitable portfolios, portfolio monitoring, and client reporting.