Interestingly a good hour of the presentation had passed before a fund manager, participating in the product, referred to the importance of ESG (Environmental,Governance, and Social) factors in making his investment decisions. He then went on to give the example of Johnson and Johnson, a company who had improved their value by better sustainable practices. At this point it was like a light bulb had been switched on. Here was something that IFA's , particularly those new to this area, could hang their hat on. This was something they could comfortably introduce into a conversation with clients.
The problem with ESG ,at the moment, is that it's all a little abstract and far removed from the everday dialogue between advisers and investors. It seems to be more the territory of institutional investors and ESG consultants.
It should however be fundamental in driving SRI investment forward because it is saying that by being more responsible to the planet and its people a Company has a better chance of offering more sustainable returns in the long run.
In addition to the example given above there is a growing body of evidence to support this. For example in thier 2007 report 'GS Sustain' Goldman Sachs point to the fact that companies who lead in ESG policies are leading the pack in stock performance (see below).
The Way Forward
As there is more analysis out there advisers should be demanding this from fund managers, and in a format that can be passed on to clients. In turn this will incentivise those managers to demand more disclosure from companies.
It might not be a simple as it sounds but it is a way to appeal to the light greens.