OPINION OF THE WEEK: What To Say If Clients Aren't Interested In ESG

Tom Burroughes Group Editor February 3, 2023

OPINION OF THE WEEK: What To Say If Clients Aren't Interested In ESG

It is possibly a sign of unchallenged assumptions when clients in certain parts of the world show little interest in a topic that everyone is supposed to be concerned about. That is the case with ESG investing.

It is possibly a sign of unchallenged assumptions when clients in certain parts of the world show little interest in a topic that everyone is supposed to be concerned about. That is the case with ESG investing.

These days, we read much about how high net worth and ultra-HNW clients think ESG investing is a priority. And for younger individuals, this appears particularly to be the case – if you buy the narrative that is relentlessly trotted out.

It comes as a bit of a shock to find that in some regions at any rate, ESG isn’t discussed or mentioned at all by clients. Feedback from my colleagues who have been doing business in the Middle East suggests that ESG – at least in the most general sense – isn’t something that clients in the region raise in meetings or casual conversations. 

There may be several reasons for this, not least that this is, after all, an oil-rich region in which people are understandably wary of what a decarbonized economy will look like. There has been the recent outpouring (with some hypocrisy and grandstanding by certain well-paid football stars, it must be said) of Western criticism of the Qatar World Cup over issues such as gay rights and treatment of workers on building sites. And the locals might think that this is a bit rich when the West is happy to import vast amounts of Gulf oil and gas and yet can’t bring itself to frack for oil and gas at home. (The UK being a case in point.) That, coupled with the Russian invasion of Ukraine and the spike in energy prices last year, means that the ESG bandwagon hit a few bumps recently – at least the “E” part of it. 

Clearly though, whatever one’s views are about certain parts of the ESG agenda, this investment trend isn’t going away. We have had enough years of debate and data on the topic to know that ESG can and arguably should form part of the due diligence and risk management analysis that wealth managers employ. 

In North America, the picture – at least based on surveys we receive from banks and others – is different from that of the Middle East. Clients are, so advisors tell me, interested in ESG options and this tends to be even more prounounced among younger high net worth individuals. In some cases, not having ESG embedded in processes is seen as a turnoff. 

ESG is still controversial, as is to be expected. That’s not a bad thing: this industry doesn’t need “echo chambers.” Vigorous debate is welcome. When the Securities and Exchange Commission last year moved to force publicly listed companies to disclose their climate impact, a group of 22 law and finance professors in the US said the regulator was exceeding its authority. This is also a political hot-button topic.

Argument continues over whether climate-linked investment ideas are able to produce investment returns that match, or even beat, more conventional ones. Defenders of “green” investing claim they are as good, and can beat other investment approaches. Asset managers such as BlackRock, which oversaw more than $8 trillion at the end of 2022, have pushed their weight about over environmental and sustainability ideas. The firm has defended itself against the charge that it is becoming increasingly political or "woke" in its investment conduct.

There has been controversy in other ways in the US. Last May, Vivek Ramaswamy, the author of Woke Inc who made his fortune investing in pharmaceutical companies, won the backing of hedge fund manager Bill Ackman and billionaire tech entrepreneur Peter Thiel to launch a new venture called Strive. Strive only invests in firms that focus on maximizing profits and will shun those that espouse political beliefs. Time will tell how well Strive does. 

ESG has also become a battleground over what the fiduciary responsibilities of firms’ owners are. Half a century ago, Chicago economist Milton Friedman, in an influential commentary, said the role of companies is to maximize shareholder returns, not to foster social or non-financial objectives that are not explicitly stated in articles of incorporation. Since then, however, the trend has shifted to the point where Friedman’s argument is treated as incomplete. Debate continues on whether such investment approaches match or beat more conventional forms over time. When stocks and bonds fell last year, while certain energy stocks outperformed, being an ESG investor wasn't a comfortable place to be.

On a slightly different tack, I have also noticed a trend in the US of “faith-based” investing, through which advisors and clients try to follow Christian teaching, and where areas such as abortion, contraception, video games etc. arise. In all these cases, there can be some overlap with certain ESG ideas, although in others there’s tension. (Some ESG investors would disagree with limits on abortion or contraception, for example.)

What should advisors do about all this? Well, they know they must walk a fine line between heeding what their clients actually want and suggesting ideas about investments and practices that are gaining ground. At the very least, they need to make clients aware of what’s out there. It is the job of a smart advisor to “look around corners” on a client’s behalf and help the client future-proof their business and private wealth. It is therefore a duty, and not just a marketing gimmick, for advisors to talk about ESG with clients. 

None of this means that advisors must preach some sort of gospel, or skate over the difficult stuff, such as “greenwashing” scandals. Nor must they over-sell ESG, or ignore debates about trade-offs. Trying to pitch a “have your cake and eat it” message about ESG is asking for trouble. Advisors must be honest, and explain that this is very much a work in progress, and that benchmarkable data, transparent information and reporting is not always easy to obtain, or as good as it should be. Care must be taken in framing expectations. And avoid jargon.

Handled intelligently and with plenty of facts and figures, ESG conversations with clients can influence attitudes. The dynamic must always be a two-way flow of ideas between clients and advisors – never a sales pitch approach on the one hand, and not being shy of sometimes saying “no” to a client on the other. Above all, ESG must be another aspect of the frank and hopefully productive conversations that smart advisors have with their clients over many years.

As always, feel free to jump into the conversation and email me at

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