Sustainable Wealth

Of course our wealth has to sustain us but it also has to play a role in sustaining our common assets, both in nature and in society.

And it is with this new understanding of wealth that we can develop a more aligned, more sustainable form of managing wealth. For example, it is only recently that mainstream investment management has started to move beyond the ‘fixed mindset’ that financial returns will be reduced by social and environmental investment objectives. Indeed many more people – both investment managers and their customers – are starting to recognise that a relentless, unquestioning pursuit of financial returns may damage our long term economic success.

Investing is clearly one important area where sustainable wealth management can have a big impact, but we should consider all areas of wealth and personal finance that can be managed according to sustainable principles. One lens through which to do this is to analyse the individual life cycle and how financial products and services can sustain customers, both directly and indirectly – through our common assets. In this diagram, we show some of the most significant wealth considerations at distinct life stages. We also show in the deep green row the main focus for financial planning at each stage.

• How much do our recommendations reflect past performance, not a sustainable future? How much of the firm’s house view is based on old economic models, beliefs and perspectives?
• Have we really explained our approach to sustainability, why it is important and how it is realised in our products and services. If we offer choices to our customers, like ‘dark green’ versus ‘light green’ pension plans, have we clearly communicated how they differ in approach, costs and potential outcomes?
• How can we ensure customer portfolios are adequately protected against climate and other environmental risks? For example, there is growing research suggesting that transition risks are not yet correctly priced into mainstream investment portfolios
• Can savings be utilised in a way that reduces both personal footprint and spending. For example, can they invest in energy efficiency and cut bills prior to retirement?
• How sustainable is the use of income when required? Does this align or negate a green approach used during accumulation? Are we helping customers to understand what is enough with regards to personal spending?
• What is the best way to include dependents in discussions around long term financial planning? For example, are the invested assets doing good before they are transferred to the next generation?

There will of course be more questions based on your specific business model. Once the analysis is complete, you can then generate strategic options to transition to a more sustainable wealth proposition. These changes may be evolutionary or revolutionary, depending on where you are now. The good news is that there are a growing number of tools and services available to support this transition. Examples include climate risk assessment tools, green lending frameworks, investor voting rights platforms, green payment infrastructure and transactional carbon emission data.

We are always happy to discuss the options to progress towards more sustainable wealth management. Do get in touch at info@euvita.co.uk for an informal chat.