Ahead of the InvestorDaily ESG Summit 2022, Nigel Stewart, a wealth strategist who is due to appear to discuss the role of environmental, social, and governance (ESG) in reshaping advice in a post-COVID world, has said that the next generation is going to play a key role in making investment decisions.
With a wealth generation transfer of almost $18 trillion due to occur over the next decade from baby boomers to the younger generations, he noted that the younger cohort is currently deeply concerned about the ESG issues plaguing the globe.
“As such, the really good advisory firms will be embracing change in the way they’ve done business,” Mr Stewart told InvestorDaily.
“That is a very logical and sensible bridge in building that communication successfully in the next generation.”
Advice practices that wish to incorporate a greener model into their businesses would be required to be aware of and display passion for societal issues and express a desire to effect change within their firm and their community, Mr Stewart said.
He also said that these advisers would be abreast of the changes occurring across the globe, including climate change targets and the extreme weather events such as bushfires and floods in Australia and the globe.
“If advisers are engaged in their communities and what is happening around them in the world – including racial issues, which we’ve seen in the US and elsewhere – then they can make a difference if they choose,” Mr Stewart said.
“There are sensible investment solutions out there for them to research, which don’t necessarily involve them taking a hit to performance. They need to communicate clearly to people within their firm in their communities.”
A recent United Nations report by the Intergovernmental Panel on Climate Change found that based on current pledges to slash greenhouse gas emissions, the planet’s temperature would rise by 2.7 degrees this century.
However, the report has recommended that global warming be capped at 1.5 degrees Celsius above pre-industrial levels to avoid the severe impacts of climate change.
Regulators such as the Australian Securities and Investments Commission have been seeking to establish reporting frameworks, which would require disclosure of material climate risks to investors.
“I think there has been deep engagement by the regulators,” Mr Stewart said.
“What regulators are aiming at is increasing our transparency, measuring the impact of greenhouse gas emissions and developing a global standard.”
“They’re requiring our financial service organisations to do a lot of stress testing on standard assets or other assets that will impact their financial performance.”
Federal Treasurer Josh Frydenberg recently said that climate risks had become a significant topic of discussion among domestic and offshore chief executives and investors.
To hear how financial advisers could provide clients with effective ESG investing advice, register here for the InvestorDaily ESG Summit 2022.
