Wealth Strategies
ESG Now A Must-Have Wealth Menu Item At Indosuez Wealth Management

The organisation talked to this publication about the increasing centrality of ESG approaches to managing client portfolios.
Integrating environmental, social and governance disciplines into
how clients’ portfolios are managed creates additional work, but
ESG is an increasingly must-have part of a wealth offering, an
international house argues.
Gone are the days when ESG-driven investment ideas were the
preserve of idealistic people unconcerned by strong returns and
the other metrics used to judge how well portfolios were managed.
Today, these ideas are in the mainstream, and woe betide any
firm, it seems, that doesn’t have them on the menu.
With a younger generation of wealth-holders rising in prominence,
such clients tend to be equally concerned about doing good in the
world as well as doing well, Julien Collin, head of markets,
investing and structuring, Singapore at Indosuez
Wealth Management, told this publication in a recent
interview.
“Clearly with generations changing, it is going to be a market
advantage [to have ESG approaches] in the coming years,” he
said.
Already clients of Indosuez Wealth Management benefit from ESG
ratings on their portfolios; this type of service is now
available for clients in Switzerland, Hong Kong and Singapore.
The Paris-based firm, part of Crédit Agricole, intends to spread
its ESG footprint even further, notably by computing the carbon
footprint of clients’ portfolios. “Few other banks in Asia have
that in place,” Collin said of the ESG ratings for private
clients’ portfolios.
Awareness about what ESG investing means continues to vary,
requiring a continued effort to inform and educate clients, he
said. “Asia is lagging a bit behind but growing fast and in the
discussions that I have had with clients, it [awareness] is
increasing,” he continued.
Indosuez WM, via Amundi, Crédit Agricole’s asset management arm,
provides much of the groundwork in creating client portfolios
that are used, providing ESG ratings for thousands of companies
from around the world. A range of asset classes and different
ways of owning them also form part of this process: equities,
bonds, structured products, and so forth, he said. The French
firm prides itself on having a pedigree in the sustainability
investment stakes, having been a signatory to the UN’s Principles
of Responsible Investment since 2006, Collin added.
“There’s a necessary responsibility of companies and investors
towards society,” he said. ESG is about the long term and there
is an increasing body of academic and industry work showing that
such approaches add value to investments over the long term, he
said.
“We integrate ESG into our clients’ portfolios to manage their
downside risk,” he continued.
A number of firms have made a point about their ESG credentials.
A few days ago, UBS, the world’s largest wealth manager, said it
now offers “comprehensive environmental, social, and governance”
assessments of the funds it offers to private clients worldwide.
The assessments will apply to the Swiss firm’s in-house and
third-party funds, it said.
A report by Boston Consulting Group and MITSloan Management
Review found that investments that deliver financial results are
closely correlated with those that are deemed sustainable
(Investing For A Sustainable Future, 11 May 2016).
Separately, a study by Barclays found that investment-grade bonds
with higher ESG scores outperformed those with low ESG scores
between 2007 and 2015 (source: MSCI).
A few days ago, Aite Group, the consultancy, said that
environmental, social, and governance strategies are becoming
increasingly adopted by the wealth management sector. “Overall,
individual firms’ approaches can vary significantly, along with
the extent to which investment analysis is performed. But there
is a growing recognition that ESG factors can be material to
investment performance, as well as risk, and that integrating
such factors into the investment process aligns with a long-term
investment horizon,” Aite said in a report.
Not binary
Indosuez’s Collin said that his firm does not adopt a “Manichean”
attitude towards investments, such as refusing – with some
exceptions – to ever touch a certain type of firm or business
area. “We look at firms making progress in ESG as well as the
good firms,” he said.
Does all this activism increase the workload? “Yes, it provides
extra work but it is becoming a must-have,” he said.
The approach clearly puts Indosuez Wealth Management on the side
of those businesses that see big value in active management,
which is perhaps ironic at a time when the “passive” investment
approach, driven by a bull market in stocks, disenchantment with
fees and other factors, has boomed. But where there are pockets
of inefficiency and clients who want the added benefits of ESG
approaches, the active fund management mentality appears to have
plenty of traction.
Indosuez WM knows that other large banks and wealth houses are
pushing hard at the ESG and impact investing agenda, and this is
already becoming a competitive field. Those firms which are able
to make this business idea work will need to have consistent
performance over the long term to convince clients that they
really deliver.