Sustainable investing is a term commonly used to describe investment decisions that take into account ‘ESG’ analysis, which is based on environmental, social and governance (ESG) factors. These factors, at times, have also been known to affect the risk and return of investments. 

  • Climate change and carbon emissions
  • Air/water pollution
  • Energy efficiency
  • Water scarcity
  • Waste management
  • Deforestation
  • Product safety
  • Data protection/safety
  • Gender and diversity
  • Employee engagement
  • Supply chain management
  • Labour standards
  • Board composition
  • Audit committee structure
  • Executive compensation
  • Lobbying
  • Political contributions
  • Bribery and corruption 

ESG ratings on BT Panorama are a great way for advisers to engage with clients around their investments.

Investors have indicated they think it’s important for financial advisers to ask about their interests and values in relation to investments1 and one of these areas of interest that is gaining traction in Australia is sustainable investing. Of the $2.25 trillion invested in professionally managed assets, 44% is in responsible investments2.

Many investors also believe companies that apply corporate ESG practices tend to enjoy higher profitability and may therefore be better long-term investments3.

Read the article for more on current trends.  

 

The opportunity for advisers

Despite the growing level of investor interest, there is a lack of information and tools that investors can use to help evaluate investments on a sustainability basis.

This presents an opportunity for financial advisers to provide guidance and support by confidently talking to their clients about the options available to them. 

Sustainable investing is gaining traction, fast. It’s more than just a new trend, with 90% of people surveyed believing sustainable investing is important.
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For investors

  • Greater transparency
  • Being active and taking part in a sustainable future
  • Improved long-term financial performance

For advisers

  • Innovative capability
  • Accessibility to wider group of clients
  • Risk management and the potential for positive financial performance
  • Transparency leading to more informed decisions 

BT has partnered with Morningstar and Sustainalytics to provide ESG research tools on the BT Panorama investment platform. The tools aim to help you understand an investment’s exposure to ESG risk and to appropriately consider the sustainable approach of companies when making decisions about investments.

This is how the scores are calculated:

For ASX200 listed companies:

Sustainalytics assesses a company’s performance across a range of material ESG issues, along with its involvement in ESG-related controversies:

  • Step 1 - Review of company reporting
  • Step 2 - Review of external resources
  • Step 3 - Structural peer review and company feedback

For managed funds:

Morningstar assesses the holdings of a fund and applies an asset-weighted average of the ESG risk scores from Sustainalytics in relation to the underlying investments.

Each company and managed fund receives a score on a scale of 0 to 100, where 100 represents the highest exposure to unmanaged ESG risk and 0 indicates lowest exposure to ESG risk.

Find out more about the research process.

Sustainability scoring

Sustainability risk score (overall ESG risk score):

  • Environmental risk score
  • Social risk score
  • Governance risk score
Sustainability scoring screenshot

Peer comparison

For each investment within the same sector you can identify and compare the sustainability scores and their corresponding financial returns for the last 12 months.

Peer comparison screenshot

To find out more about using BT Panorama to identify risks and opportunities that may preserve and grow the value of a client’s portfolio in the long term, download our e-book.

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Find out about the wide range of sustainable and ethical investment options available on BT Panorama.

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1 From Values to Riches 2020, Responsible Investment Association of Australasia https://responsibleinvestment.org/wp-content/uploads/2017/11/From-values-to-riches-Charting-consumer-attitudes-and-demand-for-responsible-investing-in-Australia-2017.pdf
2
 Responsible Investment Association of Australasia Benchmark Report 2019 https://responsibleinvestment.org/wp-content/uploads/2019/07/RIAA-RI-Benchmark-Report-Australia-2019-2.pdf
3 Morgan Stanley Institute for Sustainable Investing Report 2019 https://​www.morganstanley.com/​pub/​content/​dam/​msdotcom/​infographics/​sustainable-investing/​Sustainable_Signals_Individual_Investor_White_Paper_Final.pdf

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