From left: Dugald Higgins, Fiona Thomas, George Walker, and Fiona Reynolds

Advisers have been receiving an increasing number of clients asking about ESG investments but the lack of standards around disclosure is creating obstacles for advisers.

Several institutions – including the Sustainability Accounting Standards Board – are, however, working to form these standards.

Speaking at the Professional Planner Researcher Forum, Zenith Investment Partners head of responsible investment and sustainability Dugald Higgins said Australia remains quite limited with how it approaches fund transparency and holding data.

“If you’re an ethically-driven investor and you can’t see a fund holdings data you’re effectively blind dating because you don’t know what’s in that portfolio,” Higgins said.

Despite this, he said funds are passing the age of rhetoric and into accountability.

“A big part of where we’re at now with looking at funds and how the industry presents itself,” Higgins said. “The big difference we have right now is move from ‘tell us what you’re doing’ to ‘show us what you’ve done’.”

Higgins added a big part of how this new age will work is transparency.

“Transparency is key – transparency in the process, transparency in the holdings, transparency in stewardships, in actions, in outcomes, transparency in metrics like carbon.”

ESG v sustainable v responsible investing

Higgins said the industry often conflates ESG and sustainability, clarifying that ESG is looking at external factors that can impact a company’s value while everything a company does that impacts the world is sustainability.

“If you’re confusing ESG and just an investment process inside a portfolio that’s only designed to look at risks and opportunities and then mixing that up with a company that’s trying to be sustainable… they’re not necessarily the same thing,” Higgins said.

Ethinvest general manager Fiona Thomas said there are many ways to keep track of what is occurring within the ESG investing space.

“For an investment to be classified as an impact investment for us [Ethinvest], there needs to be a precise measurement process in place.”

Thomas believes people do not understand the difference between ESG factors, responsible investing, and sustainable investing.