We occasionally hear of concerns relating to regulatory or reputational dangers of profiling aspects of investors' financial personalities (such as their responsible investing preferences) for which no sufficiently differentiated product solutions are currently available.
Similar concerns have been raised about whether the profiling tool and outputs might be too extensive/comprehensive for current investment propositions.
Most institutions who are starting to deploy these tools are using stripped down versions, with a view to expanding the profiling over time as their propositions, and indeed the use of ESG by the industry as a whole, increases.
This is very easy to do, and we would always work with our clients to determine the elements that gave the best fit and insights to their current proposition, as well as enabling a road map for future proofing. We are also continuing to develop our knowledge and profiling capabilities and improve our tools as knowledge increases.
While we can certainly just cut back on the range of elements profiled, it's worth noting that these concerns can be overstated.
Firstly, as long as the profiling is positioned as being part of broader discussion and that this is an area where the whole industry is still at an early stage, I think there is no real problem with talking to investors about a richer profile than the current product shelf is able to serve. It could help to position them for future sales down the line, and also provide useful education and engagement.
Secondly, even for firms who only have a single ESG offering, these will generally contain investments that reflect a range of social outcomes spanning some E, some S, and some G. The richer profiling then enables targeted sales narratives to bring out the particular aspects of the broad portfolio that are most of interest to the individual investor.