Sustainable, Responsible and Ethical Portfolio Construction Service
For Professional use only.
How do you know you are using the right tool for the job?
This service has been created specifically for Irish Financial Advisers to offer over 45,000 combinations of taxable investment portfolios which are designed to capture the following potential benefits for their clients:
- The tax treatment of securities, as distinct from investment funds in Ireland, giving the equity component Income Tax and Capital Gains tax treatment rather than Exit Tax.
- Through a Euro Hedged UCITS fund, to have the ability to invest in a diverse, portfolio of global fixed-income securities, selected according to PIMCO’s internal ESG screening process. The fund invests primarily in a diversified portfolio of investment grade bonds from around the world, on the basis of PIMCO’s ESG exclusions, evaluation and engagement decisions. Designed to provide stability and allow advisers to mix equities and fixed interest in exact proportions to meet the need, willingness and capacity for risk of their client.
- To invest in a composite portfolio of securities designed to replicate a market capitalisation weighted stock portfolio and provide beta or market returns but with a sustainability filter applied to seek to achieve the objective of zero traditional energy companies.
- The ability to progressively exclude certain funds from the portfolio in order to dial out certain controversial stocks which might not meet the exacting investment requirements of certain investors. An example might be Safran (military aircraft)
- The ability to blend these three portfolios in any desired proportion in order to meet the exact requirements of a particular client with over 45,000 combinations of portfolios available to choose from.
Example portfolio for illustrative purposes
What do your clients think about sustainable and responsible investment?
When members of the public were actually asked what they thought about the idea that their retirement savings could make a difference to the world. Do they know that their money is being invested? Do they care where it's invested? Would they take more interest in their pension scheme if they thought they were doing good with their money? Watch 10 people get it, and suddenly start to care where their money is invested.
SRI Advice Process
This advice process is intended to help Irish Financial advisers to offer advice on green and ethical funds more effectively.
This process is intended to compliment not replace your existing fact-finding processes and obligations under the Consumer Protection Code and advisers must issue their own Statement of Suitability.
The process is intended to assist advisers to demonstrate how and when different aspects of SRI can be brought into the advice process.
The advice process has been designed specifically for taxable accounts held with Conexim Advisors Ltd and is not suitable for any other investment platform.
For pension and ARF accounts, please see here
To watch a presentation see here
STEP 1. Identify your client's tax status
Understanding the taxation of investments in Ireland a guide for Financial Advisers
- Investors in these portfolios must self-assess for tax purposes. And all investors must complete and return their tax return (Form 11) by 31 October in the following tax year. Taxation is the responsibility of the end-investor. The Central Bank of Ireland does not regulate tax advice
- The service is intended for larger portfolios (€250,000+) due to the underlying charges applicable for dealing and execution. For smaller accounts advisers should consider if a Life Assurance contract might be more suitable
2. Initial Fact Find Question
Aim: To find out if your client is interested in SRI, environmental or ethical investment considerations
Action: Ask an initial SRI fact find question as part of your standard fact find
With reference to the impact of climate change, Larry Fink, Chairman and CEO of BlackRock, stated;
‘We are on the edge of a fundamental reshaping of finance’
Comments such as these and the growing interest of consumers in understanding how their savings are being deployed, highlight the importance of building an understanding of ESG and Responsible investment to not only meet the needs of clients, but also to meet the incoming regulatory change. The changes are pursuant to Article 25 of MiFID II, with the European Commission currently seeking to amend Delegated Regulations to Articles 2, 52 and 54, which will require advisers to build an assessment of each client’s ESG preferences into the suitability test.
Would you like to consider environmental, social, ethical or religious issues when looking at where you might invest?
Step 3: Identify your client's SRI Aims
Aim: To identify relevant SRI strategies for your client
Action: Ask the client to complete the SRI Stylefinder Questionnaire
For clients with an interest in SRI, green or ethical investment you need identify what areas of SRI most appeal to them in order to match a suitable portfolio of investments.
To help advisers with this process, ask the client to complete a “supplementary SRI fact find questionnaire” – which comprises tick box ‘high level’ indicator questions.
Clients should select the phrases they feel most closely represent their ethical, social, environmental or religious views or ‘SRI aims’.
The tool uses this information to identify the three best fit SRI Styles (EcoStyles).
SRI Style Finder tool
The 'SRI StyleFinder' Questionnaire is a tool which helps you identify your client's preferred 'sustainable and responsible' or 'ethical' investment Style(s) and helps you to prepare for discussing this area with an investor.
The SRI StyleFinder is free to use. It is provided for information purposes only and does not constitute financial advice. The providers of this questionnaire 'sriServices/Fund EcoMarket' are not regulated or authorised to offer financial advice.
Although this portfolio service does not currently support all of the possible EcoStyles identified, advisers are able to dial up the “Ethical filter” for those clients with a clear Ethical Investment preference.
Remember – SRI fact finding is in addition to regular fact finding (and research), not in its place
To access our SRI guide for Financial Advisers, see below
Step 4 – Complete the form
Aim: To provide a bespoke portfolio which meets BOTH the investor’s attitude to investment risk and accurately reflects their preference for SRI issues
To recommend investment options to a client you need to take into account both SRI aims and information deduced from your standard fact find and risk profile process. This service is intended to suggest a portfolio
to help advisers shortlist relevant options more easily by combining SRI fact finding with flexible portfolio construction so that advisers can deliver a more customised solution.
The proposed portfolio can then be used as the basis for further research and due diligence by the adviser in order to assess if the proposed portfolio is suitable for their client.
You should carry out your regular due diligence on the proposed portfolio as with any other recommendation and finalise your advice process as normal. This may involve recommending an alternative product or service.
NOTE: This process works on the assumption that a standard fact find questionnaire has been completed and that you understand your clients investment aims and attitude to risk. It also assumes that you have an idea of possible product solutions and you are conducting research and due diligence into investment options.