Is the Wealth Management Industry leading the Global Sustainability efforts?

When it comes to sustainability, the future of the wealth management industry looks profitable and growth-oriented. The paradigm shift is definitely creating a potential avenue for investors.

The UK had its hottest summer this year. People struggled to keep cool as temperatures soared above 40°C. The bad news is that the heat is here to stay. The good news, however, is that more and more businesses are becoming serious about how to mitigate the effects of climate change.

And when it comes to business, the impact of finance and investment in driving change and growth is undeniable. 

A few years ago, investing in sustainability was quite a corner-of-the-room topic. It was more of a friendly, ethical approach. However, being sustainable in everyday life of the business is a necessity now, it’s the business imperative. It can be a massive risk or a massive opportunity, nothing in between.

In Episode 17 of The Innovation Room, Chris Tweed, CEO of Tweed Wealth Management, and Sam Turner, Head of Responsible Investment at St. James's Place Wealth Management, pointed out three main reasons behind the paradigm shift toward a more sustainable finance industry behind the growing businesses:

• Investors’ mindsets and demands are changing

Wealth management practitioners' understanding of their clients' appetites and needs has seen a significant shift. More and more investors have begun to care whether their money contributes to sustainable goals. New generations influence the older ones to opt for a sustainable lifestyle and care for the planet keeping it safe for future generations. If that's what one's kids and grandkids care about and talk about all the time, it will not be difficult to be influenced. And that's a massive shift we are seeing in the insights from the Wealth Personality digital tools: sustainability is no longer a generational matter.

• The status of ESG (Environmental, social, and governance) for businesses has changed for investors

It’s no longer an appetite for ethical investors. It is the actual business risk and opportunity management for investors. So it is becoming the appetite of all investors hence the business imperatives for attracting growth funds and strategic investment.

• Changes in Policy and Regulation 

While the UK government aims to reach net zero emissions by 2050, it is introducing policies and regulations to force all industries to decarbonise and have massive infrastructure changes that lead to huge risks and opportunities… that's what the investors look for. 

These reasons are increasing the importance of the role of the wealth management industry as one of the significant factors in business growth and innovation. Finance has an excellent opportunity to play in fueling innovation in existing businesses, creating new jobs, and supporting the ideas to create new businesses.

Businesses need to go through massive infrastructural, organisational and behavioural changes to become more sustainable and drive the initiatives that our world needs to deal with climate change. And this brings an opportunity that the investors can’t afford to ignore or miss out on. 

With digital technology being the most significant disruptor as well as an enabler of change in our world, the crossroad of sustainability and investment is changing into a massive highway for impactful innovation. And wealth management practitioners with digital technology understanding can impact how quickly the speed limit will increase on that highway.

WealthTech is the new favourite phrase in wealth management vocabulary. Practitioners are increasingly integrating technology into their decision-making which in turn is changing the face of the industry at pace. 

The future looks very interesting and bright… watch this space!