Q&A: Lifting the lid on ESG Compass

Q&A: Lifting the lid on ESG Compass

Mike Dowsett, Senior Research Consultant at Tenet takes a deep dive into the company’s new digital platform, ESG Compass, and how it will help advisers and their clients navigate a challenging ESG product landscape.

Q: What is ESG Compass?

A: ESG Compass is Tenet’s brand-new digital platform that empowers advisers with the facts and opinion they and their clients need to achieve their ESG goals. We’ve developed this to provide advisers with access to a suite of the leading ESG funds, mortgages, and managed portfolio services – all subject to comprehensive due diligence and regular re-evaluation.

Located in an easy-to-use digital platform, you can search and filter propositions in the suite according to their ESG approaches, including investment and ESG style, product type, and cost – enabling you to match the right solutions to your clients’ ESG values quickly and easily.

Q: How does Tenet conduct its ESG research?

A: All our research is conducted by the Tenet Research Hub, a team of industry specialists with extensive experience supporting advisers with product research, provider due diligence, and constructing product and fund panels. With so many different products available, and growing concerns about issues such as greenwashing, our aim is to give advisers confidence and peace of mind about the ESG products they are discussing with clients.

Q: How does Tenet collect data?

A: We collect data directly from providers using in-house due diligence questionnaires. We also have access to data on fund research tools such as FE Analytics. To avoid overcomplicating things, we only collect data we feel will be useful to our research process.

Q: What about product due diligence, what is Tenet’s criteria for passing this?

A: In addition to in-house due diligence questionnaires, other factors taken into consideration include a provider’s financial strength, the experience and qualifications of its management team, charges, investment performance, ESG objectives & screening methodology, data sources used to conduct screening, provider reporting, and benchmarking against ESG objectives.

Q: What benefits does ESG Compass’ data and research give advisers?

A: The data allows advisers to understand the differences between the various ESG fund and discretionary managed portfolio propositions available in the wider market. The propositions will have varying approaches to ESG and are grouped into different categories based on their ESG approach.

This enables advisers to focus their research and selection on the products most suited to a client’s needs and values. We also include a range of supporting information to assist with the adviser research process, including charges, commentary on investment performance, availability on the various fund platforms, and attitude-to-risk tools.

Q: What specific search options are available on ESG Compass?

A: There are a number of filters, with these enabling advisers to search across the following options:

Funds: investment style (active, blend, passive), ESG classification (ethical, sustainable, impact, ESG integration), IA sector, and risk approach (focused, targeted)

Discretionary portfolios: investment style (active, blend, passive), ESG classification (traditional ethical and responsible, sustainable, impact), type of discretionary agreement (agent as client or reliance on others), and custodian (direct or platform-based)

Q: How do you keep your ESG data up-to-date?

A: We appreciate that ESG products, like any other financial product, need to be regularly monitored. We therefore engage with providers on a regular basis to keep abreast of any changes in their funds and update the data accordingly. All ESG data is formally updated every six months.

Q: This is a digital product – would an adviser also have to review if a fund is really a match for a client’s investment preference and risk profile?

A: ESG Compass facilitates, not replaces, the financial advice process. Advisers still need to review whether a fund or discretionary portfolio is a match for their client’s risk profile, and we provide inf0rmation within our data on which risk profiling tools each proposition is available on – helping advisers arrive at the most suitable solutions more easily. Our aim is to give advisers as much information as possible in one easily accessible place – enabling them to make more informed decisions for their clients.

Q: If a fund underperforms, would you remove it, and what is the process of doing this (and how often)?

A: We regularly monitor all products on the platform. If a fund were to underperform, we would not necessarily remove it, but instead investigate the reasons for this to arrive at an informed view and see what action best serves advisers. For example, we’d look to determine if such performance was expected due to market conditions at that time, or if there was an issue with the proposition’s investment objective and approach.

For more information on ESG Compass and how it can help advisers, please visit our research page.