While a growing number of investors are seeking to make sense of their investments, ESG products are not yet meeting the demand. And this, despite a strong potential and much better profitability than in recent years. Is this a foregone conclusion? Fortunately not. Here are 10 actions you can take today to boost the sale of your ESG products, to become profitable again.
1. Simplify the vocabulary of the ESG offer
SRI, ESG, low-carbon funds, green bonds, Greenfin label, best-in-universe or best-in-class approach… The first obstacle to selling ESG products is the complexity of the offer. In light of the lack of general financial knowledge among investors, there is an urgent need to demystify the world of sustainable finance. For example, the very term “sustainable” finance can be misleading, because it refers to sustainability and the long term and does not necessarily refer to the environmental, social, and governance criteria of ESG… This lack of clarity could dampen the spirits of an investor, who is nevertheless motivated to act in favor of the environment. It is, therefore, necessary to explain how an investment can have an impact and what are the different types of investments that can be made. But before the offer can be popularized, the advisors themselves must have a perfect command of it… This brings us to our second recommendation.
2. Increased training for advisors on ESG products
To date, only 5% of French people say that their advisors have talked to them about ESG products, whereas 65% of them want to invest in ESG. Paradoxical, isn’t it? These figures can be explained by the fact that advisors are not sufficiently trained in ESG-related topics. Due to a lack of knowledge of existing products and to remain credible with their clients, they simply prefer not to talk about ESG products. This situation is all the more damaging because sustainable finance is of great interest to the new generation of investors. Between the ages of 25 and 34, 81% of them want to know more about responsible investment (KPMG, 2019).
3. Putting an end to the clichés about ESG products
Preconceived ideas are hard to come by. Many investors, especially those over 40, are still convinced that investing in sustainable finance means sacrificing a portion of their profitability. These individuals generally consider that they already have their philanthropic works and that it is not through ESG products that they will be able to make their savings grow. If it is true that ESG products were not profitable when they were launched, things have changed in 20 years… It is a matter of breaking this preconception by example and proving to your clients that it is possible to be profitable, even very profitable, by investing in green products. Several major studies converge in this sense. After analyzing 11,000 studies on mutual funds, Morgan Stanley’s Institute for Sustainable Investment concluded, for example, that responsible investment funds offered comparable returns and a lower risk of market downturns, particularly during periods of volatility. An approach that was verified in 2020: ESG products outperformed during the Covid-19 crisis.
4. Fighting the fear of greenwashing
In a general climate of mistrust towards authorities and institutions of all kinds, even the use of labels no longer inspires confidence. For example, some investors will not understand why a company such as Total can be included in an ESG fund. While some will welcome the fact that Total is encouraged to invest in green energy, others will categorically refuse to invest even one euro in such a group. In any case, education and transparency are needed to explain how ESG-labeled funds are designed.
5. Work towards better structuring of ESG products
In the same way that in their time, the first organic labels could be claimed without necessarily having any control behind them, things are in the process of being structured for ESG products. Under the impetus of the SFDR regulation and the EU, a taxonomy of green products is being developed. Soon, sustainable finance will be more standardized and regulated, for the greater benefit of investors.
6. Appeal to the spirit of national solidarity
The Covid-19 health crisis has had a heavy impact on the economy. The State will not always be there to wipe the slate clean. And the traditional 100% investment mode in euro funds and real estate will not be enough to rebuild the economy… Beyond ESG, the idea is to remobilize individual investors to invest in the real economy, to work towards rebuilding the European economy. However, for this new common economy to be sustainable and inclusive, it must be based on sustainable finance.
7. Offer ESG products in line with investment values
Currently, most ESG products offer investors the opportunity to take action for the preservation of the environment but are less focused on social issues such as health, education, or diversity. The reason for this focus on the climate is that historically, ESG products have been created for institutions, not individuals. Given that environmental protection is a rather consensual trend, the institutional offer has largely taken hold of it. However, investors sometimes have very different values. In the United States, for example, religious motivations play a fundamental role. But to be able to offer ESG products in line with investors’ expectations, it is necessary to know them…
8. Assessing investors’ ESG preferences
You can’t sell the right product to the right person without knowing their investment profile and values. To boost the sale of ESG products, you need to be able to assess your clients’ ESG preferences. In any case, the assessment of ESG preferences will soon be a requirement, according to the last part of the MiFID II regulation that should apply during 2022. So you might as well get to grips with this issue now! To do so, you can simply add questions to your suitability test form, or you can opt for a more innovative and efficient solution, such as Neuroprofiler’s ESGProfiler.
9. Using behavioral finance and gamification principles
To help financial institutions boost the sale of ESG products, Neuroprofiler has designed an ESGProfiler. An interactive questionnaire based on behavioral finance, ESGProfiler allows you to accurately assess your clients’ appetite for sustainable finance and to understand the impacts they wish to have through their investments. The use of ESGProfiler allows you to be in full compliance with the new MiFID II directive, but above all, it constitutes an unprecedented commercial opportunity to recommend to your clients THE most appropriate ESG product and therefore to boost your sales.
10. Educating clients on sustainable finance
It takes time to train advisors on a complex offering like ESG products. At the same time, you need a tool to match client expectations with products on the market: ESGProfiler. But to sell better and more, you also need to improve the financial knowledge of your clients. That’s why Neuroprofiler has also developed the EDU Profiler module: a fun e-learning tool that democratizes the world of investment for investors. Thanks to this gamification-based tool, investors gain a better understanding of financial products and can therefore invest more easily.
Ready to boost the sale of your ESG products? Ask for a demonstration of the Neuroprofiler modules!