Falling interest rates, investor reluctance, difficulties in switching from euro funds to unit-linked products… These are not the most favorable times for financial institutions. In an economic context marked by the crisis, banks are struggling to return to profitability. However, by equipping themselves with innovative digital solutions, it is possible to encourage more individuals to invest more in more profitable funds… such as ESG funds. Find out how in this article!
ESG financial products: sustainable finance is becoming an unavoidable trend
The environmental concerns of citizens are such that sustainable finance is no longer a niche market. The year 2020 marked a turning point in this area. According to a study by the European Fund and Asset Management Association (EFAMA), 11,000 billion euros of assets included an ESG criterion in 2020, i.e. 45% of assets managed in Europe. Environmental, social and governance factors are now guiding the decisions of investors, who are increasingly seeking to have an impact on their investments.
This quest for meaning is particularly strong among the younger generations: 81% of 25-34 year-olds say they want to know more about responsible investment, according to a 2019 KPMG study. Between 2013 and 2018, they were even 75% to have increased the share of responsible investments in their portfolio. The same enthusiasm also exists among older investors, at least among those who have understood that sustainable finance no longer requires sacrificing profitability.
The demand for ESG products is there, and the Covid crisis has only accentuated this movement. And that’s great news for banks.
ESG financial products: what are investors’
expectations?
Climate change, circular economy, natural resource preservation… In which areas are investors looking to make an impact? How much of their portfolio do they want to allocate to sustainable finance? To find out, you have to ask the question. This is what the MiFID 2 regulation encourages, because only by understanding investors’ preferences will financial institutions be able to offer them adapted financial products.
Instead of asking your clients to checkboxes on a boring paper questionnaire, we suggest you use digital tools based on behavioral finance and gamification that will turn this regulatory constraint into a business opportunity. This is what InvestProfiler is all about: a tool that assesses investors’ appetite for sustainable finance and identifies the impacts they want to have in their investments.
ESG financial products: a growth driver for banks
To boost sales, a bank has three options:
- Increase the number of its customers
- Increase the number of outstanding loans
- Boost sales by encouraging investors to be less conservative
ESG products allow us to act on these three levers. Here is a demonstration.
ESG financial products to increase the number of clients
We have already mentioned the craze around sustainable finance: by explaining to individuals that they can make sense of their investments via sustainable finance, it is possible to surf on this trend and increase the number of clients.
To achieve this, however, it is necessary to act in favor of better financial education of clients. Although it is of interest to them, sustainable finance is still a relatively obscure subject for many investors. It is, therefore, necessary to demystify this universe, with the help of tools such as EduProfiler. This adaptive knowledge test includes training modules dedicated to sustainable finance, to raise awareness and educate investors on the diversity of ESG products.
ESG financial products to increase the number of assets
The InvestProfiler module can be used as part of a marketing campaign to raise customer awareness of sustainable finance, to increase their assets.
Inserted on your website, InvestProfiler introduces the concept of sustainable investment through a fun and interactive journey. At the end of their journey, depending on their preferences, your clients are offered the ESG product that best meets their expectations and is invited to increase their assets.
ESG financial products to boost assets
For the time being, most ESG financial products fall into the category of unit-linked products (UL). Setting up actions to promote ESG products is therefore acting in favor of the conversion of Euro funds to UA. Neuroprofiler shows a conversion rate of 10% from Euro funds to UC. This will help financial institutions to sell better and more to more clients. Ask for a demo!