Sustainability and its implications for risk and for the suitability of investment portfolios is now centre stage for all parties across financial services.

Environmental, social and governance factors potentially having a negative effect on the value of investments are all in the spotlight. For example, the instances of workforce standards in a company’s supply chain or business ethics are increasingly making headlines and as a result, pose material risk. There appears to be no hiding place.

Financial markets are further perturbed by transition risks tied to change in global sentiment, politics or labour policy, all of which can trigger a reassessment of an asset’s value. In the future, there are additional liability risks potentially, still to be quantified, as people impacted by climate or social change pursue compensation.

All the while, the speed of change increases as governments and investors accelerate plans to transition economies and companies toward more sustainable practices.

Rising tide, rising demand

Larry Fink’s letter to investors in January this year laid bare BlackRock’s commitment to supporting net zero greenhouse gas emissions, across its portfolio by 2050, founded on their opinion that there is now a fundamental reallocation of capital towards sustainable assets. Meantime, in 2020, we saw household names like Barclays unveil a net zero target for businesses it lends to, while similar pledges too have been made by HSBC and JP Morgan Chase, adding weight to the movement.

Against this backdrop, advice firms are increasingly talking about sustainability, its risks and opportunities, with their clients. A survey we carried out last year, revealed that 55% of advisers, more than half, discussed sustainability with clients during reviews and 83%, more than four in five, wanted more information on the sustainability of investment solutions.

Measuring ESG risk – What’s the problem?

That said, how is the industry currently measuring sustainability risk and opportunity; explaining it; and accounting for it in client portfolios and final recommendations? The short answer is there is no accepted or uniform answer yet. Why? Below are three key reasons:

  1. Lack of consistent, objective disclosure of a company’s activities in relation to ESG risks alongside the practice of ‘greenwashing’ – implying sustainable credentials for funds when the reality is different
  2. Externalities – the wider cost paid by the environment or society from a company’s activities are not simple to understand or measure
  3. Longer term, the scale, incidence and impact of potential risks are uncertain and difficult to factor in. Five years ago, then Bank of England Governor Mark Carney called this the ‘tragedy of the horizon’ as investors discounted very long-term risks

At the heart of these three issues is measurement and the need for consistent, objective assessment here. Regulators around the world are driving this agenda. From next month [10 March], EU Regulation on sustainability-related disclosures in financial services [Disclosure Regulation or SFDR] must be implemented.

UK managers distributing in the EU are already preparing for this. The UK regulator has commented they are ‘working closely with the Government and other regulators on how to implement the EU’s proposals in the UK’. Already this year, new regulations in line with the Task Force on Climate Related Disclosure, a global initiative mandated by the G20’s Financial Stability Board, demand stricter disclosures from listed companies in the UK.

As better data becomes available as a result, so fund analysis around the risks and opportunities here will improve.

Going beyond manager questionnaires and self-descriptions is important in order to create more universal models founded on publicly available information, accurately capturing historic patterns and allowing for forward-looking risk assessment without an absolute reliance on opinion. In this way, we will match the way those models take a view on risk.

ESG research available to you today

At Dynamic Planner, we have long considered a wide range of risk factors of each individual holding, when assessing the overall risk of investments. In that light, our own approach here has been to incorporate similar, whole of market ESG data from MSCI, a world leader in gathering sustainability information from public sources.

We this year made this research available to advice firms, to inform objective conversations with clients and enable them to compare investments fairly like for like. Over time, we are interested in understanding what does or does not pose risk for investments, in particular against its risk profile peer group, as we do today with liquidity and credit risk, for example.

Without doubt, we are only part way along the ESG assessment journey. From an adviser’s standpoint, the key is to adopt tools and data available today and to not let ‘perfect’ be the enemy of ‘good’ in terms of having a meaningful discussion with a client. As measurement of sustainability improves, the market will become more accurate in its risk assessments.

Read more about sustainable investing research, available today in Dynamic Planner.

Dynamic Planner has been selected as the best by award-winning financial adviser group Tenet to provide its members with risk profiling and asset allocation investment processes. 

All Tenet appointed representatives and directly authorised clients of TenetSelect will be able to use Dynamic Planner to risk profile their clients, enjoy full, two-way integration with Intelligent Office [iO] and tap into the independent, whole of market fund analysis and research of 1,300+ funds each quarter.

Ben Wright, Business Development Director at Tenet, said: “Dynamic Planner is recognised as the market leader in this space. As well as offering full integration with Intelligent Office, this deal will significantly enhance our offering, helping members deliver an efficient and accurate service, as well as enriching their end-client experience of the risk profiling and annual review process.”

We are delighted to announce our partnership with Tenet as part of our wider focus on ensuring suitable advice and investments are provided to all. Having taken part in a rigorous due diligence process and been selected as the best in the market, we are looking forward to servicing hundreds of Tenet firms over the next six years. Using Dynamic Planner, Tenet advisers will enjoy flexibility when risk profiling their clients. They will be able to access online, academically proven psychometric profiling questions – via email and synced back to Dynamic Planner – completed by the client in a time and place of their preference. Other options include the iOS app, at a computer with the client, or on paper.

To recommend suitable investments, they can access Dynamic Planner’s independent, whole of market research and select from more than 1,300 funds risk profiled every quarter. They will also quickly be able to view Tenet’s approved fund list to further recommend investments from and will be fully aligned against Tenet’s policies and procedures. This process is robust and effective.

We are confident Tenet firms will now have access to the very best risk profiling and asset allocation investment services, helping them increase efficiencies in their back office and review processes, select suitable investments and clearly demonstrate the value they bring in the advice process. We’re committed to helping Tenet advisers drive their businesses forward and are proud that Dynamic Planner will now be an integral element of their investment process.

A huge warm welcome to Tenet members from Dynamic Planner. We look forward to working with you over the coming years to future proof your advisory firm, bringing you compliance benefits, increasing your efficiency, reducing the number of back office systems you rely on, and providing someone to turn to at every step of the journey.

To get set up, please contact your Tenet representative and we look forward to servicing you.

Schroders has partnered with Dynamic Planner, the market-leading provider of digital risk profiling and financial planning services for financial advisers, to launch five risk-targeted funds.

The Schroder Dynamic Planner Portfolios have been designed to enable advisers who use Dynamic Planner to risk profile their clients to select investment solutions that are suitable for their clients’ requirements. The funds target Dynamic Planner risk profiles from level 3 to level 7, and have been specifically designed to remain within the volatility parameters of each level. The five funds are called:

The Schroder Dynamic Planner Portfolios are managed by Schroders’ highly experienced Multi-Manager Team, led by Marcus Brookes. The team research an investment universe of more than 5,000 funds, aiming to select the best combination of products from leading fund managers across equity, bond and alternative asset classes on a global basis. The team will make tactical asset allocation decisions while operating within the Dynamic Planner risk profile, meaning clients’ money will always be aligned to their risk profile.

The portfolios will have an ongoing charge of 0.99% and will be available on a wide range of UK adviser platforms.


James Rainbow, Co-Head of UK Intermediary said:

“The Schroder Dynamic Planner Portfolios provide investors access to the expertise of our highly experienced and talented Multi-Manager Team, led by Marcus Brookes, who currently manage between them more than £3bn of assets on behalf of our clients. We have worked closely with Dynamic Planner for many years. They have a successful risk profiling and investment process which is trusted across the industry by more than 7,000 advisers and we look forward to continuing our relationship with them.”


Chris Fleming, Director of Asset & Risk Modelling, Dynamic Planner said:

“We are delighted to be collaborating with Schroders on this new range of active funds. With their proven expertise and our risk targeting and asset allocation model, this partnership will provide greater choice for investors seeking suitable long-term funds.”