The call to move away from the ESG acronym seeks to better align with client understanding of sustainability.
- UKSIF CEO James Alexander stresses the importance of clear communication in promoting sustainable finance.
- Research indicates that clients lack awareness of available sustainable financial products.
- Educating clients on sustainability could prevent greenwashing, ensuring transparency and trust.
- Financial services should utilise terms like ‘sustainable’ and ‘responsible’ to better engage clients.
At a recent Good Money Week event, James Alexander, UK Sustainable Investment and Finance Association (UKSIF) CEO, addressed the need for the financial services industry to revise its approach in promoting sustainable financial products. He advocated for the abandonment of the ESG (Environmental, Social, Governance) acronym in favour of terms that resonate more effectively with clients, such as ‘sustainable’ or ‘responsible’. This shift in terminology is aimed at bridging the gap between industry offerings and client understanding, thereby fostering a more informed client base.
This call for change is underpinned by research suggesting that a significant number of clients remain unaware of sustainable financial products in the market. Alexander highlighted the critical role of education in empowering clients with the knowledge necessary to make informed financial decisions. By elucidating the benefits and availability of such products, clients would be encouraged to include sustainability in their financial considerations.
Moreover, Alexander warned against the perils of greenwashing, where the true value and impact of sustainable products might be overstated. To combat this, he insisted on the necessity of transparency within the industry, ensuring that sustainability claims are both accurate and trustworthy.
The proposal to drop the ESG acronym is seen as a strategic move to enhance client engagement and understanding. By adopting more intuitive language, the industry would not only avoid potential confusion but also align its messaging with client expectations, thereby strengthening relationships and trust.
Ultimately, adopting a client-focused communication strategy could significantly bolster the industry’s capacity to promote sustainability effectively. Such a strategy would require unwavering commitment to educating clients and maintaining transparency, ensuring that sustainable finance products truly reflect their purported benefits.
Aligning client understanding with industry practices is crucial for promoting sustainable finance.
