Five years ago, we launched PNr – our responsible portfolio – designed to achieve the same investment returns as our traditional (PNt) portfolio while integrating environmental, social, and governance (ESG) principles.
Organisations with better managed ESG risks are prioritised within the portfolio, while companies with poorly managed risks are underprioritised. The PNr portfolio also favours asset managers with a clearly defined approach to engagement and stewardship. Today, our responsible portfolio accounts for 57% of AUM, with a further 5% in our intentional portfolio, with the majority of Paradigm Norton’s clients choosing to invest responsibly.
As PNt investment uptake plateaus, clients increasingly prefer to invest with a responsible lens – no longer a fringe strategy, but a mainstream choice.
Responsible investing is our default investment proposition, and uptake of PNr continues to accelerate. Of all our clients, 62% now invest with an ESG or impact screen. Our PNi (intentional) portfolio has nearly tripled in the last 18 months, and we expect continued growth. Investing in PNi ensures investments support businesses with proven and legitimate sustainability credentials, measured against the UN’s Sustainable Development Goals. While PNi involves higher costs, which may impact returns, clients accept this trade-off because they want specific control over where their money is invested.
As part of our client onboarding process, we ask clients to complete a financial personality questionnaire. This helps us understand not only their views around risk, but also their preferences when it comes to sustainable investing. Often, after explaining our different portfolio options, clients make the decision to go with PNr or PNi.
We believe PNr’s approach to sustainable investing hits the sweet spot between evidenced-based investing and responsible investing. Indeed, the investment returns of PNr have been near identical to PNt since inception, supporting the notion you do not need to give up financial returns to invest sustainably. New clients are overwhelmingly going straight to ESG-screened portfolios, while some long-standing PNt clients are dipping their toes in by investing a proportion into PNr. We’re encouraged by this demand, and we hope other financial planning businesses will follow suit.
We expect adoption of responsible investing to continue rising, particularly as we continue to share our responsible investment approach more widely. While it’s becoming easier than ever for people to make their own investment choices, unfortunately it remains very challenging for most people to know which investments are truly responsible. We’re proud to have delivered on our PNr mandate, with our stewardship and asset manager engagement providing reassurance around responsible investment.
Looking ahead, we have high ambitions. It is encouraging to see such high demand and uptake – with education, trust, and a great track record, we’re ensuring clients can still retire well while doing good along the way.
Investing places your capital at risk. The value of investments can go down as well as up, and you may not get back the amount you originally invested. Sustainable investments carry additional uncertainty – the environmental or social benefits expected may not be achieved. The information and opinions we share in this report are based on sources believed to be reliable, but we cannot guarantee they are accurate or complete, so they should not be relied upon as the sole basis for making investment decisions.