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  • K O Jones

An Interview with Cleona Lira: How I became an Ethical Adviser

Abridged version published Feb 21 by Aviva Investors

Photograph by Emma Marshall - https://emmamarshall.com/personalbrandphotos
emmamarshall.com/personalbrandphotos

Financial adviser Cleona Lira frequently appears in the financial press, both as an influencer and writer specialising in ethical investments.


According to a survey conducted in September by Aviva, 81% of advisers are now considering ESG, 38% of whom are now thinking about ESG ‘much more’ than before. In fact 92% of advisers also believe ESG will make up a larger proportion of the business in 2 year’s time.


How did you get into ESG Cleona? Was it a conscious career path?

Not really. I worked in a bank and one of my clients requested ethical investing back in 2009. It piqued my interest even though we could only offer basic screening. My client worked for Google and had a large chunk of shares. He said ‘I just want to do something good with this money.’

So when I became self-employed around 2013, I asked every client if they wanted to invest ethically or not. Over time, it became my niche and I hyper-focused on this topic. It also suits my own values and is meaningful work.

Eventually, your niche becomes a self-reinforcing bias – through referrals, my blogs, etc and I began to attract more clients interested in ESG.

They say like you look a lot like your dog and your clients are like your tribe, so I guess it's a process. Life happened and life took me to ESG.

Do your customers fit a particular profile? They say younger investors are very keen on ESG.

I enjoy working with young people, but I don't have too many as clients; usually because they've inherited money.

It’s quite difficult for them; they probably spend 50% of their earnings on rent . There isn’t that much left.

My clients are mostly working professionals, aged between 40 and 65 with a fairly even split of men and women.

Are there any myths or misconceptions about ESG that need addressing?

That ethical funds are underperforming. Or that ethical funds are expensive.

This is most often repeated by clients when they come to me. ‘Oh, I had a financial advisor. I tried to get him to talk about it. But he didn’t seem interested and tried to put me off.’

It’s not true that ethical funds underperform. And most are priced fairly similarly to conventional active funds.

Ethical finds have done well. What’s done badly as a sector for quite a few years now is energy and during Covid, certain sectors like Airlines have been hard hit. We usually don't have those in socially responsible funds, and then we have quite a bit of technology, so that bias has helped as technology has done well as a sector.

As far as I know, there are no long-term studies or definitive evidence to say SRI/ESG funds have overperformed or underperformed. I follow Jon Hale who writes for Morningstar. He has evidence about how ESG funds outperform [more conventional funds].


How do you broach ESG with clients - without making them feel guilty if they're not interested?

Usually if you ask and listen carefully, a client tells you exactly what they want.


I always ask ‘Do you have a preference to invest in line with ethical values?’ or something of that nature, and let them know all the options available in a clean way, including active, passive and ethical funds. I think it is important to guide and educate the client in a non-judgemental, matter of fact way. That’s what I mean by clean - no manipulation or guilt. I use examples and show different fund factsheets so it is visual; I try to use some story-telling and share examples of companies, rather than just facts.

Clients can sense when the adviser has an agenda very quickly; so, I believe in laying out the options, clarifying and answering any questions as needed. Helping the client to choose what is appropriate for them based on their values, goals and objectives.


The client relies on us to make decisions that feel right to them. And I work with clients who want conventional, non-ethical funds.


Many people say ESG is confusing. Would you agree?

Yes. The terminology can be rather confusing.

Even Shell, BP and Exxon Mobil report on ESG criteria. There could be a small company that’s very environmentally friendly in their approach, that produces solar panels for example, that doesn’t report on ESG and is therefore not included in an ESG focused fund.

So it’s about nuances. I ask the client to fill in an ethical questionnaire which gives a structure for research purposes and of course, compliance, but then you also have to have the conversation to gather ‘soft facts’ so you have an idea of clear boundaries, preferences and value priorities.

I usually ask “What do you know?”, and “What would you like to know?. Then, I focus on the gaps in knowledge and where the client’s interest lies. Most clients just want big picture so it’s useful to check how much detail is wanted.

There's a traditional way of ethical investing, which is how it started, which was very much ‘I don't want to invest in things that are harmful’. I usually give an example like Boohoo which was in the news recently, where there have been allegations of human rights violations.

Then there are impact funds which have more of a focus on creating the world we want and a ‘towards’, rather than an ‘away from’ focus. Also, positively-screened themed funds and many other terms so clients need help to de-mystify the labels.


I made a video about it, explaining all the terminology. Clarity is king really. If you're a financial adviser, you have to understand these nuances at an advanced level so you can distil it down clearly for clients.


What ESG tools are available for advisers?

There are lots of resources to widen your knowledge on the topic including books and podcasts. Also, there are interesting people to follow on Twitter. For example, Sir Ronald Cohen, a Philanthropist and Social Innovator, who recently published a book called “Impact” – very helpful to learn more about impact investing. It helps if you’re immersed in the topic.

I use Fundecomarket and Ethical screening for fund research.I also use FE analytics which costs £93 per month. It saves a lot of time in doing the fund research.

Software just saves time. A colleague recently shared that his research process (without software) took him four days just to pick funds for a portfolio. That’s not sustainable.

That’s the biggest obstacle – perhaps, for greater adviser take up in the industry. As we are regulated and independent, the research has to be evidenced and that takes time.

Do you think Covid has had an effect on ESG?

Yes. Definitely.


With screening factors, what I see, is that environmental factors are usually the highest criteria, because of climate change. Human rights violations follow this. In this lockdown period, we have seen how air quality has improved. There was less traffic, less stress, more cycle lanes. It's made people more aware of how businesses operate, how we live and the environment.


Diversity and inclusion are also a big focus. Board diversity with various perspectives and experience is highly beneficial to businesses avoiding groupthink and bad decision making.

We can see how businesses are treating staff during Covid. Some have been pretty brutal in a lack of care for employees while other companies like Patagonia have demonstrated a strong commitment to employee welfare.

The pandemic has shown the inequalities that exist in society and the importance of essential workers is not reflected in how they are remunerated. Everything feels more amplified.


Cleona Lira can be contacted here:


www.cleonalira.co.uk (you can subscribe to her newsletter free of charge) www.celticfp.co.uk


Sources:


ESG Landscape Research conducted by The Big Window Survey September 20 for Aviva

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