How can financial advisors help convince savers to finance the energy transition?

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How can financial advisors help convince savers to finance the energy transition?

“Individuals remain largely unaware of the link between their carbon footprint and their savings. Their awareness could be raised through the creation of new tools.” Guillaume Lasserre, Director of Asset Management at LBP AM.

The savings of the French are insufficiently directed towards financing the energy transition. Financial advisors therefore play a crucial role in encouraging savers to redirect their savings with this goal in mind. However, they need to be better equipped to persuade their clients. What tools, indicators, and offerings should be made available to them? In the coming months, within the “2030, Investir demain” Think Tank, the “Climate” working group led by LBP AM will analyze these issues and seek to develop solutions.

The reality of climate change and its consequences, the need to act, and change our behaviors are rarely questioned. However, the role of finance raises concerns among individuals. The funding needs and, therefore, the ability of investors to meet them are not discussed in the institutional world. While professional investors may be able to grasp these issues, savers lack both the expertise and the time to address the link between their investments and the fight against climate change.

Consumers Adopt Good Practices

The savings sector has objectively failed to convince them that the mobilization of private capital is key. However, as citizens and consumers, many have adopted good practices, favoring sustainable mobility or even reducing their beef consumption or heating use. Therefore, we must provide savers and their advisors with the tools to ask the right questions, as the fight is far from lost. This way, they will realize that their savings can become a vehicle for individual action, just like their car use, diet, or water consumption. Some data can help with this awareness: for instance, while the average CO2 emissions of a French citizen are around 9 million tons per year, it only takes savings of a few tens of thousands of euros to reach the same level. Acting on one’s savings can thus significantly contribute to reducing their carbon footprint. Everyone can freely choose to use this lever to reduce their personal emissions.

The Major Challenge is Supporting the Transition of the Most Emissive Activities

We must adopt a pedagogical approach, but without oversimplifying the issue: the energy transition is not limited to the development of renewable energies. Thematic funds, which had benefitted from a favorable cyclical trend, have since disappointed, hindered by rising interest rates, less generous budgetary policies, and changing regulatory environments, which have shaken the economic model of some renewable energy actors. The major challenge is to support the transition of the most emissive activities, for example, being able to produce steel or build and renovate buildings under better conditions. The energy transition is not limited to “low carbon” activities. It involves a trajectory effort, adaptation policies, and transitions to achieve the net-zero emissions target by 2050. Dynamic choices need to be made because we cannot rely solely on immediate efforts producing immediate effects.

Financial Advisors Must Feel Well-Equipped

These topics appear complex, especially since the financial culture of the French remains very much in need of improvement. In this context, financial advisors are assigned the task of convincing savers to play their part in financing the energy transition. The task is heavy, and their skills need to be expanded, as there are many concepts to address in their roles. They must feel sufficiently equipped to address this issue with their clients, without fearing that they will be caught off guard by their questions, and, on the contrary, know how to respond effectively. In this perspective, these advisors need to be equipped with new digital tools, providing them with relevant information capable of establishing a compelling link between each individual’s carbon footprint and the management of their savings, thereby confirming the significant leverage savings represent for reducing it. In the coming months, the ambitious goal of our working group will be to determine the nature of this information and develop new tools.

Content written by Guillaume Lasserre, Managing Director of LBP AM.