'Demand for sustainable solutions is ever-rising'

I have had mine for nearly three years now and, after an initial period of adjustment, have been very happy with it. I quickly got into a routine of overnight charging and have felt good about travelling with a smaller carbon footprint. 

I would be lying if I said I was not worried about range at first, but that faded after a few longer drives – although there have been times on holiday when I have needed to charge on the motorway at busy periods and it has taken a while to find a working pump without a queue several cars deep. 

It was this last factor that persuaded my wife it was not quite time to take the plunge when her old car came to the end of its life.

While most of my journeys are well within the range of my nightly charge, she needs to drive further due to caring responsibilities, often with her elderly mother in the car.

Investors are increasingly on board, with client demand becoming a key driver of momentum.

Spending time sitting at charging stations or driving around to find a functional one did not feel practical in these circumstances, so in the end she opted for hybrid. 

You might be familiar with the idea of the hype cycle. Developed by US research and technology company Gartner, it plots the journey of a new technology from initial development to widespread adoption. 

Early excitement gives rise to heightened expectations, which are inevitably disappointed. But that does not mean the technology is no good. Rather, disillusionment is followed by a more realistic appraisal of the potential, refinement of the product and gradual adoption, alongside the development of the infrastructure that makes mainstream rollout feasible.

We can see this curve at play in the EV journey. We are no longer in the period of fevered anticipation – electric cars will not solve all the problems of automakers or of a car-dependent society. Nor are we in the slough of despond.

Instead, work is underway around the globe to make EVs more affordable, clean up production, improve battery life and build charging networks that can support future demand. 

'Feel good' investments

Many are choosing to make the switch at this stage, perhaps accepting a degree of inconvenience that is manageable within their lifestyles in exchange for a clearer conscience about their impact on the planet. Many others will do so as it gets easier.  

Sustainable investing appears to be on a similar trajectory.

After the frenetic rush of a couple of years ago, sustainable investing funds had a torrid time following the invasion of Ukraine. As traditional energy and defence stocks led a market rotation, unbelievers declared the end of a passing fad. 

According to Morningstar, just 55 new sustainable funds were launched in Europe in the first quarter of 2023, compared with more than 200 at the peak in Q4 2021. Assets in sustainable funds have recovered gradually but remain below their late 2021 highs.

However, behind the scenes, the hard work of real adoption is underway.

Asset managers large and small have integrated ESG considerations in their decision-making processes, such that what was once a differentiator for the sustainable houses has become hygiene.

No longer is it possible to launch a fund, stick the word ‘sustainable’ in the name and carry on with business as usual.

Today, 89 per cent of investors consider environmental, social and governance  issues in some form, according to research by Capital Group. 

Investors are increasingly on board, with client demand becoming a key driver of momentum. A Dynamic Planner survey conducted in 2022 found growing numbers of clients were asking their advisers about ESG issues without being prompted. 

In our software, we have seen a sharp rise in use of our sustainability profiling tool, with 20 per cent of the financial planning firm clients completing risk profiling in March 2023 also filling out the sustainability questionnaire – up from just 5 per cent in Isa season last year. 

Increased regulation

And one driver of the slowdown in fund launches is the gradual introduction of regulation that will better protect clients in the future.

No longer is it possible to launch a fund, stick the word ‘sustainable’ in the name and carry on with business as usual. Today, firms are being held to higher standards intended to reduce greenwashing and support investor confidence. 

In the UK, that regulation will come in the form of sustainability disclosure requirements (SDR) and fund labelling. Following a significant response to its consultation ending in January this year, the Financial Conduct Authority will now publish its Policy Statement in Q3. 

While the final details are as yet unclear, the regulator has said it will seek international coherence with other regimes and standards that will keep the UK at the forefront of sustainable investment.

Though clients might know they do not want to do harm, most are a long way from being able to translate that vague feeling into an investment choice. 

Consumer duty will increase the onus on advisers to make sure their clients understand the new labels and disclosures, so they can make informed decisions that allow them to reflect their values in their investments.   

Recently, the FT published a guide to buying electric cars, responding to the thirst for information among consumers.

Cars are tangible objects that can be touched and test driven, and the purchase process itself is much the same as for a petrol or diesel car – but even experienced car owners understandably feel they need support in navigating a new market category. 

In comparison, choosing a sustainable investment is much more challenging. There are already so many dimensions for investors to get their heads around, from the idea of risk to the difficulty of imagining the future, that adding in a non-financial variable can feel overwhelming.

And though clients might know they do not want to do harm with their money, most are a long way from being able to translate that vague feeling into an investment choice. 

It is therefore well worth the while of advisers to get up to speed with developments in sustainable investing and stay apace of regulatory change.

In this, as in so many aspects of clients’ financial lives, they are urgently needed as trusted guides because real adoption is now underway.

Ben Goss is chief executive of Dynamic Planner