Talking Point  

One third of advisers would never consider ESG funds

One third of advisers would never consider ESG funds

The financial advice industry is greatly divided in its approach about whether to consider ethical, sustainable and governance (ESG) funds for its clients, according to the latest FTAdviser Talking Point poll.

The poll asked advisers the following question: “How likely are you to consider ESG funds for your clients?” 

The results were mixed as 22 per cent of respondents said they are likely to recommend them and 44 per cent said it depends on the type of client they are dealing with. 

But more than one third (34 per cent) of advisers said they are likely to never consider ESG funds for their clients. 

Ricky Chan, chartered financial planner and director at IFS Wealth and Pensions was surprised that 34 per cent of respondents said they would never consider them. 

He said: “In my humble experience, if you educate clients and have a genuine discussion about what ESG funds can do, then you often find that clients hadn’t realised that this was an investment option and so they become quite open to the idea.”

Julia Dreblow, founding director of SRI services and Fund EcoMarket, said: “I know opinions on environmental and social issues vary, but this implies that one in three advisers would overrule their clients wishes - which is particularly terrifying at a time when the rest of the investment industry is heading the opposite direction.”

Mitch Reznick, head of sustainable fixed income at Hermes Investment Management, attributed the low proportion of advisers wanting to consider ESG funds due to a lack of acceptance of ESG integration. 

He said: “The numbers are picking up that the market acceptance of ESG integration is not yet uniformly deep on a global basis, and also the existence of a small minority of sceptics who are reluctant to accept that ESG integration is inexorably linked to delivering superior risk-adjusted returns.”

Last month, the Baillie Gifford Positive Change fund warned that lack of standardised reporting methods from ESG funds means companies are able to appear in practice ESG compliant without running in line with any ESG principles. 

This practice of trying to artificially appear ESG compliant is known as “greenwashing”. 

Mr Chan said there should be a universally accepted minimum standard that applies to ESG funds as the criteria and investment processes vary widely. 

He added: “By doing this, we can have more confidence that they are all genuinely trying to make a positive contribution to society, rather than some simply paying lip service.”