Figures from Rathbones, published yesterday (August 24), showed nearly all advisers (92 per cent) felt the small number of suitable ESG products available was an issue.
Of the 100 advisers polled earlier this year, more than four-fifths (83 per cent) said they found matching client aims to a specific strategy challenging.
Steve Nelson, director at the Lang Cat, said there had been “plenty of off-the-shelf” product ranges launched but this didn’t make it “any less of a challenge” to advisers to match products to specific client aims and ethics.
He said: “It’s worth taking a step back and thinking about the problem we’re trying to solve here.
“If you view ESG as a catch-all issue and a means for asset managers to do more work to make their investment choices more ethical, sustainable and whatnot, then great.
“Instead, if you view ESG as the challenge of matching a customers’ specific ethics and beliefs to their investment range then that’s fundamentally more difficult.”
Mr Nelson said such a view would only be met by shaking up the architecture of how investment portfolios were put together.
The findings come as Mifid II measures, set to come into force in early 2021, will compel advisers to ask clients about their ESG preferences.
Some 80 per cent of advisers said the new rules were a “positive development” while every single adviser surveyed said they expected ESG to play a more important role over the next five years.
But while advisers seemed to support the overall ESG initiative, less than a fifth (18 per cent) of those polled said ESG advice was already fully integrated into their business.
A further 28 per cent described it as partially integrated and 54 per cent said it was only relevant to specific clients.
Advisers were looking for further help on ESG, the research showed. About a third (34 per cent) said they needed more support on introducing ESG investing to their clients and 61 per cent had concerns about their clients’ lack of knowledge.
When offered a choice of one or more approaches, 65 per cent of advisers expected to use a centralised investment proposition, 53 per cent said they would outsource or partner with a DFM and 43 per cent said they would deal directly with fund providers.
Mike Webb, chief executive of Rathbone Unit Trust Management, said: “With or without a MiFID II mandate, the study reveals more needs to be done, and advisers are seeking partnership and support, in terms of both knowledge sharing and physical collateral.
“There are gaps in ESG strategies and product ranges, suggesting adviser businesses and providers need to work closely together to ensure clients’ values are met with suitable products and services.”
ESG investing has boomed in popularity over recent years as fears over climate change have led investors to consider the impact of their money and as a growing number of millennials have begun investing.
Morningstar’s latest report showed assets held in ESG funds worldwide hit a record £810tn in June this year as investors pumped £54bn into sustainable products in Q2 alone.
The recent Boohoo saga highlighted the ESG 'minefield' faced by advisers however, with experts warning the complex nature of a client’s ESG choices, the sometimes contradictory and flawed rating systems and fears of ‘greenwashing’ have created a confusing and challenging maze for advisers.
Just last week the CFA Institute warned confusing terminology used in ESG investing could cause advisers to have “unproductive conversations” with their clients.
imogen.tew@ft.com
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