ESG Investing  

Who is making the ESG investment choices?

This article is part of
Guide to intergenerational wealth transfer

Who is making the ESG investment choices?
  Pexels/Andrea Piacquadio

The stereotype that it is just young people who are interested in ESG investing is quickly becoming out of date. 

While originally a fairly niche part of the investing universe, ESG investing has exploded and now every firm has to seriously consider it given the interest that is coming across the board. 

Recent figures from the IA on fund flows into ESG products show just how important this sector now is for advisers.

Figures from the Investment Association, published in November, showed responsible investment funds saw net flows of £7.1bn in the nine months to September this year — 275 per cent more than the £1.9bn measured in the first first three quarters of 2019

Gemma Harle, managing director of Quilter Financial Planning says previously much of the concern with more traditional investments coalesced around the issues with governance and the environment. 

“Climate change in particular has been a real focus as a result of the likes of Greta Thunberg and Sir David Attenborough raising awareness of the threat of rising temperatures and sea levels,” she adds. 

“However, as a result of the pandemic we are now seeing an interest in social issues too. People want to know that the companies they are investing in treat employees and society as a whole well and that their values are aligned.”

Desire to be green

Lucy Birtwistle, director, family office at Stonehage Fleming, says she has been involved in many family meetings where the next generation speak passionately about their desire for the family to be more ‘green’, whether that’s ESG investing, through philanthropy or adjusting their business model to focus on green technology. 

She adds: “Interestingly, for entrepreneurial families the parents often say that they absolutely support this choice but when they were setting up the business in the beginning, their focus was on profitability."

So what does this mean for advisers?

Tim Morris, financial adviser at Russell and Co Financial Advisers, says more often than not, he still instigates the ESG conversation with clients. 

And while most are open to this and are becoming increasingly engaged – often due to stories in the press – there has been more resistance from some older generations of clients 

"That is now changing,” says Mr Morris, “especially with the increasing climate emergencies making global news headlines in recent years. An upside of the pandemic has been to focus people’s minds."

So it is not just the young that are interested in ESG.

John David, head of Rathbone Greenbank Investments says: "ESG investment appeals to people of all ages. Of course on average those later in life have accumulated more wealth but we are starting to see an inter-generational transfer of assets and it is certainly true that younger generations score highly when asked about their interest in issues such as climate change, or sustainability more generally.