ESG Investing  

Fifth of advisers have ESG conversations with clients

Fifth of advisers have ESG conversations with clients

The number of financial advisers having conversations about ESG investments continued to grow in the six months to March 2021.

According to NextWealth 19 per cent of advisers are now talking about ESG with their clients, up 2 percentage points over the past six months.

However, while an increase, it was smaller than the 10 percentage points jump seen between October 2019 and October 2020, according to the latest NextWealth ESG Tracker Study out this week (April 19).

Heather Hopkins, managing director of NextWealth, said: "Client interest in ESG, ethical, impact and sustainable continues to grow, and is now coming up in one fifth of client conversations, up almost three-fold since October 2019. 

“While the rate of growth has slowed over the last six months, two thirds of advisers anticipate conversations about ESG will become more frequent in the next 12 months, with one in ten saying that the frequency will increase significantly."

According to NextWealth, an average of 15 per cent of client assets are invested in ESG or sustainable, ethical or impact funds and solutions, an increase on the 12 per cent invested in these assets a year ago.

Around 68 per cent of financial advisers surveyed said they expected to see a continued increase in investment in these funds.

The majority (61 per cent) of financial advisers felt comfortable discussing ESG-related issues with clients, however those that did not cited issues such as product availability, product research and skepticism around the information given by providers around products as the reason for their hesitation.

Hopkins added: "Providers and tech firms need to step forward to make ESG investing more accessible, particularly for smaller firms who en masse hold a large share of client assets.

"A great deal of the take-up of ESG products will depend on how the option is presented to clients, and currently the lack of consensus, perceived lack of transparency, and the frustration of an added layer of complexity involved in developing an ESG proposition will hold some advice firms back from embracing it enthusiastically."

The survey also showed that the vast majority of advisers believed there was little difference in the risk and performance of ESG products and other products.

However, nearly one in five believed that ESG-integrated investment choices were more expensive.

Hopkins commented: "There is mounting evidence that ESG investing can in some cases yield superior returns, nevertheless our research has found that both investors and advisers believe there are trade-offs when it comes to investing according to ESG principles.

"On price, many financial advisers believe ESG integrated investing can be more expensive because of a perceived need to have a higher allocation to active funds."

sally.hickey@ft.com