ESG Investing  

Advisers still behind on ESG warned clients 'will switch'

Advisers still behind on ESG warned clients 'will switch'

More than half (53 per cent) of financial advisers say their knowledge of ESG issues is limited, as some warn this could lead to client exits.

A survey found a third (31 per cent) of investors said they had never spoken to their advisers about ESG issues, and 23 per cent had never been offered a sustainable investment product.

CoreData Research1 polled 100 UK advisers and 250 investors for HSBC Asset Management in the first two months of the year and found a considerable number of investors (42 per cent) said greater access to information would encourage them to take more interest in sustainable investing in the future.

The two biggest barriers to ESG investments for advisers were a perceived lack of 'suitable products’ (57 per cent) and a lack of client demand for sustainable products (57 percent). 

Instead of ESG, advisers ranked track record and risk level as the most important characteristics to take into account when choosing investment products.

Dan Rudd, head of UK wholesale at HSBC Asset Management, said: “As the number of governments and organisations making net-zero pledges increases against the backdrop of social inequalities resulting from the pandemic, it is unsurprising so many investors want their investments to reflect their environmental and social values. 

“However, clearly more needs to be done to educate investors about the merits of sustainable investing and advisers will play a vital role in this process.” 

Olivia Bowen, partner at Castlefield, said it had become clear that demand for ethical investing was not going to go away so advisers should prepare, or else they could face client exits.

She said: “Why [financial advisers] haven’t [educated themselves around ESG investing] yet is either they’re not interested or it has seemed like a big piece of work to educate themselves.

"One has to assume that for those advisers who have been waiting for demand from their clients, it can’t have mattered enough to them personally to educate themselves." 

She added: “I think we are already seeing people switching advisers because of dissatisfaction with their existing advisers on this issue, and this will just increase as public and industry awareness increases. It’s whether industry awareness will keep up with public awareness of this issue - and in the past year for the first time it’s looked like it has.”

The research comes as a separate survey of 735 UK investors in April showed that 60 per cent want investment providers to be more transparent about the environmental or social impact of different products and assets, and demand could boom in the near future.

According to mortgage lender Butterfield Mortgages Limited (BML), around a fifth of the investors it surveyed, who all have portfolios above £20,000, planned to make an ESG investment in the next year, with a quarter intending to do so before 2025.

Alpa Bhakta, chief executive of BML, said: “ESG investing has become far more prominent in recent years, yet our research reveals that it’s still in its relative infancy; fewer than a quarter of UK investors have entered into ESG investments to date. Clearly, though, the market is set for rapid growth.