ESG Investing  

Lack of knowledge still 'biggest barrier' to ESG investing

Lack of knowledge still 'biggest barrier' to ESG investing

Two fifths of advisers say a lack of knowledge is still the biggest barrier to investing in sustainable investments, with many relying on a single question when discussing those investments with their clients.

A survey by Invesco in January found 42 per cent of 161 financial advisers said the knowledge gap was the biggest barrier, with 43 per cent saying there was too much jargon used in the sustainable investment space, and 38 per cent saying there was not enough literature accessible to them.

Two-fifths added they do not have a framework in place to discuss sustainable investment preferences with clients, and of those who do have frameworks in place, more than half said their frameworks were a single question of whether clients want to invest sustainably or not.

But a third of the advisers surveyed said they would like more guidance around using the right language and terminology with clients, with 46 per cent of respondents saying they would like asset managers to provide client-facing educational materials.

Clive Emery, fund manager at the Invesco Summit Responsible range, said: “The sustainable investing universe has grown at a faster pace than could have ever been imagined and can no longer be considered a passing ‘fad.’ 

“The topics and issues covered by ESG are so broad and universal and our findings show that it is important to establish that there is a spectrum of sustainable solutions that exist – not a simple one size fits all approach.

"It’s crucial that advisers and asset managers can confidently educate their clients and ensure they understand what they are investing in."

In May, Dynamic Planner launched its sustainability questionnaire, which aims to solve the challenges advisers face when assessing their clients’ individual environmental, social and governance (ESG) investing preferences. 

At the time, Louis Williams, head of psychology and behavioural insights at Dynamic Planner, said: “Expectations of the impact [sustainable investing] can have can be misjudged, along with the importance and balance clients place on potential returns and their sustainability preferences.

"The key to fully understanding the ESG and sustainability hopes and expectations of a client is real engagement, so that their preferences can be accurately captured and the implications of their choices discussed.”

sally.hickey@ft.com