Opinion  

It's time to get to grips with ESG investing

Liz Field

Liz Field

Debate continues about how to combat what even policymakers are now beginning to acknowledge is a global climate crisis.

It probably shouldn’t come as a surprise, therefore, that ever-greater numbers of investors are looking to funds that take account of ESG factors.  

Research forecasts that the ESG-based investment market is set to double in 2021, suggesting ESG ratings are now a major factor for investors when making decisions about their portfolio.

According to fund network Calastone, UK-based equity funds had record inflows totalling £6.2bn in the second quarter of this year, with funds focused on ESG issues accounting for 50 per cent of this.

Globally, new sustainable funds are being launched on an almost daily basis in order to meet what can only be described as a significant and sustained increase in demand from investors.

According to Morningstar data, last year saw sustainable, open-ended funds and ETFs available to investors across Europe attract net inflows of £199bn, almost double the figure for 2019.

In the fourth quarter alone, sustainable funds attracted close to £85bn in net new money, taking 45 per cent of overall European funds flows.

On a global scale, according to research from Natixis Investment Managers, the final quarter of 2020 alone saw record inflows of £110bn, and asset levels reach a record £1.2tn. There were also a record 196 product launches.

Looking at age demographics, ESG-based investments are highly regarded across all age groups. Around three in four (77 per cent) of 18 to 55-year-olds say ESG factors play an important role in their investment decision.

This only falls slightly among those aged above 55, with 71 per cent saying the same. As the much-discussed intergenerational wealth transfer is now taking place, this is another compelling reason to engage.

As it has never been more important for our industry to get to grips with this new paradigm, Pimfa has launched an ESG Academy for wealth managers, in partnership with MSCI, Fidelity International and Farrer & Co. 

Comprising an online training platform built specially to equip wealth managers with the latest ESG knowledge and insights and to empower better client conversations, this follows the successful series we began last year for the adviser sector. 

The academy simplifies the array of latest information and language around ESG, while also delivering up-to-date regulatory guidance.

The online course will be split into three modules designed to provide wealth managers with a greater understanding of the ESG space. 

The academy’s online learning environment is led by experts in the field.

Those taking part in the course will learn how to recognise and meet their clients’ demand for ESG investing; be able to explain clearly and succinctly what qualifies as an ESG investment; and understand more about the regulatory framework governing ESG investments and how this might develop.  

They will also learn how to use appropriate tools and portals to identify suitable ESG investment paths for their clients and develop opportunities by guiding clients through the ESG investing process and deepening their client relationships.