Advisers “clearly can’t be confident” on their understanding of environmental, social and governance products, as the data is "so poor", Clive Waller has said.
The chairman of The Investment Network who runs CWC Research, a consultancy firm focused on the platform industry, said two thirds of advisers his firm has been speaking to in recent months have said they were confident or very confident in their ability to understand ESG products.
“Well if they’re confident, I can’t understand it,” said Waller. “Because I’ve been studying it for years and I haven’t got a clue.”
He continued: “They clearly can’t be confident because the data is so poor at the moment. All the data is subjective.”
Back in June, Redington's responsible investment lead, Edwin Whitehead, told FTAdviser there was a “serious problem” within ESG investing.
Whitehead said this was due to a lack of consistent, reliable, accurate and timely data on the emissions or climate impacts of a portfolio at a total asset owner level.
As a result, the investment manager said this encourages estimations over calculations, which in many cases inhibits people from investing in the products.
Advisers’ self-acclaimed confidence on the topic, regardless of the so-called data gaps, led Waller to observe: “Advisers can be bullish characters”.
But he was quick to caveat this with the fact such a temperament “isn’t their fault”. “They’re buried in the pressure of the ‘now’,” said Waller.
Darius McDermott, managing director at Chelsea Financial Services, said the asset management community is doing a “huge amount of work across the piece around ESG”.
“There’s a lot of data out there about how to integrate ESG into mainstream investment services.
“IFAs which own their investment strategy can’t ignore ESG. It’s not like they’re short of information.”
What’s much more challenging, in McDermott’s opinion, is the overwhelming amount of information out there, and where to start - particularly around carbon and clean energy.
For some advisers, it almost feels like the ESG debate is happening over their heads.
Joshua Gerstler, chartered financial planner at The Orchard Practice, said “very few” of his clients raise ESG in conversations.
“There’s a lot of hype from asset managers which want to be seen to be doing the right thing,” said Gerstler. “Clients wouldn’t put ESG ahead of investment returns.”
Contrary to Waller’s opinion, Gerstler said there was “plenty of information” out there to have a conversation with clients about ESG, but that these conversations were “few and far between” due to a lack of demand.