Sustainable Investing  

Advisers are sceptical of funds’ sustainability claims

Advisers are sceptical of funds’ sustainability claims
 

Just 1 per cent of financial advisers and wealth managers 'completely trust' the sustainability claims from funds, research from the Association of Investment Companies has revealed.

But despite this mistrust of ESG claims, advisers and wealth managers remained supportive of ESG investing, with 79 per cent of those surveyed agreeing that 'investments should make a positive difference as well as a financial return'.

The AIC surveyed 200 intermediaries, including 109 financial advisers and 91 wealth managers, and asked them to rate their trust in funds’ sustainability claims on a scale of one to five.

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The majority of respondents (56 per cent) indicated they had 'limited trust' in these claims.

The AIC’s head of intermediary communications, Nick Britton, said advisers and wealth managers are awake to greenwashing, which is where firms promote unsubstantiated claims to make consumers believe their products are more ESG-friendly than they are.

“In light of this, the FCA’s decision to impose stringent rules on how funds present their sustainability claims looks timely, and it is one we fully support," he said.

Britton was referring to the regulator's recently released rules on fund labels, which was warmly received by the industry.

Fears of greenwashing could be allayed by more specific information and examples from funds, Britton suggested.

One wealth manager said: “I would need to see real examples in the portfolio. I would need them to say, ‘We looked at company X last year.

"We really, really liked it. It scored really well on all our stuff but then when we thought about it from a sustainable point of view, we didn’t invest in it.’”

Survey respondents were overwhelmingly engaged with ESG matters, with only 1 per cent saying ESG was not something their firm was interested in.

Nearly half of respondents (48 per cent) said they considered their firm to have been an early adopter of ESG investing, an increase from 37 per cent last year. 

Meanwhile, 31 per cent of respondents said their firm had recently bought into the value of ESG.

Perceived performance

The events of the last year have been “the perfect storm” for sustainable investing, according to the AIC.

Over a third of respondents agreed that higher energy costs, Russia’s invasion of Ukraine, market falls and rising inflation and interest rates have had a negative impact on their likelihood to invest in sustainable funds over the next year.

They were also more pessimistic about the likely performance, risk, and charges of ESG investments this year than they were last year.

Last year, 47 per cent of respondents thought that ESG investing was more likely to improve performance whereas this year the figure shrunk to 36 per cent.

For risk, 45 per cent of those surveyed said ESG investing was likely to lead to a higher level of risk, compared with 32 per cent in 2021.

Meanwhile, the percentage of respondents who think ESG investing will lead to higher charges increased from 46 per cent last year to 61 per cent this year.