Talking PointApr 24 2023

Advisers divided over importance of fund managers' net-zero strategy

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Advisers divided over importance of fund managers' net-zero strategy
Advisers are seeing a growing demand for ESG investments from clients. (Ron Lach via Pexels)

Advisers are split on how much importance they ascribe to understanding a fund manager’s approach to net zero, according to the latest FTAdviser poll for Talking Point.

When asked "how important is it to you and your clients to understand how your investment or fund manager is approaching net zero?", more than half (53.9 per cent) said it was 'not at all important'.

The remainder voted for varying degrees of importance, with 15.4 per cent saying it was 'extremely important'; 19.2 per cent saying it was 'very important'; and 11.5 per cent saying it was 'moderately important'.

Renzo Desbordes, portfolio manager at Flying Colours, said at the firm they have observed a growing demand for environmental, social, and governance investments from clients.

He added: "We firmly believe that this trend is not just temporary, but rather a permanent shift in the investment landscape.

"A lot of this demand is being driven through greater awareness of the issues that we are facing from a climate perspective and through government and regulatory initiatives to increase the availability and use of ESG investing.

"One issue that currently exists is a lack of clarity on what exactly falls under the ESG umbrella and in this area, we see the proposed changes from the FCA as a positive step towards establishing clearer ESG objectives and reducing some of the greenwashing that exists today," Desbordes added. 

"We view ESG as a risk that needs to be managed and understood, especially as some assets carry higher ESG risks than others. For example, we do not believe that risk-free assets such as UK government bonds need to be ESG-rated, while growth assets such as equity or corporate bonds carry a higher ESG risk. 

"Therefore, we see our biggest challenge is to educate clients about the compromises involved in balancing investment performance and risk, alongside doing good for the world."

WisdomTree recently launched an exchange-traded product that allows investors to gain exposure to the performance of California Carbon Allowances – a scheme to reduce greenhouse emissions. 

Alexis Marinof, head of Europe at WisdomTree, said the process of reducing greenhouse gas emissions to net zero was an increasingly important focus for policymakers around the world.

Marinof added: “There is more emphasis on climate change mitigation than ever before, but progress will be limited if investors and policymakers aren’t aligned and working together towards reaching climate targets. It is therefore imperative that investors have access to a wide spectrum of exposures.”