'Performance chasing' leads to drop in clients' ESG interest

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'Performance chasing' leads to drop in clients' ESG interest

The number of clients asking advisers about sustainable investing has dropped substantially over the past six months, research has shown.

Some 12 per cent of clients raised the topic in the first quarter this year, compared with 22 per cent in the third quarter last year, according to a new report by NextWealth.

Heather Hopkins, managing director of NextWealth, said interviews with financial advisers for the report suggested “performance chasing” had led to the drop in interest, as well as the cost of living and inflation shifting conversations away from sustainability.

Percentage of clients conversations where the client raises sustainable investing

Source: NextWealth

“However, some advisers we surveyed pointed out that interest in ‘greener’ matters tends to rise and fall depending on how much focus is made of it in the media," she said.

“In spite of the fall in interest, the share of assets invested in sustainable funds and solutions has not significantly changed. 

“Clearly, advisers and their clients are invested for the long term.”

IFAs interviewed by NextWealth said sustainability is “just not talked about anymore…just because it has not performed as well.”

Another adviser said: “There were a majority of clients making value-based decisions. There was a period of time where sustainable portfolios were performing because they are a little bit more skewed towards growth stocks, so there are a few people who have shifted for performance reasons.”

The report shows advisers’ confidence in sustainable investment and terminology has remained flat as they develop their knowledge.

Just over a third of advisers said they were “somewhat confident” in understanding clients objectives relating to sustainability, as well as recommending and reporting on those solutions.

sally.hickey@ft.com