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IFA and client discrepancy over demand for ESG

‘Industry is still some way from providing standard definitions’ for sustainable investing


Over 80% of IFAs have a very positive view of the importance of ESG in portfolio construction, according to a survey by private equity investment manager Foresight Group.

The research, conducted among over 100 UK financial advisers, revealed that 80% now say sustainable principles are important when building client portfolios, including 28% who say it is ‘very important’.

On the other hand, only 12% of IFAs said that over half of their clients now express a preference for ESG investing, compared to 9% in 2020.

Financial intermediaries remain conscious of their role in the move towards sustainable investing with 45% of respondents saying that education sessions would encourage them to suggest ESG funds more frequently to clients.

Additionally, respondents expect that over half of their clients will be invested in portfolios in which ESG is a core component in about five years.

Industry standards remain a concern

In terms of delivering advice and selecting suitable ESG strategies for clients, the greatest challenge is the lack of an industry-wide definition of ESG investing, according to 49% of advisers.

The lack of an industry-wide gold standard for ESG criteria, and a lack of transparency when reporting ESG activity, were also both cited by 20% of respondents.

Mark Brennan, partner at Foresight Capital Management, said: “We are enthused to see that IFAs are increasingly open to joining the global movement towards sustainable investing.

“Major steps forward have been taken this year in helping companies and investors define what qualifies as a sustainable economic activity or investment, although the investment industry is still some way from providing standard definitions.”

So, what is holding back clients from ESG investing? Is it lack of knowledge about the strategy or are IFAs too scared to talk to clients about ESG?

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