ESG “knowledge gaps” prevail among advisers
Environmental, social and governance (ESG) investing may gain momentum among advisers, but there are “significant knowledge gaps” that need to be addressed.
There has been a “major shift” this year in the way advisers discuss ESG investing, according to Platforum’s new report.
The UK Financial Advisers: Investment Proposals study examines the key decisions advisory firms make about their investment proposals.
He revealed that most advisers said they have fully risk-assessed ESG offerings in place and available in their centralized investment proposals.
Meanwhile, around 27% of advisors said they included ESG factors in their top five fund selection criteria.
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The report says the âperceived trade-offâ between sustainability and economic returns used to âdominate the discussionâ around ESG only a few years ago. But the strong performance of ESG funds over the past 18 months has changed that view.
In addition, advisers and their clients are increasingly aware of investment opportunities to have a positive impact.
The wider awareness of social and environmental issues – particularly climate change – is leading to the shift towards positive impact investing.
However, the report suggests that many advisers still primarily associate ESG with exclusions and have a âpoor understandingâ of the other components of responsible investing.
âWe are seeing advisers focusing more on ESG investing and integrating this investment approach into their financial planning processes and investment proposals,â Platforum said in the paper.
“But there is still a lot of confusion and advisers are adopting a wide range of solutions.”
When asked to name their top three ESG investment providers, 42% of advisors mentioned RLAM and 36% mentioned Liontrust.
Liontrust launched a new fund – ESGT – last month, as part of its continued efforts to expand its presence on ESG issues. Earlier this month, he confirmed his full board of directors and released his prospectus, which includes a calendar for shareholders.
He recently said the fund will provide more opportunities to invest in small businesses that benefit society.
ESG has been listed as one of six key trends leading to board transformation in 2021, according to Ross Liston, Managing Director of Bankhall and PMS Sustainable.
He said ethical investing currently outperforms traditional funds, with three-quarters of advisers saying clients ask about these criteria when investing.