As you know, we have recently been transitioning our clients into the new ESG range of portfolios offered by our preferred investment advisers, EBI. Speaking to many clients it has become clear that most had not heard anything about ESG prior to us bringing it to their attention. This did come as a surprise to me because it has been a very hot topic for Financial Advisers and our regulator, the Financial Conduct Authority (FCA), over the past 2 years or so.
Accordingly, I thought you might find the findings of a study by Invesco into the attitudes and perceptions of customers when it comes to the subject of ESG, of interest.
The following is by Invesco fund manager Clive Emery, it was published on 30th June 2021.
“2020 was the year environmental, social and governance (ESG) investment demonstrated it was as much about delivering outperformance as meeting personal values. Returns from some ESG funds exceeded those of their traditional counterparts by as much as 20 percentage points during the first nine months of that year1.
It is no wonder then that $45.6bn of new money poured into ESG funds during the first quarter of 2020 at a time when $384.7bn of investment was pulled out from the overall fund universe2. This trend looks set to continue.
Invesco recently surveyed 161 financial advisers and 201 advised investors3 to get their views on ESG and found a considerable and widespread appetite for these strategies.
The new reality is that every client is an ESG client, with nearly four out of five (79%) investors declaring that sustainability is important to how they invest. More than half (52%) of those not already investing sustainably plan to start doing so over the next 12 months.
It is clear that interest in sustainable investing is strong among all generations of investors, but it is also clear that the next generation exhibits the highest levels of interest; 90% of respondents aged under 45 say it matters that their money is invested responsibly, versus three-quarters of the over 60s. Undoubtedly then, the role of the financial services industry must be to support investors in meeting their responsible investment goals today, and also in the future.
The survey confirmed that knowledge levels are nascent, with inconsistent terminology making it harder for investors to get on board. More than two-fifths of investors say a lack of knowledge is the biggest barrier to sustainable investing and that there is too much jargon or confusing language.
Both advisers and their clients admit to struggling with the multitude of terms employed to classify the general landscape of ESG. Those surveyed were comfortable using adjectives, not acronyms. Responsible, sustainable, ethical and green were well used but perhaps less understood. While these terms are distinct, they are often used interchangeably. Interestingly, only 14% understood the term ESG.
In addition, terms used to describe the investment approach of sustainable funds were not well understood. Negative screening was the only ESG approach well understood by advisers and surprisingly this was the least understood phrase by investors. Conversely, sustainability focus was the only investment approach that the majority of investors understood.
It is apparent that investors could benefit from more guidance on sustainable investing, but the survey reveals that while advisers are enthusiastic about advising on ESG, that message may not be getting through, given that nearly 60% of investors say their adviser has not mentioned sustainable investing despite two-thirds (62%) of advisers having a framework in place for discussing the topic.”
In light of the very clear interest in sustainable investing, it was surprising to see in the last paragraph, that 60% of investors say their adviser has not mentioned it; clients of Clearwater do not now fall into that cohort.
I hope you found the above of interest but please do not hesitate to contact me if you have any concerns or questions relating to anything in this e-mail or indeed any other finance related matter.
Yours sincerely,
Graham Ponting CFP Chartered MCSI
Managing Partner
Source: www.trustnet.com/news/7466122/esg-funds-beating-their-conventional-rivalsin-most-sectors-this-year
Source: www.morningstar.co.uk/uk/news/202274/investors-back-esg-in-thecrisis.aspx
Survey conducted January 2021. The quoted number of participants all responded/ participated in the research
