Significant uplift in advisers providing advice on ESG

New research has revealed a significant uplift in advisers providing advice on ESG investments.  

According to the second ESG Survey of Australian advisers and investors conducted by Australian Ethical in partnership with Investment Trends, advisers are realising more benefits from engaging with responsible investing, including the opportunity to enhance their value proposition and build better rapport with clients.

The research revealed that 65 per cent of advisers now agree that asking about clients’ ESG needs is required to fulfil their best interest duty.

In fact, the survey found that with the arrival of values-based advice and more ethical investing solutions, advisers are having more conversation about responsible investing with their clients than ever before.

The most popular topics discussed included renewable energy, climate change, fossil fuels and human rights.

Regarding portfolio construction, Australian Ethical revealed that the top five methods advisers use to choose responsible investments include ESG integration (21 per cent), sustainability-themed investing (15 per cent), active ownership (13 per cent), negative screening (12 per cent) and positive screening (11 per cent).

Moreover, the research also showed that a majority of advisers (45 per cent) prefer active managed funds to meet clients’ responsible investing goals, followed by active ETFs (34 per cent), index managed funds (30 per cent), index ETFs (30 per cent) and managed accounts (26 per cent).

Among the most important factors prioritised by advisers when choosing responsible investment product providers are competitive fees and a good investment track record, followed by the provider's investment philosophy and its alignment with their clients’ beliefs.

But advisers admitted that the biggest challenge when recommending responsible investments is greenwashing, with 34 per cent of advisers recognising it as a barrier.

Earlier this year, research from behavioural finance experts, Oxford Risk, revealed that advisers face losing clients over a perceived lack of focus and commitment to ESG investing.

In fact, Oxford Risk found that two out of three retail investors are considering transferring their investments to a new adviser purely based on their current adviser’s engagement with ESG. 

Delving deeper into the matter, Oxford Risk found that 7 per cent of clients rate their adviser’s ESG focus as poor or very poor.

The researcher also flagged technology as key to grasping the opportunities and meeting the responsibilities of matching socially minded investors to suitable ESG investments.