The vast majority of advisers are already factoring sustainability into their suitability assessments, despite a lack of client demand, according to new research from abrdn.
Nearly nine in ten (86%) respondents to abrdn’s bi-annual survey of UK financial advisers said they currently ask clients about their sustainability preferences during suitability assessments.
More than half of these advisers (55%) said they had been doing so for more than a year, while just under half (45%) have started doing so within the past 12 months. Of those that haven’t yet incorporated sustainability questions into their assessments, nearly two fifths (37%) said they plan to start doing so in the year to come.
The findings indicate advisers are ahead of mooted regulatory changes that would make environmental, social and governance (ESG) factors, like sustainability, a mandatory part of suitability assessments.
However, while advice firms are clearly geared up to advise on ESG, most advisers said they are seeing only a minority of clients ask for their sustainability preferences to be incorporated into their portfolios.
A quarter (24%) of respondents said that none of their clients had asked them to incorporate their sustainability preferences into their investment portfolio in the past year, while two fifths (39%) said just 1-10% had.
Only one in ten (9%) said that more than half of their clients had asked for their sustainability preferences to be factored in.
Steve Owen, Solution Delivery Director at abrdn, said: “These findings show that advisers are taking sustainability seriously when it comes to suitability and taking the lead in prompting conversations around sustainability with their clients.
“As advisers look at how they can refine and evolve their ESG advice offering, considering technology will be key. The right technology, including solutions that help advisers screen for ethical funds or funds that make a positive and measurable impact on society or the environment, can ensure the portfolios they’re building for their clients match their preferences as closely as possible.”
abrdn’s research also found that the majority of advisers (63%) have no fixed definition of ESG investing when it comes to selecting funds. More than half (51%) of those that do have a defined concept of ESG in place have developed the parameters themselves rather using ones from a third party.
Variation in industry guidance on what constitutes ESG investing (37%) was the most common reason why advisers did not have a fixed ESG definition in place.
