More than a third of advice firms want more support in accessing the right sustainable finance and ESG investment data, a survey from PIMFA has revealed.
The survey of PIMFA members found only 7% of firms feel they are doing an excellent job of educating their clients on sustainable finance and ESG investment, with the majority of firms unclear on the different rating systems and methodologies they should use.
PIMFA members reported data vendors providing a range of products and services, each with their own methodologies and standards but rarely offering a ‘one size fits all’ set of standards to cover the full array of investment products, prompting 36% to say they want more support in accessing the right sustainable investment and ESG data.
The survey comes as client demand for ESG investing continues to rise. Of the £6.2 billion net inflows into UK based equity funds in the second half of 2021, 50% flowed into funds focused on ESG factors. Over two thirds (69%) of firms said they are taking into account their client’s ESG investing preferences when assessing suitability, with negative screening proving the most popular strategy (71%), followed by thematic investing (69%) and impact investing (48%).
PIMFA said its members also reported a lack of consistency in ESG terminology, making it harder for them to support their clients in understanding this topic.
In response to the findings, the wealth management trade association has developed a new microsite to provide further information on sustainable finance and ESG investing, with details of regulatory work taking place on a national and international level.
Maja Erceg, senior policy adviser at PIMFA, said: “There is clearly a significant opportunity for wealth managers and advisers to provide their clients with sustainable finance and ESG products and services. It’s also clear wealth managers and advisers want to provide such services. But as our survey has found, there is confusion around data and methodology as well as the correct language to use.”
Erceg said the proliferation of ESG definitions and interchangeable language used throughout financial services has caused confusion for both clients and wealth managers.
“Clearly there is a need for standardisation both in terms of how data is used and the methodology for collecting that data and the terminology to describe ESG. As ever, PIMFA will continue to work closely with member firms, the Government and regulatory bodies to address these key areas for supporting ESG investing,” Erceg added.
[Main image:jon-tyson-PXB7yEM5LVs-unsplash]
