Advisers believe clients would be willing to accept lower returns in exchange for more environmentally and socially friendly investments, a new report has found.
According to the Embark Investor Confidence Barometer, almost half (45%) of advisers believe their clients would accept a lower financial return if an investment had social or environmental benefits.
This sentiment was echoed by investors, particularly younger investors with an adviser. More than half (58%) of advised investors aged between 35 and 44 said they would agree to accept a lower return if they felt their money was having a positive impact. However, this number reduced significantly among older investors, with only 30% of those 55 or older saying the same.
Embark Group said the data showed that advisers investors are almost twice as confident as non-advised investors that their portfolio is invested in line with their ESG values. Less than a third (32%) of non-advised investors agreed their portfolio was invested according to their values, compared to 58% of advised investors. Meanwhile, 60% of advised investors were confident they knew where their money was and that it was meeting ESG principles, versus 39% of non-advised investors.
However, advisers feel there is a lack of viable ESG options for them to recommend to clients, with only just over half (53%) confident they could provide clients with an adequate range of options.
Embark said the findings also highlighted that more needs to be done to understand clients’ ESG needs. Two fifths (42%) of advisers said they were either neutral or not confident in their ability to accurately measure clients’ ESG preferences.
Peter Docherty, CEO, Embark Platform, said: “It’s very possible those who are more likely to embrace ESG are also more likely to seek advice. But advisers carry significant weight in introducing investment concepts to their clients. The role of advisers to help guide clients through the complex world of ESG is invaluable.”
Greg Davies at Oxford Risk added: “It is striking that 45% of advisers are confident their clients will accept a lower return for ESG, with the same proportion of advised clients saying the same. It should also not come as a surprise – after all most people are willing to accept returns of minus 100% on the wealth they donate to charities.
“Advisers clearly have the potential to be very effective in directing investors towards ESG investing. However, they also need help to do this with confidence. Indeed, for many advisers ESG just adds complexity and hassle to an already complex problem. For advisers to most effectively open ESG doors they need the technology and tools to be able to accurately profile investor’s ESG preferences, and crucially to connect these preferences directly into tailored ESG-suitable portfolios.”
