A lack of clear standards and definitions and the risk of greenwashing is preventing advisers from promoting ESG investing to their clients, says FE fundinfo.
According to FE fundinfo’s Financial Adviser Survey, 56% of advisers cited a lack of clarity around ESG terms as preventing them from further adopting of ESG investing, while 55% said greenwashing posed a hurdle.
This is despite nearly three quarters (72%) of advisers now offering an ESG proposition to their clients, up 7% over the past year.
While FE fundinfo said client interest was also on the rise, with 79% of advisers noting their clients have expressed an interest in ESG investing, advisers also said client understanding of ESG investing was a significant barrier.
Christoph Dreher, head of ESG product group at FE fundinfo, said: “It’s clear that while interest in ESG investing is at an all time high and, as a topic, is fuelling many conversations between adviser and client, the industry needs to do more to shape understanding and provide relevant information.
“While the industry has taken great strides in recent years, client and adviser understanding of ESG investing is preventing greater adoption of ESG investing and the market needs to provide more education and information that is accessible and easy to understand in order to support this interest.”
To gain a better understanding of the space, 49% of advisers use multiple third party sources, while 21% use information provided by fund groups and 15% use quantitative ESG ratings.
Dreher added: “On the surface it is great that advisers are conducting their own research into ESG investing and analysing a number of different sources but perhaps the bigger story is that advisers are having to go to numerous sources to find the information they need. In such a fast-moving industry, where regulations and their requirements are constantly changing it is of course understandable that there is a gap between the information fund managers are required to provide from a compliance point of view and for advisers who are presented with reams of information which might not necessarily be of value for their clients.”
