The overwhelming majority of advisers and wealth managers do not fully trust sustainability claims from funds, while still being supportive of ESG investing, according to research from the Association of Investment Companies.
Research carried out among 200 intermediaries revealed that just 1% “completely trust” funds’ sustainability claims, while 56% expressed limited trust amid fears of greenwashing.
Despite widespread scepticism, advisers remain supportive of ESG investing, with 79% agreeing that investments should make a positive difference as well as a financial return.
Nearly half (48%) considered their firm to have been an “early adopter” of ESG investing, up from 37% last year, while a further 31% said their firm had recently bought into the value of ESG. In contrast, just 1% said ESG was “not something my firm is interested in.”
Nick Britton, head of intermediary communications at the Association of Investment Companies, said: “Advisers and wealth managers are overwhelmingly on board with ESG and sustainable investing, but they’re also keenly aware of the risks of greenwashing with only 1 in 100 completely trusting ESG claims from funds.
“In light of this, the FCA’s decision to impose stringent rules on how funds present their sustainability claims looks timely, and it’s one we fully support.”
The research also found that this year has created a perfect storm for sustainable investing, with higher energy prices, the Russia-Ukraine war, market falls and rising inflation and interest rates all impacting advisers’ desire to invest in sustainable funds over the next 12 months.
Advisers and wealth managers are also more pessimistic about the performance, risk and charges of ESG-orientated funds, with 36% of advisers believing ESG investing was more likely to improve performance compared to 47% a year earlier.
More than three fifths (61%) of respondents also think ESG investing will lead to higher charges compared to 46% last year and 45% also believe ESG investing is likely to lead to higher risk. Nevertheless, ESG demand is still expected to increase over the next 12 months.
Britton added: “ESG investing has faced a perfect storm this year, and this has clearly affected expectations about performance and risk. Market falls, higher inflation and the war in Ukraine have made many advisers and wealth managers more wary of investing in sustainable funds in the short term, though they still expect demand for ESG investing in general to increase over the next 12 months.”
