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More advisers discussing ESG with clients

29 April 2021

Nearly a fifth of advisers are discussing ESG investments with their clients, new research from NextWealth has shown.

The latest NextWealth ESG Tracker Study found the number of advisers having ESG-related conversations with clients rose 2% to 19% between October 2020 and March 2021.

However, the rate of increase has slowed, with NextWealth’s previous surveys recording a 10% jump between October 2019 and October 2020.

Heather Hopkins, managing director of NextWealth, said: “Client interest in ESG, ethical, impact and sustainable continues and is now coming up in one fifth of client conversations, up almost three-fold since October 2019. While the rate of growth has slowed over the last six months, two thirds (65%) of advisers anticipate conversations about ESG will become more frequent in the next 12 months, with one in ten saying that the frequency will increase significantly.”

According to NextWealth, an average of 15% of client assets are invested in ESG or sustainable/ethical/impact funds or solutions, up from 12% six months ago and nearly double October 2019 levels. Over two thirds (68%) of advisers expect to see an increase in assets invested in these funds and solutions.

However, advisers also cited various barriers to sustainable investing, with 9% citing product availability and 6% pointing to product research as a potential hurdle. A further 5% admitted scepticism around what providers tell them about the products.

The survey also found that nearly one in five (19%) advisers believe there is a higher price to pay for ESG integrated choices.

Hopkins added: “There is mounting evidence that ESG investing can in some cases yield superior returns, nevertheless our research has found that both investors and advisers believe there are trade-offs when it comes to investing according to ESG principles. On price, many advisers believe ESG integrated investing can be more expensive because of a perceived need to have a higher allocation to active funds.”

Hopkins believes providers and tech firms must do more to make ESG investing more accessible, particularly for smaller firms, noting that a lack of consensus, perceived lack of transparency and the frustration of complexity involved in developing as ESG proposition will hold some advice firms back.

Professional Paraplanner