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Report shows ESG benefits advice businesses

25 August 2020

A new report by Rathbones has shown a ‘sea change’ in adviser attitudes towards ESG investing, as well as benefits to adviser firms business growth  amid growing client demand for more sustainable investments.

According to the report, entitled The Value of ESG: how mainstream is investing within today’s adviser world? three quarters (75%) of advisers said that ESG investments can enhance investment returns.

It also found that 96% of advisers favouring ESG experienced ‘fast or steady growth’ in their business over the past five years, compared to 80% of those advisers who had much lower exposure to ESG investing.

The research, which looked at the impacts of ESG on business growth, client engagement, retention, referrals and perceptions of performance, divided adviser groups into two entities; advisers with 20% or less in ESG investments and those with 60% of more.

While five years ago, over a quarter (28%) of the surveyed advisers’ clients had no ESG investments, today this figure has fallen to just 4%, Rathbones said.

When questioned about the importance of ESG investing within client relationships, ESG advisers reported longer client tenure and more referrals and 76% believed clients were more engaged with the investment process when ESG was involved.

Nearly two thirds (64%) of non-ESG advisers believed ESG investments facilitated client retention, while 80% of ESG advisers felt the same. Furthermore, 82% of ESG advisers said average client tenure was in excess of 10 years, compared to 52% of non-ESG advisers. The gap widened further for client tenure of 15 years or more (56% versus 20%).

Additionally, 72% of advisers with a higher number of ESG investments said investing in this area had led to increased levels of new business referrals from clients. In contrast, just 36% of non-ESG advisers said the same.

Mike Webb, chief executive, Rathbone Unit Trust Management, said: “We undertook this project to help inform our thinking around this critical topic. Despite the research having been undertaken just prior to the pandemic, the results show that a sea-change in attitudes was already underway, with both adopters and non-adopters recognising ESG strategies’ ability to deliver for their clients.

“And from the advisers’ own business perspective, the report demonstrates ESG adoption’s value in areas including business growth, extended client tenure and client engagement.”

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