Despite weaker near-term sentiment toward sustainable investing, UK intermediaries expect clients already invested in sustainable funds to stay the course and increasingly to add to allocations over time, according to new research from EdenTree Investment Management in partnership with Research in Finance.
From a survey of 100 discretionary fund managers (DFMs) and 100 investment advisers (IAs) conducted in late Q1 2026, the research found that while 64% believe sustainable investing is currently out of favour, nearly 3 in 4 (73%) expect clients with sustainable investments to remain invested or increase allocations over the next 12 months.
Looking further ahead, that rises to 84% over 3-5 years, as confidence strengthens over time.
Out of favour, but expected to return
When asked about overall sentiment towards sustainable investment, most intermediaries believe sustainable investing is either already in favour (25%), or currently out of favour but likely to return (64%).
Among those expecting a return to favour, the recovery is seen as a medium-term story, with 57% expecting a comeback within 3-5 years, versus 8% within 12 months and 29% within 1-2 years.
In the near term, IAs are the more upbeat: 36% say sustainable investing is currently in favour, compared with 13% of DFMs, while 15% expect demand to return within 12 months and 36% within 1-2 years, versus 3% and 24% respectively for DFMs, who are more likely to expect a recovery over 3-5 years (64%).
While performance and geopolitical concerns were the factors most frequently cited as hindering demand, a greater awareness of sustainability-related issues and concern about the climate crisis were noted as the leading drivers of increased interest in the sector.
Medium-term confidence in sustainable allocations builds
The research paints a nuanced picture in the near-term outlook for sustainable demand, with IAs again more positive than DFMs. Over the next 12 months, 80% of IAs expect sustainable clients to remain invested or increase allocations, compared with 65% of DFMs. Meanwhile, just 14% of IAs expect clients to reduce allocations, versus 31% of DFMs.
But that gap narrows over time. Over the next 3-5 years, 86% of IAs and 81% of DFMs expect clients to remain invested or increase allocations to sustainable strategies.
Looking specifically at expectations for allocation increases, the figures show a clear upward trend. Across intermediaries overall, while just 3% expect clients to increase allocations over the next 12 months, this rises to 15% in 1-2 years, 38% in 3-5 years, and 46% in 5 years+.
This trend is even more pronounced among DFMs, where the share expecting allocation increases rises to 44% in 3-5 years and 53% in 5 years+, compared with 31% and 39% respectively for IAs.
Philip Baker, Head of Distribution at EdenTree Investment Management, commented:
“While the mood may be more cautious today, the results of this survey echo what clients are telling us day-to-day: demand for sustainable investing is far from over. And the fact that advisers – who spend the most time in conversation with end clients – are more upbeat in the near term, could suggest the demand conversation is starting to turn.
“What the findings do show clearly is that, despite understandable uncertainty around regulation, short-term performance and geopolitical disruption, sustainable investors are staying the course, and intermediaries increasingly expect allocations to rise again over time, signalling less a retreat than a reset, with a greater focus on performance, credibility and long-term value.”
