84% of advisers report barriers to ESG investing

by | Jun 22, 2021

Share this article

Facebook Open Graph

Aegon’s 2021 adviser attitudes report reveals an increased demand for ESG investing. Despite this, 84% of advisers cited barriers to integrating ESG into their propositions – the key issues being poor quality information and a lack of product choice. 

UK savers put almost £1 billion a month on average into ESG funds in 2020, up 66% on the previous year. In its latest Adviser attitudes report, Aegon provides further evidence of this increased demand, with 41% of advisers reporting an increase in queries about ESG investments.

However, advisers are facing a number of difficulties as they integrate ESG into their investment propositions. Aegon’s report highlighted a degree of frustration among advisers at the lack of maturity of this market.

84% cite barriers to integrating ESG

 
 

84% of the advisers surveyed highlighted barriers to integrating ESG into their investment propositions. These break down into two main categories:

  • Lack, or poor quality, of information
  • Lack of product choice

Poor quality information

 
 

Despite the high level of interest, there is a clear lack of knowledge and understanding among both clients and advisers surrounding ESG. Only 2% of advisers felt their clients understood ESG well, with the remaining 98% citing a need for further education and improved awareness of the options available. 12% said their clients are overwhelmed by the choice available, while 28% said that their clients didn’t realise there were different types of approaches to ESG.

38% of advisers said they themselves found ESG research confusing, while 24% said they found a lack of information available on ESG. This points to a need for providers to improve, not only the quality of educational material on the subject, but also to better report on the solutions they offer in terms that are clear and accessible to all.

It also highlights a need for industry standardisation of ESG fund categories so advisers (and their clients) can more easily compare strategies. In this respect the Investment Association Responsible Investing framework, which sets out five key ways in which ESG can be incorporated within investments ─ ESG integration, stewardship, exclusions, sustainable and impact investing ─ could form a good starting point.

 
 

Poor product choice

26% of advisers said that the lack of ESG asset classes to build rounded portfolios made it difficult for them to fully embed ESG within their propositions. A further 22% feel that the current range of investment products is too equity focused and doesn’t offer their clients products that match their values and investment goals.

14% were sceptical of the ESG credentials of fund managers, 10% criticised the poor relative performance of ESG products and 9% felt that the higher costs of ESG were also a barrier.

 Tim Orton, Managing Director of Investment Solutions at Aegon UK notes:

“ESG is no longer an optional extra. There is a real opportunity to help advisers cut through the marketing messages so their clients can connect their savings with the ability to make an environmental or social impact.

“Our research shows that the industry is not moving fast enough in terms of clarity and consistency ─ which is a source of frustration for advisers and their clients.

“The government’s green finance agenda puts UK financial services at the forefront of this opportunity and as an industry we need to increase transparency so clients and their advisers can make informed decisions about their investments.”

Share this article

Related articles

IFAM 127 | Not if, but when | April 2024

IFAM 127 | Not if, but when | April 2024

Not if, but when… Spring finally seems to have arrived! Since our last edition, we have had the Spring Budget and the Bank of England (BoE) rate announcement to name but a few important landmarks. This has kept us, like all of you I am sure, quite busy over the last...

Sign up to the IFA Magazine Newsletter

Trending articles

IFA Talk logo

IFA Talk is our flagship podcast, that fits perfectly into your busy life, bringing the latest insight, analysis, news and interviews to you, wherever you are.

IFA Talk Podcast - listen to the latest episode

x