Quoting research from investment management firm Invesco, Suffolk-based independent financial advice and wealth management experts, Kingsfleet Wealth, have suggested that there is a growing level of interest in sustainable investing, but information and knowledge to help investors make key decisions poses an obstacle.
The Invesco research uncovered that 85 per cent of advised investors were interested in making sustainable investments, while just over half [52 per cent] who are not currently investing sustainably expect to be doing so within 12 months.
The strong interest in sustainable investing was consistent across generations, with 90 per cent of under-45s indicating that it mattered to them that their money was invested responsibly, while 75 per cent of over-60s also agreed. A mere 15 per cent of investors, on the other hand, suggested that they had no interest at all in sustainable investments.
Within Invesco’s findings, it was apparent that financial advisers were also taking an interest in sustainable investing. 85 per cent of advisory firms surveyed said that they had discussed environmental, social and corporate governance [ESG] investing with their clients at some stage.
Yet, despite the appetite among investors and financial advisers, the research revealed a significant lack of information and knowledge, which could hold these good intentions back from reaching their full potential.
This is not the only instance in which sustainable ways of doing business have been held up. Green Home Finance through the form of green mortgages is another matter that has been discussed in the UK for some time, but there is a lack of real information on these products and a lack of traction for green finance options in the UK market. Matthew Fleming-Duffy of independent mortgage broker Cherry Mortgage & Finance, spoke about this matter at length with The Leaders Council in late 2020.
Indeed, in the realm of sustainable investing, inconsistent information is a major barrier to investors wanting to make informed decisions on where their money is going. 42 per cent of financial advisers reported to Invesco that this was in fact the most significant barrier to allocating funds to sustainable strategies.
Analysing the research further, Kingsfleet Wealth reported that the second most significant barrier to sustainable investing was a perception shared by over a third of advisers that such investments were riskier or more volatile. In addition, 31 per cent of advisers suggest that ESG investing could actually hinder investment performance.
The findings also suggest that financial services firms need to do more when discussing sustainable investment preferences with clients. Although the appetite to discuss such options is there, 38 per cent of firms said that they do not have a formal framework in place for discussing ESG investing, and only tend to cover the topic if the client raises it first.
Meanwhile, ‘greenwashing’ was a concern for 45 per cent of advisers responding to the Invesco study. This is an example of when a green or sustainable label is inaccurately applied to a certain investment. Over one quarter of all investors surveyed also worried that some investment products would be advertised as “green”, without really being as sustainable as claimed.
With the government pushing for a green economic recovery from the Covid-19 pandemic as part of the Build Back Better agenda, Invesco Summit Responsible Range fund manager, Clive Emery, said that the industry could no longer look at green investing as a passing “fad” and that advisers have a duty to educate their clients on what they are investing in and whether these investments are environmentally responsible to help fuel a more sustainable way of doing business.
Kingsfleet Wealth quotes Emery as saying: “The sustainable investing universe has grown at a faster pace than could have ever been imagined and can no longer be considered a passing ‘fad.’ We believe as awareness grows and SI is implemented into core products, the statistics from our survey will shift significantly as the conversation grows.
“The topics and issues covered by ESG are so broad and universal and our findings show that it is important to establish that there is a spectrum of sustainable solutions that exist – not a simple one size fits all approach. It is crucial that advisers and asset managers can confidently educate their clients and ensure they understand what they are investing in.
“We know that a concerted and common effort from the investment industry – including managers and advisers – will support investors to make informed decisions and be able access the best sustainable investment options that meet their objectives today and in the future.”
