Surveys
IFAs Frown On ESG Products' Ratings Dearth - Survey

HSBC Global Asset Management conducted a survey of 204 UK IFAs to discuss the current state and future of ESG investing.
According to new research, around 57 per cent of UK-based
independent financial advisors want more information in the
market when it comes to ratings of environmental, social and
governance products.
HSBC
Global Asset Management conducted a survey of 204 UK IFAs to
discuss the current state and future of ESG investing.
The research found that only 13 per cent of IFAs think that the
current ratings available for ESG products are sufficient.
ESG implementation varies by investment manager and it can be
difficult for IFAs and their clients to tell which products have
more robust sustainable investment approaches.
The findings come at a time when enthusiasm for investments that
embrace environmental, social and governance ideas appears
strong, not least by the amount of investment industry commentary
about it.
Reasons for ESG demand
The survey found that interest in social concerns, such as
diversity, human rights, consumer protection, and animal welfare
is the main reason for client demand for investments explicitly
incorporating ESG issues, according to IFAs.
One in five (28 per cent) IFAs believe that the interest is due
to a combination of factors, rather than a single reason. Also,
the third most used answer was the increased number of ESG
investment products available – it is easier to find ESG products
that meet client needs.
Impacts on demand
The survey respondents said that a limited understanding of ESG
issues and the potential long-term impact on investment
portfolios is the main reason for fuelling client demand for ESG
products (34 per cent).
Not needing to take ESG issues into consideration when investing
(9 per cent), investing in an ESG strategy might mean sacrificing
returns (9 per cent), and a lack of ESG investment products
available – not enough products meet client needs (7 per cent),
made up the rest of the reasons.
Some 38 per cent said that a combination of all of the reasons
was responsible for driving client demand for ESG products.
“Investor interest in ESG issues continues to grow rapidly,” said
Daniel Rudd, head of UK wholesale at HSBC Global Asset
Management. “However, what we’ve found is a considerable lack of
information to adequately explain these issues and their impact
on companies and, in turn, investments. Given the complex and
diverse ways of implementing ESG, it can be difficult for
financial advisers to effectively inform their clients without
detailed information and robust ratings. Our research shows that
there is a significant opportunity to better equip IFAs. We will
continue to strive to educate our clients and the markets about
the relevance of ESG to long-term economic performance and the
sustainability of the financial system.”