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.”