More than eight out of 10 advisers said there were significant barriers to integrating ESG (environment, social and governance) factors into their proposition, according to recent research.
Over the past year there has been an huge increase in demand for ESG investment, with UK savers putting almost £1bn a month into ESG funds, a 66 per cent increase on the previous year.
However according to Aegon’s latest adviser attitudes survey, advisers report that they face difficulties as they integrate ESG into their recommendations.
Aegon says that these fall into two broad categories: poor quality information about ESG, and a lack of product choice.
Aegon’s research found that 41 per cent of advisers said that had seen an increase in queries from clients about ESG investment over the past year. However only 2 per cent of advisers felt their clients understood ESG well, with the remaining 98 per cent citing a need for further education and improved awareness of the options available.
It isn’t just clients though that find ESG research confusing. Almost four out of 10 advisers (38 per cent) said they themselves found ESG research confusing, while 24 per cent per cent said they found a lack of information available on ESG.
Aegon says 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.
This also highlights a need for industry standardisation of ESG fund categories so advisers, and their clients, can more easily compare strategies.
When it comes to choice of products, one in four (26 per cent) 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 per cent said 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.
The research found that 14 per cent were sceptical of the ESG credentials of fund managers, with 10 per cent of advisers critical of the poor relative performance of ESG products, and 9 per cent saying the higher costs of ESG were also a barrier.
Aegon UK managing director of investment solutions Tim Orton, says: “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.”
