Is ESG demand low?

Female-financial-advisor
Female-financial-advisor

Article by Christina

Despite the deluge of publicity about ESG funds it seems that in reality demand is low. Abrdn have just published their annual adviser survey and found that although over 90% of advisers now ask their clients about their ESG requirements, almost a quarter say they aren’t interested in ESG funds and 40% of advisers said that less than 10% of their clients were interested. Only 10% said over 50% of their clients were seeking ESG solutions. So far then it seems like the old 80/20 rule. 20% are making all the noise about demand for ESG when in reality 80% aren’t interested.

That probably fits with our current experience as female financial advisors.

But, in complete contrast global funds network Calastone have just reported that over two thirds of their funds in flow this year (over £700m) have come into ESG active managed funds. That creates an increasingly confusing picture.

Others have also reported increased inflows into ESG investments, including Aviva who have reported 40% growth in investments to date with inflows of £2.7 billion. They are hoping for a further boost with the launch of their low-cost advice service which will see a cross over between data input from clients and live chat with an adviser.

There continues to be debate about to manage each part of the E, the S and the G, which don’t always work together. Take the example of sustainable energy in the Greek Islands. Wind turbines are now contributing almost all the energy requirements and even some surplus. But many of the islands have suffered disastrous flooding as a result of the destruction of natural vegetation in order to accommodate the turbines. A good example of the E and the S not being compatible. This tale repeats itself in many areas which claim to have ESG investment credentials.

The FCA are also keen to make sure that the ESG market is functioning properly, As part of its approach it is funding a new “sandbox” in which firms are invited to test their products in a controlled environment with FCA funding to see if they can improve the market. In the so called ESG “sandbox” the FCA are looking to see how digital technologies can help to validate reporting on sustainability which would bring credibility to a firms ESG data.

 

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