80% of IFAs viewing ESG considerations as ‘important’, research finds

Over 80% of independent financial advisers (IFAs) have a positive view about the importance of ESG in portfolio construction, according to a new study by Foresight Group LLP.

The research by the private equity investment manager, conducted among over 100 IFAs, revealed that four in five are now saying it is important when building client portfolios – including 28% who said it is “very important”. This compares to 65% of advisers who described this as important last year.

UK retail investors also seem to be adopting the same stance, albeit more gradually, Foresight stated. The research revealed that 12% of IFAs believe over half of their clients now express a preference for ESG investing, compared to 9% in 2020.

Foresight also suggested that financial intermediaries have remained conscious of their role in the move towards sustainable investing, however, with 45% of respondents saying that education sessions would encourage them to suggest ESG funds more frequently to clients.

Furthermore, the study’s respondents are expecting over half of their clients will be invested in portfolios in which ESG is a core component in an average of 4.7 years.

In terms of delivering advice and selecting suitable ESG strategies for clients, Foresight suggested the greatest challenge is the lack of an industry-wide definition of ESG investing, according to 49% of advisers. The lack of an industry-wide gold standard for ESG criteria and a lack of transparency when reporting ESG activity were also each cited by 20% of respondents.

Foresight Capital Management partner, Mark Brennan, said: “We are enthused to see that IFAs are increasingly open to joining the global movement towards sustainable investing.

“Major steps forward have been taken this year in helping companies and investors define what qualifies as a sustainable economic activity or investment, although the investment industry is still some way from providing standard definitions.

“We pride ourselves on being a sustainability-led investment manager, and we are certainly prepared to take on responsibility in helping the investment industry to shape sustainable investing in the future.”

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