When environmental, social and governance (ESG) investing was first introduced, it seemed many viewed it as a fad.
While the UK and Europe are far advanced in their use of ESG and responsible investments, it seems Australia has lagged, not helped by the high proportion of resources companies boosting the economy.
However, this is now changing with investors more than ever asking their adviser for responsible and ESG options.
Not only are they asking for it but findings from behavioural finance company Oxford Risk have stated that clients would be willing to walk away from their adviser if they had insufficient ESG options or failed to implement it in portfolios.
Some 43% said they would move if they continued to be unhappy about the ESG commitment of their current wealth adviser and one in five said they had already done so.
It seems ESG is no longer a ‘nice to have’ but a vital part of an investor’s portfolio and advisers need to have these options available and be able to discuss them with their clients. Whether the question should be raised by the client or by the adviser is another matter, but it is a conversation that needs to be had if an adviser wants to build a fully-formed portfolio.
As detailed in our page 14 ETF feature, more and more fund managers are also launching products in the ESG space and expect to continue to do so. Millennials coming of age and making their first investments has coincided with fears over climate change and the younger generation are particularly keen on ESG products.
This view is likely to stay with them for the rest of their investing life, indicating ESG products will be appearing in portfolios for years to come, not just while these investors are young.
It is in advisers’ interest to get on this (eco-friendly) train as early as possible if they want to be able to service the needs of the younger generation when the intergenerational wealth transfer takes place in the future.
