There is a mismatch between financial advisers and clients when it comes to environmental, social and governance (ESG) investment, according to Natixis Investment Managers.
In an ESG report which surveyed financial advisers globally, the firm said just 16% of client assets managed by financial advisers were invested in ESG investments.
In Australia, just 16% of financial advisers, Natixis IM said, had been asked by their clients for ESG investments despite 83% of individual investors saying they wanted investments which aligned with their assets and values.
This was the lowest rate globally, joint with Hong Kong, compared to a global average of 29% and 81% respectively.
“Placed at the intersection of clients who are demanding more ESG investments and the firms trying to deliver, financial advisers are uncertain about how it will all play out,” the firm said.
Advisers said better reporting would help them and that it was difficult to establish which of the many ESG vehicles available would be able to offer good performance.
“Seven in 10 say that with an increasing number of these strategies available, it is hard to know which ones may deliver on both investment performance and ESG performance,” the firm said.
“Like institutional investors, they identify reporting as a critical factor for gaining buy-in on ESG. Some 73% say standardised reporting will increase ESG adoption and 66% say it is hard to know which measures of non-financial performance actually matter.”
This experience by financial advisers differed from that of fund selectors. Over three-quarters of fund selectors said they were implementing ESG strategies and 86% planned to maintain or increase this in the next 12 months. This was due to growing social awareness of ESG and to align investment strategies with organisational values.
The firm said: “Fund selectors note ESG efforts are driven by the demands of their end clients: individual investors. But when it comes to implementing ESG in portfolios, financial advisers and clients are not always on the same page”.