Financial advisers around the world have said ESG investing is an opportunity to grow their business as well as deepen relationships with clients, according to a Franklin Templeton survey.
The study, sponsored by Franklin Templeton and conducted by NMG Consulting, examined the attitudes of over 800 financial advisers and intermediaries towards responsible investing in 10 markets across the globe in EMEA, APAC and North America, and found significant usage of responsibly invested funds particularly in the UK and Europe.
Moreover, 90% of respondents said responsible investing was a ‘good’ business opportunity, which included 42% that described ESG investing as a ‘great opportunity” for business.
The study also found that that inclusion of ESG considerations in retail client discussions allows them to deepen relationships by enabling new conversations around the fundamental purpose of investing and the client’s investment mission.
Julie Moret (pictured), global head of ESG at Franklin Templeton, commented: “The growing relevancy of environmental issues linked to climate transition, natural resource scarcity and efficiency is undoubtedly driving greater interest in ESG products and solutions. Regulatory pressures are also accelerating these themes. Encouragingly, the study’s findings show that advisers are responding to the increased demand from clients which will help to deepen the industry’s knowledge and innovation in this space.”
European advisers are leading the way in terms of ESG integration with 91% and 90% of advisers in Italy and France respectively allocating investments to ESG products.
Looking at SRI or impact-focused products specifically, Swedish financial advisers were the most interested with 70% and 68% respectively allocating to these products. Denmark and the Netherlands were also among the highest adopters of impact products and the UK is catching up with 30% of retail clients expected to make a ‘significant increase’ in responsible investments over the next two years, in contrast to the global and European average (23% and 25% respectively).
However, UK retail investors are slightly ahead of continental European peers when investing in ESG products, with 87% of the UK advisers having clients invested in ESG funds, versus 85% as the average across Europe.
Despite covid-19 bringing social and governance factors into focus, nearly half of advisers (46%) said they believe that environmental factors are the most important for their clients in the near term. Just 34% cited governance and 20% cited social. Advisers explained that environmental issues are most likely to engage retail clients when investing for both the short and long term (46% and 63% respectively), with concerns about climate change, sustainability and resource efficiency, being the top three ESG issues advisers believe will change how people invest over the short and long term.
However, Franklin Templeton’s Moret had a warning for the asset management sector: “The industry needs to make sure it is aligned when discussing ESG terminology and practices. Greater transparency on ESG risks and measurement will not only better educate and inform investors in their decision-making, but also further the investment case for responsible investment.”
Michel Tulle, senior director – Europe ex-UK at Franklin Templeton, added: “The asset management industry should respond by supporting advisers as they educate themselves and clients on ESG, as well as to respond to investor demand by providing a wider range of more innovative products and solutions.”