June 25, 2018 / News

US advisers question the “cost” of ESG

By Joe McGrath, ESG Clarity

More than a third of US investment advisers believe they have to sacrifice returns, to include environmental, social and governance metrics into investment portfolios, a survey has found.

US advisers question the “cost” of ESG

More than a third of US investment advisers believe they have to sacrifice returns, to include environmental, social and governance metrics into investment portfolios, a survey has found.

The US Monthly Product Trends report by research consultants Cerulli Associates, found that 35 per cent of advisers who are not currently using ESG said that the prospect of a “negative impact on investment performance” was a significant factor preventing them from implementing ESG.

The same report found that less than one in five investors (19 per cent), who are already embracing ESG metrics in their investment portfolio, believed that sustainable investment returns were a major factor driving demand for this approach to investing.

In a media statement accompanying the research findings, Cerulli said that while fund firms had “prioritized” incorporating ESG criteria into their investment processes, it had not led to “actual investment among financial advisers”.

It added: “Cerulli argues that true ESG integration requires the application of material ESG factors with intentionality, in a process driven by robust data that is aggregated from both proprietary and third-party sources.”

This latest research from Cerulli follows a similar path to an Investor Study, conducted by Schroders in 2017, which found that 47 percent of European investors in thought long-term performance was a hurdle to embracing an ESG-oriented investment strategy.

The news will come as a disappointment to ESG champions, who have seen increasing numbers of asset owners, particularly in Europe, embrace sustainable investment solutions over the past year.

Last month, investment consultant Mercer released its latest European Asset Allocation report which found that the number of pension schemes now weighing up risks from climate change had jumped from 5 per cent in 2016 to 17 per cent a year later. However, the report also suggested that regulatory intervention was a key factor.