Environmental, social and governance (ESG) investing has been a dominant force in the institutional sector but research shows it is also gaining traction in the retail space.
Global investment manager Federated Hermes surveyed 200 UK IFAs and found 85% have seen a rise in client requests to allocate capital to ESG-integrated funds since the start of the coronavirus outbreak.
Some 82% reported an uptick in enquiries from investors about how their capital can be committed to combat the effects of climate change, raise governance standards and improve human rights.
Interest has come from investors across a range of demographics; as 42% advisers receiving enquiries from clients aged under 40, while 36% have received them from those aged 40 or over.
Future outlook
Eight-in-10 IFAs (82%) said that the current crisis and its impacts will result in more individuals investing in pursuit of ESG goals in the future.
They also said that companies’ actions during the pandemic will also play a part in clients’ strategy, as 78% believe that investors would choose to divest from businesses they deem to have failed to support their employees and wider society through the crisis.
Harriet Steel, head of business development for the international business of Federated Hermes, said: “The covid-19 crisis is driving seismic change across markets, the economy and society, so it is no surprise to see that investors are reassessing the long-term aims and outcomes of their investments.
“The pandemic has radically reconfigured concepts of sustainability, reinforcing our long-held belief that investment and value creation must deliver more than just strong financial returns.
“These findings make clear that the crisis will be a catalyst for change as individual investors ascribe more weighting to the importance of ESG factors, and scrutinise the purpose of companies, and what they deliver for society, to an ever-greater extent.”
Sector views
This survey comes several months after International Adviser interviewed Colin Dyer, head of proposition and private client management at 1825, who said demand for ESG will “accelerate exponentially over the next few years” and there are a lot of ESG products “coming down the conveyor belt”.
But this differs from a recent Square Mile survey which found only 22% of IFAs said more than half of their clients would wish to invest in a portfolio with an ESG steer or positive impact.
