For professional investors only
New Wealth DFM survey carried out in conjunction with Invesco, investigates how wealth managers are currently positioned regarding ESG exposure within their portfolios and reveals interesting underlying trends which wealth managers will be keen to hear about.
There certainly are plenty of potential barriers to sustainable investing, however, it is the ‘lack of consistency in definitions’ which seems to be proving the biggest challenge for Wealth DFM readers with 77% of those surveyed citing it as a problem. Hard on its heels though, 67% of respondents revealed that issues relating to ‘greenwashing’ were proving to be a challenge when it comes to identifying what is really going on in relation to the sustainability credentials within collective investment vehicles.
Getting good data on the breadth and depth that different funds and fund managers are going to with their analysis and research seems therefore to be making the task of assessing fund suitability that much more of a challenge. However, it seems that the lack of guidance to date from the FCA on assessing sustainability in investment funds isn’t seen as a hindrance, with only 6% of respondents citing it as a barrier.
Can ETFs deliver for ESG exposure?
It seems that sustainable exchange traded funds (ETFs) are increasingly being viewed positively as a means of obtaining sustainable investment exposure. According to our survey, 35.5% of respondents are either already investing in this way using ETFs or are currently considering doing so – although 64.5% have admitted that ESG ETFs are not currently on their radar.
However, when we asked respondents about their future plans for investing in ESG ETFs, it was notable that 36.6% said yes, they are planning to increase their allocation in this way over the next 12 months, with 0% saying they aren’t considering such an option. When it comes to those currently sitting on the fence, 63.6% said they are not sure whether they will or won’t increase their ETF ESG exposure over the next year.
It seems that the jury is out when it comes to our wealth manager audience about whether ETFs can achieve real ESG change, with 35% believing that they can whilst 38% believe they can’t with remaining respondents not sure either way.
SRI nudges ahead in popularity stakes
One area where there was no doubt was in our respondents current ‘go to’ categories for ESG investment. Our survey found that SRI (Socially Responsible Investing) proved to be our respondents most popular choice of ESG fund category in their portfolios with 48% citing that they have exposure to it, this was closely followed by impact investing (45%), broad ESG (45%) and climate-focused (42%) funds.
Sustainability – help or hindrance when it comes to performance?
Again, our wealth manager audience seems to be split on their opinions as to whether sustainable investing is more likely to help or hinder investment performance. We found that whilst 41.9% of respondents believe that sustainability is more likely to improve performance overall, 22.5% believe that it is more likely to hinder performance. As you’ll guess, the remainder felt that sustainable investing is likely to have no overall impact on performance at all.
Of course, where your own thinking is on such issues is another matter but it’s useful to consider where other wealth managers are positioned in respect of this increasingly important aspect of asset allocation and stock selection.
In brief, we believe that these data show that there is clearly more need for clarity and transparency when it comes to the growing momentum towards investing sustainably, and that wealth managers are seeing greater potential in the use of ETFs to deliver effective solutions.
Thanks to all the Wealth DFM readers who took the time to feed back their response to the survey and to share their views with us.
If you’re interested in broad ESG improvements or have more specific targets, find out how you can use Invesco’s range of ESG ETFs to meet your core investment objectives as well as gain exposure to more specialist areas.
The ESG Sentiment Survey was carried out by Wealth DFM Magazine between 17th and 22nd March there were 31 respondents.
The value of investments and any income will fluctuate (this may partly be the result of exchange-rate fluctuations) and investors may not get back the full amount invested.
This article contains information that is for discussion purposes only, and is intended only for professional investors in the UK.
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Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
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