Advisers lack clear information
Advisers are finding ESG research confusing, according to the 2024 Advisers Attitudes Report by financial services firm Aegon.
47% of the 200 advisers surveyed said finding research “confusing” was a key issue for them when selecting ESG investments. A further 30% reported a lack of information was an issue in their selection process.
Despite adviser difficulties, the report found that almost 73% of firms have enhanced their ESG proposition to meet client demand. Almost a quarter (23%) said they’d increased the number of ESG options in their company-wide investment proposition. 12% said they have taken the significant step to include ESG as standard within all recommended portfolios.
This increased focus may come as a surprise to many given as investors’ appetite for ESG has been knocked in recent years. According to the Financial Times, clients have withdrawn a net $40 billion from ESG equity funds so far this year – the first year that flows have trended negative. But, according to Aegon’s report, the majority of advisers had seen little change in demand for the investments. In fact, 16% reported a net increase in client requests for these products in the past 12 months.
An evolving regulatory landscape
Aegon cautioned that if this demand is to be fully realised, more support would be needed from fund providers and industry bodies in terms of education, fund specific information and reporting for the benefit of both advisers and their clients. The firm remained optimistic that things would improve for advisors, however.
“We would expect future reports to show an improvement in the quality and clarity of research and fund-related communications following the introduction of Sustainable Disclosure Requirements [sic]. This should make it easier for consumers and advisers to navigate the ESG landscape,” the report read.
In April, the UK Financial Conduct Authority announced that it would to extend its Sustainability Disclosure Requirements (SDR) and investment labels regime to all forms of portfolio management services. The rules state that if a portfolio manager wants to make sustainability claims, then it must apply to the FCA for one of four labels. These labels relate to the portfolio’s sustainability objective. To use a label at least 70% of the overall portfolio arrangement would need to be invested in accordance with this sustainability objective.
At Industrial Thought, we believe ESG investing should be more transparent. We believe wealth managers should have easier access to accurate and explainable data which is why we invested £100,000 in specialist ESG ratings and analytics platform Integrum ESG.
A solution with Integrum ESG
Integrum ESG has been developed by investment professionals, for investment professionals, to solve the problems associated with opaque methodologies. Its platform offers a ‘glass-box’ approach to ratings, giving clear reasoning for its ESG scores and visibility into the underlying data. This then allows wealth managers to understand and explain a company’s ESG challenges and how it manages those challenges in the market.
Integrum’s platform blends human and artificial intelligence to capture, verify and display data for firms to analyse and assess. Its proprietary machine learning models capture and pull in a variety of data from company-disclosed sources. The captured data is then reviewed by its team of research analysts before being uploaded onto the Integrum ESG dashboard for its clients to see and assess.
If you’d like to learn more about Integrum ESG, get in touch.