Demand for environmental, social and governance focused investments are growing and along with it, increasing evidence that advisors who disregard that market do so at their own peril.
A new survey from State Street’s Center for Applied Research found that 50% of retail investors surveyed want their financial advisor to communicate more about ESG investing. They want to learn about ESG investing because they want to align their investments with their personal values, and there is growing evidence that in doing so their returns won’t suffer.
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“In the case of individual investors, our industry is falling behind in providing knowledge on this topic,” according to the State Street Center study, which surveyed 750 individual investors in 24 countries and nearly 600 institutional investors – both asset managers and asset owners – in 29 countries.
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The study found that 83% of individual investors did not get their knowledge of ESG from their financial advisors but from their own research or from family and friends. This clearly represents an opportunity for advisors.
“Our research suggests that advisors should expect an increasing number of their clients will be contacting them about ESG investing,” according to the study. “If advisors want to be able to respond to that interest, they need to have the requisite knowledge to do so.”
The survey found that 62% of investors who already invest in ESG-related assets – and 43% who don’t – plan to approach their advisor about ESG investing in the next 12 months. “This shows interest in ESG investing even by those not currently practicing it,” the study states. “There’s an opportunity for advisors who are willing to start the conversation.”
In addition, the study found there’s an opportunity even for advisors whose clients already invest in ESG-related assets, provided those advisors “have the requisite knowledge…. More than half of retail investors say ESG factors will be increasingly important to them in the next five years.”