Financial advisors expect bigger book of ESG business in coming years, new Vontobel study reveals

• Despite a challenging two-year period for ESG investments, more financial advisors are integrating them into their practices with clients.
• 65% of advisors globally believe ESG has a neutral to positive impact on investments, with European advisers proving the most confident.
• The possible factors impacting advisors’ confidence are inconsistent standards, metrics and taxonomies (88%), not enough suitable sustainable products available (82%), and the evolving ESG regulations (81%).

A new global study by Vontobel has found that an increasing number of financial advisors (62%) are integrating ESG offering into their practices with clients, compared to 53% in 2021. The result shows that sustainable offerings continue to rise in importance in the advisory space despite the headwinds and political backlash that sustainable investing has been experiencing over the last two years.

The Vontobel Advisor ESG Study 2024 assesses the views of 300 financial advisors and wealth managers in 15 countries throughout Europe, the Americas and Asia Pacific to understand their takes on various aspects and challenges of ESG investing.

When asked what percentage of their total book of business is invested in ESG, 54% of advisors globally said less than 10% is currently invested this way. European advisors were the most likely to have a greater book of business in the space, with 24% investing at least a quarter of their total book in ESG, compared with 16% in APAC and 11% in the Americas.

This figure is expected to rise in the coming years, with ESG continuing to gain momentum in all regions surveyed. Advisors in all three markets expect this to be a growing area over the next three years, with over 63% expecting to have 10% or more invested in ESG at the end of this period.

This momentum is not a universal trend, however. For those advisors who have limited, or no, allocations to ESG, the overwhelming reason provided (80%) was that ESG is simply a trend.

Interestingly, previous concerns over the impact that ESG may have had on financial returns appears to have faded across all markets. Most advisors now believe that ESG investing has a neutral to positive impact on investment performance, with 65% believing it doesn’t harm performance at all. This is most prevalent in Europe, with 76% of advisors believing it has a neutral to positive impact.

Despite this growing confidence, advisors continue to face several challenges when recommending ESG investments. The biggest obstacle is inconsistent standards, metrics and taxonomies, with 88% of advisors saying this made it somewhat or very challenging. Other reasons provided included insufficient sustainable products available across all asset classes (82%), evolving ESG regulations (81%), and a lack of ESG data, research and information (80%).

Encouragingly, the study shows that the advisors surveyed tend to access a broad set of information sources rather than relying only on one source when conducting research on ESG products. This helps them provide better advice to clients. Financial institutions and consultants (50%), industry reports and whitepapers (43%), and financial news and journals (40%) are among the sources advisors rely on the most.

Vontobel
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