Forty-five percent of U.S. households prefer an environmental, social and governance (ESG) approach to investing, Cerulli Associates learned in a survey. Among those between the ages of 30 and 39, this increases to 64%, and for those younger than 30, it is 67%.
“In response to growing client demand and demographic trends, asset managers are clearly working to develop and launch environmental, social and governance product for client portfolios,” says Ed Louis, a senior analyst at Cerulli. “While wealth managers and other providers are developing the tools to support these efforts, advisers and investors are implementing them in portfolios more slowing than intended.”
Seventy-five percent of advisers who do not employ ESG strategies say they are moderately fearful of negative performance. For 35% of those advisers, it is a major factor. “Additionally, 41% of advisers believe that ESG and socially responsible investing (SRI) strategies do not offer necessary performance,” Louis says.
When asked about challenges to increasing client demand for ESG products, 29% of asset managers say that misperceptions about performance are a major challenge, and 68% say it is a moderate challenge.
“Asset managers recognize that increasing adviser adoption is a long-term project and are working diligently to address these concerns,” Louis says. “Their efforts are achieving some results, as one-fifth of all advisers are beginning to consider using ESG and SRI strategies.”
Additionally, 40% of asset managers say that investors’ lack of knowledge about ESG investing is a major challenge. “Providing advisers with materials that can be used to educate clients about a firm’s approach to ESG investing is crucial in increasing adviser adoption,” Louis says.
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