Despite rising client interest in sustainable investments, many wealth managers and financial advisors lack the necessary systems to manage these concerns effectively, according to a survey.
The study by Ortec Finance, a provider of risk and return management solutions, has revealed that nearly 90% of wealth managers and financial advisors report an increase in client focus on ESG credentials. About 12% even describe this increase as “dramatic”.
According to the study, this trend is expected to continue, with 85% of respondents anticipating greater client emphasis on ESG factors over the next 24 months. About 14% of the respondents said they expect the current level of focus to remain unchanged.
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Environmental and climate concerns are at the forefront for many clients. About 93% of surveyed professionals said they have seen more clients aiming to avoid investments in companies and sectors that harm the environment or contribute to climate change. Additionally, 83% said they are noticing heightened client awareness of the climate risks their investment portfolios might face, with 38% witnessing a dramatic increase in such concerns.
Despite this growing client interest, only 1% of respondents believe their tools for reviewing ESG and climate risks are ‘very effective’. A larger group, 71%, rate their systems as ‘quite effective’, while over 27% consider their tools merely ‘average’.
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More than 90% agree that such investments are crucial for better understanding and managing ESG and climate risks in client portfolios. The overwhelming consensus among wealth managers and financial advisors is clear: the industry must invest significantly in new technology and systems.
Tessa Kuijl, MD, global wealth solutions at Ortec Finance, commented: “Wealth managers and financial advisors must be equipped with the right tools and systems to effectively analyse and fully understand the extent to which their clients are exposed to ESG and climate-related risks, particularly as this is an area which clients are only planning on focusing more on in the next few years.
