Despite a challenging two-year period for ESG investments, increasing number of financial advisors are integrating ESG offerings into their practices, according to a study.
The study by investment manager Vontobel, which surveyed 300 financial advisors and wealth managers in 15 countries across Europe, the Americas and Asia Pacific, has shown a rise from 53% in 2021 to 62% in 2024 of advisors incorporating ESG into their client offerings.
The study has highlighted that 65% of advisors globally believe ESG has a neutral to positive impact on investments, with European advisors being the most confident. However, advisors face several challenges, including inconsistent standards, metrics, taxonomies, a lack of suitable sustainable products and evolving ESG regulations.
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When asked about the percentage of their total book of business invested in ESG, 54% of advisors globally reported less than 10%. European advisors were more likely to have a significant portion of their business in ESG, with 24% investing at least a quarter of their total book in ESG, compared to 16% in Apac and 11% in the Americas.
Looking ahead, advisors expect the importance of ESG to grow, with over 63% anticipating that at least 10% of their investments will be in ESG within the next three years. However, some advisors remain skeptical, with 80% of those with limited or no ESG allocations viewing it as a passing trend.
Interestingly, previous concerns about the negative impact of ESG on financial returns have diminished. Now, 65% of advisors believe ESG investing has a neutral to positive impact on investment performance, with this belief being strongest in Europe at 76%.
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Despite growing confidence in ESG, advisors still encounter several obstacles. The most significant is the inconsistency in standards, metrics, and taxonomies, cited by 88% of respondents. Additionally, advisors noted a shortage of sustainable products across all asset classes and challenges due to evolving ESG regulations.
Advisors also reported using a variety of information sources for ESG research, including financial institutions and consultants, industry reports and whitepapers, and financial news and journals.
Christoph von Reiche, Vontobel’s head of institutional clients, commented: “Although ESG has been facing several headwinds recently, our study shows that it is set to continue to rise in popularity among investors in the coming years. Bloomberg Intelligence estimates that global ESG assets will rise to $40 trillion by 2030. A closer and more open dialogue between both parties could help ensure that advisors’ needs, and those of their clients, are met appropriately.”
