Just 1% of wealth managers and financial advisers completely trust the sustainability claims of investment funds, according to research from the UK’s Association of Investment Companies (AIC).
The research analysed responses from 91 UK wealth managers and 109 financial advisers. Participants were asked to rate their trust in the sustainability claims of funds on a scale of 1 to 5 (5 being complete trust).
Just 1% responded with a score of 5, while the majority responded with 3 – indicating limited trust.
The findings come at a time of regulatory crackdown on greenwashing in the UK, with the Financial Conduct Authority (FCA) recently publishing its delayed Sustainable Disclosure Requirements (SDR) and investment labels proposals aimed at building transparency and trust through the introduction of labels to aid retail investors.
Participants noted that greenwashing fears could be diminished by the provision of specific information, including real portfolio examples:
One manager said: “I would need them to say, ‘We looked at company X last year. We really, really liked it. It scored really well on all our stuff but then when we thought about it from a sustainable point of view, we didn’t invest in it.’”
Despite an evident lack of trust, support for ESG investing remained strong, with 79% of respondents agreeing “investments should make a positive difference as well as a financial return”.
A significant number of participants said soaring energy prices, Russia’s invasion of Ukraine, market volatility and rising inflation and interest rates had had a negative impact on the likelihood they would invest in sustainable products over the next 12 months.
Nick Britton, head of intermediary communications at the AIC, said: “Advisers and wealth managers are overwhelmingly on board with ESG and sustainable investing, but they are also keenly aware of the risks of greenwashing with only 1 in 100 completely trusting ESG claims from funds. In light of this, the FCA’s decision to impose stringent rules on how funds present their sustainability claims looks timely, and it’s one we fully support.
Advisers and wealth managers were more pessimistic about performance, risk and charges of ESG-tilted funds than they were last year, however.
Britton added: “ESG investing has faced a perfect storm this year, and this has clearly affected expectations about performance and risk. Market falls, higher inflation and the war in Ukraine have made many advisers and wealth managers more wary of investing in sustainable funds in the short term, though they still expect demand for ESG investing in general to increase over the next 12 months.”
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