Advisers predict more ESG investing in the wake of Covid-19

New research from Standard Life has found advisers expect a continued shift towards Environmental, Social, and Corporate Governance (ESG) will be the most likely change to their investment approach in the wake of Covid-19, followed by increased uptake of outsourced investment management and risk-rated fund ranges.

Standard Life’s bi-annual survey of 250 UK financial advisers asked how firms’ approach to investment will change in the future when compared to how they operated before Covid-19.

The poll found more than two thirds of (69%) of advisers think ESG investing is more likely to happen in the future, up from 54% when Standard Life asked advisers the same question in June.

None of the advisers surveyed thought ESG investing is less likely following Covid-19, highlighting the trend has been well insulated from disruption caused by the pandemic.

The findings follow recent research from Boring Money and Standard Life that found more than three quarters (83%) of advised investors say they would value a conversation about investing sustainably, but on average, only 45% of advisers are having these conversations with clients.

When asked which factors would make them more likely to use new investment approaches, including ESG, half of advisers (51%) said more affordable options, four in ten mentioned evidence of higher returns (40%) and a third (32%) said more information on how the approach works.

Jenny Davidson, head of platform investment proposition at Standard Life said: “The continued shift towards ESG must be accompanied by a debunking of the misconception that ESG hampers a fund’s performance.”

Elsewhere, nearly a fifth (17%) of advisers said the outsourcing of their investment management is more likely in the future, while 14% said the uptake of risk-rated fund ranges is more likely to happen at their firm following Covid-19. Almost a fifth (17%) said active over passive investing is more likely in the future, and less than one in ten (7%) thought high risk over low risk investing would be more likely. However, the majority of advisers didn’t expect these areas to change in future as a result of Covid-19.

Jenny continued: “The uptake of high-risk investing was the only investment area in our poll deemed to be less likely by advisers. It’s perhaps not surprising that the popularity of these approaches is waning following market fluctuation caused by the pandemic.

“Platform technology has a crucial role to play in facilitating the investments and information that are made available to advisers and can enable truly personalised solutions that reflect an individual’s ethical convictions, beliefs and environmental considerations.

“We’re certain that despite ebbs and flows in investment approaches, the industry will move forwards to adapt alongside clients’ expectations and priorities.”

Data for Standard Life’s Quest report was collected between 5th October and 18th October.  250 UK advisers who work with Standard Life took part in the survey.   

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