Advisers look to ESG to counter pandemic losses - Schroders

The investment giant surveyed 63 advisers during April to gauge the impact on their businesses and views of their clients during the coronavirus pandemic. 

Advisers appeared split on how the pandemic would impact client attitudes to sustainable investing. A third (34%) of advisers surveyed said they expected the coronavirus crisis to impact client attitudes, but a similar number (35%) said they did not believe it would have an impact and the remaining 31% were unsure.

Schroder's UK intermediary solutions director Gillian Hepburn said a majority (65%) of advisers believed the crisis would increase the attention they paid to ESG risks associated with investments, ahead of regulatory changes on the issue.

"Everything is pointing towards clients looking towards investing on a more sustainable basis," she said.

"There's an obligation to not just seeing investment solutions but also to deliver education to advisers and clients in this regard. In the context of some of the MiFID II (Markets in Financial Instruments Directive II) changes, advisers are taking much more of an active engagement and paying attention to what this means for their clients."

She added: "It is demonstrating that advisers are now feeling a responsibility to work with clients in this area and pay increased attention to ESG risk assessments with clients."

Elsewhere, the survey found almost half of investors had delayed their retirement due to recent market falls, but 73% of advisers said the appetite to drawdown pension funds has not changed during the pandemic.

Hepburn said she found this figure surprising - she thought there would be less demand for drawdown given the significant market hits in recent months.

Capital loss is biggest concern

Capital loss emerged as the main concern among clients during the pandemic, with half (53%) of clients saying it was their number one concern and 91% saying it was in their top three.

Schroders head of UK intermediary Doug Abbott said the pressure on advisers and fund managers to mitigate these losses in their clients' portfolios had to an increased focus on credit-based assets.

He said active managers will turn to investment grade credit and maximiser strategies, as investors who relied on dividend income were experiencing shocks to their portfolios.

"Investment teams are cautious on equities and interested in credit," he said.

"As more data emerges people will start coming to consensus about the shape of recovery. What you have to do is keep people invested until plan becomes clearer, don't want to dropout of market or you get a massive capital loss."

Abbott added that the current crisis emphasised the importance of financial advisers in telling their clients to remain invested during this time.

"Our advice would be for clients to stick with their investments rather than panic during this time, and this shows advisers are doing a good job," he said.

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