'Sea-change' in adviser ESG perception - Rathbones research

The figures were released in Rathbones' report The Value of ESG: how mainstream is ESG investing within today's adviser world?

It also found 96% of advisers who favour ESG investment had reported "fast or steady business growth" in the area during the past five years.

The report, put together by CoreData, looked at the impacts on business growth, client engagement, retention, referrals and perceptions of performance.

The research divided adviser groups into two entities; advisers with 20% or less in ESG investments (‘non-ESG adopters'), and those with 60% or more (‘ESG advisers').

Some 97% of advisers agreed business and society are changing, with statistically little difference between advisers who have or have not embraced ESG.

Both groups confirmed increased client adoption of ESG investment. While five years ago 28% of the surveyed advisers' clients had no ESG investments whatsoever, today that was just 4%.

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Business growth

Rathbones said the results showed that having a higher allocation to ESG investments had considerable impacts on an adviser's business.

Both groups of advisers reported increased business growth but the ESG adviser sample had seen considerably faster growth with 96% saying they had experienced "fast or steady growth" contrasted with 80% of non-ESG adopters.

A fifth (20%) of the non-ESG group defined recent growth as "stable, fluctuating or reducing", while only 4% of the ESG group expressed growth at this low level.

Rathbones also asked advisers about the importance ESG investing played within client relationships.

ESG advisers reported longer client tenure and more referrals. Rathbones said further analysis "strongly suggests these deeper relationships were driven by the focus on ESG investments".

Both groups believed that clients were more engaged with the investment process when ESG was involved, with almost two-thirds (64%) of the non-ESG group, and three-quarters 76% of the ESG group, agreeing.

Some 64% of the non-ESG group thought ESG investments "facilitated client retention" and a higher 80% of the ESG group were in agreement.

Analysis of the two groups also showed that ESG advisers enjoyed far longer retention rates than their non-ESG colleagues with 82% of the former group claiming average client tenure in excess of 10 years, compared to 52% for non-ESG advisers. This gap widened further for client tenure of 15 years and more (56% versus 20%).

Performance

The results showed that advisers believe that ESG investments can "enhance investment returns", with over two thirds (68%) of the non-ESG group backing the statement, rising to 82%for ESG advisers; a 75% overall score.

Rathbone Unit Trust Management chief executive Mike Webb said: "We undertook this project to help inform our thinking around this critical topic. Despite the research having been undertaken just prior to the pandemic, the results show that a sea-change in attitudes was already underway, with both adopters and non-adopters recognising ESG strategies' ability to deliver for their clients.

"And from the advisers' own business perspective, the report demonstrates ESG adoption's value in areas including business growth, extended client tenure and client engagement."

The findings are based on data collected from 100 UK advisers during November and December 2019.

For all PA's coverage of ESG visit here

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