ESG remains strong despite greenwashing concerns, AIC reports

November 11, 2022

Only one percent of investment specialists completely trust funds’ sustainability marketing claims while more than half suspect there is too much greenwashing, according to a trade body survey.

But despite scepticism, financial advisers and wealth managers remain supportive of the growing appetite for ESG investing despite a ‘perfect storm’ of pressures on it during 2022.

The findings have emerged from research by the Association of Investment Companies (AIC), the UK’s trade association for the closed-ended investment company industry.

It quizzed 200 specialists made up of 109 financial advisers and 91 wealth managers.

They were asked to rate their trust in funds’ sustainability claims on a scale of one (do not trust at all) to five (complete trust).

Only one percent gave a perfect five-out-of-five score, while the majority (56 percent) entered a middle-of-the-road score of three - indicating limited trust.

AIC’s head of intermediary communications Nick Britton said: “Advisers and wealth managers are overwhelmingly on board with ESG and sustainable investing but they’re also keenly aware of the risks of greenwashing, with only one in 100 completely trusting ESG claims from funds.

“In light of this, the Financial Conduct Authority’s decision to impose stringent rules on how funds present their sustainability claims looks timely - and it’s one we fully support.”

When it comes to evaluation, 79 percent of respondents agreed 'investments should make a positive difference as well as a financial return'.

Nearly half (48 percent) consider their firms to have been an 'early adopter' of ESG investing, and 31 percent said their firm had recently made it a priority.

The spike in interest comes despite a number of pressures on sustainable investing in 2022.

And respondents admitted soaring energy prices, geopolitical conflicts, market volatility and rising inflation and interest rates may force them to limit ESG investment over the next 12 months.

Nearly half (45 percent) felt ESG investing is likely to lead to higher risk, likely due to greenwashing concerns, and Britton added: “ESG investing has faced a perfect storm this year and this has clearly affected expectations about performance and risk.

Read more about the recent affront on ESG:

https://www.old.manifest.co.uk/us-14-democratic-states-show-esg-support/

“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.

“But they still expect demand for ESG investing, in general, to increase over the next 12 months.”