AIC: Only 1% of asset managers and financial advisors fully believe sustainability claims by funds

According to study by the UK's Association of Investment Companies, only 1% of wealth managers and financial advisors fully believe the sustainability claims of investment funds (AIC).

The study examined replies from 109 financial advisors and 91 wealth managers in the UK. On a scale of 1 to 5, participants were asked to rate how much they trusted fund companies' sustainability claims (5 being complete trust).

Only 1% of respondents gave a score of 5, while the rest gave a score of 3, suggesting a low level of trust.

The findings come at a time when the UK is stepping up its regulatory efforts to combat greenwashing, with the Financial Conduct Authority (FCA) recently publishing its long-delayed Sustainable Disclosure Requirements (SDR) and investment labels proposals designed to foster transparency and trust by introducing labels to support retail investors.

Participants noted that by providing concrete information, such as actual portfolio examples, participants' anxieties of "greenwashing" might be reduced.

"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 a clear lack of trust 79% of respondents agreed that investments "should make a positive difference as well as a financial return," indicating continued support for ESG investing.

The majority of participants stated they were less likely to invest in sustainable products over the course of the next 12 months as a result of rising energy prices, Russia's invasion of Ukraine, market instability, and rising inflation and interest rates.

"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," said Nick Britton, head of intermediary communications at the AIC.

However, advisors and wealth managers were less optimistic than they were the previous year regarding the performance, risk, and charges of ESG-tilted funds.

"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," Britton continued.

By fLEXI tEAM