IFAs reported surge in ESG interest during Covid crisis

Research reveals that 85% of advisers have experienced a rise in clients requests to allocate more money to ESG funds.

IFAs have seen a sharp rise in the number of investors wanting to put their money to work for environmental and social good since the start of the Covid-19 pandemic.

Federated Hermes conducted a poll of 200 UK IFAs and found that 85% have seen a rise in client requests to allocate more money to ESG funds.

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The firm suggested that people are rethinking the purpose and goals of their investments during the crisis. They are especially interested in how they can use their capital to tackle climate change, raise standards of corporate governance and improve human rights.

Around 78% of advisers believe that their clients would choose to divest from companies they think have failed to support their employees and wider society through the crisis.

Contrary to the popular narrative, it is not just younger investors who are focusing on ESG – 42% of enquiries have come from investors aged under 40, while 36% have been from those aged 40 or over, the research found.

Harriet Steel, head of business development for the international business of Federated Hermes, says the pandemic has made people think more about sustainability.

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“The Covid-19 crisis is driving seismic change across markets, the economy and society, so it is no surprise to see that investors are reassessing the long-term aims and outcomes of their investments. The pandemic has radically reconfigured concepts of sustainability, reinforcing our long-held belief that investment and value creation must deliver more than just strong financial returns,” she says.

“These findings make clear that the crisis will be a catalyst for change as individual investors ascribe more weighting to the importance of ESG factors, and scrutinise the purpose of companies, and what they deliver for society, to an ever-greater extent.”

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But some financial advisers say they have not seen this trend reflected among their own client base. Darren Cooke of Red Circle Financial Planning says: “I have not had a single client want to allocate more to ESG investments and only ever had one client from over 100 express a desire to invest in ESG.”

Robert Reid, director of Syndaxi Financial Planning, says he is sceptical of such a major shift in attitudes as advisers are currently working on keeping clients afloat. “Given that most activity is to help clients through this crisis, such a fundamental change is unlikely. It’s clear that a requirement to ask if ESG is something they have considered is important, but can we assume all clients understand what ESG is?”