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The research found a greater acceptance of RI, even when it could lead to underperformance, with 61.3% of advisers claiming their clients would be willing to sacrifice their returns in order to achieve their RI aims.

Half (54%) of advisers said their clients had expressed an interest in investing in a specific RI theme, particularly climate change, which came out on top. Many clients also wished to exclude certain criteria, such as fossil fuels (41%) and tobacco-manufacturing companies (27%), according to three-quarters of surveyed advisers.

The research also found that incorporation of RI into businesses was growing, with half (55%) of advisers having a specific question on RI in their attitude to risk auestionnaire and 57% having embedded RI into their Centralised Investment Propositions, up from 46% and 39% in Q4 2020, respectively.

The leading funding group in the RI field remained Liontrust, which was the most frequently mentioned at 25%, followed by Royal London at 11%, according to the research. Their experience and longevity in investing responsibly (38%) was most often cited as influencing this perception, followed by the range of funds on offer, with performance accounting for only 17%.  

Steve Kenny, chief distribution officer at Square Mile, said: “It is encouraging to see that most advisers now recognise that choosing between doing good for the planet and society and making financial returns is not a binary decision. 

“It is also interesting to note that these findings come at a time when a combination of factors are creating performance headwinds for many responsible investment funds, following a strong run over recent years. Of course, investment is a long-term game, and the businesses which responsible investments typically back will form part of a more sustainable future, while those they exclude will either evolve or die away. This creates a clear alignment between investing responsibly and benefiting from the trends shaping the world of tomorrow.”

Terminology

In a separate report, the surveyed advisers by NextWealth for its Sustainable Investing Tracker Study highlighted a need for more consistent frameworks and terminology in the RI space with with ESG, Sustainable and Responsible being most frequently used at 32%, 29% and 21% respectively. Long-time terms for RI like green and ethical were only used by 5% of the advisers, according to the research.

As a result of this inconsistent terminology, NextWealth has changed the ESG descriptor from its latest tracker report, replacing it with ‘sustainable’, following research with advisers that highlights how use of the term ESG in client conversations is at odds with how investment providers define it.

Heather Hopkins, managing director of NextWealth, said: “Our research shows that use of the term ESG has different meanings for different groups. Investment providers use it to describe an objective measure of risk but advisers regard it as a label for sustainable investing.

“Asset managers often tell us their funds are fully ESG integrated, that ESG considerations are built into their decision-making process. When an adviser talks to a client about sustainable investing, the conversation isn’t about the ESG risk factors that might influence the future price of a stock or fund. Instead, it’s about making choices about how capital is deployed to align more closely to values. This distinction is hugely important and is the reason we are dropping the ESG label in our tracking reports.”