Most retirement portfolio advisers only considering ESG factors at client's request

July 19, 2021

Over half (52 per cent) of financial advisers only consider environmental, social and governance (ESG) criteria at a client’s request when building retirement portfolios, according to Aegon.

Research from the firm in collaboration with Next Wealth for the duo’s Managing Lifetime Wealth: Retirement Planning in the UK report asserted that, although a shift towards responsible investment had taken place, requests from retirement clients to integrate ESG into their funds had “remained low”.

Less than a third (31 per cent) of advisers said ESG credentials were amongst the factors they considered when building portfolios, while just 3 per cent said they applied a strict ESG screening approach to all funds selected.

The research found that many clients simply had a problem with one or two specific industries, such as tobacco or weapons.

Additionally, the duo asserted that most of the advisers questioned had agreed that there needed to be better standards in data and language to support wider adoption of ESG approaches to investing, seeing an industry standardised approach as preferable to their currently individually developed methods of determining clients’ ethical considerations.

Aegon managing director for investment solutions, Tim Orton, commented: “We have seen a sea-change in responsible investing with individuals increasingly looking for answers on how their investments are contributing to real-world change. This has been furthered by increased regulation and momentum from the government pushing forward it’s green agenda for investments.

“The research shows advisers are taking this seriously and considering ESG factors when building portfolios, even if demand amongst retirement clients hasn’t yet caught up with the wider investment community.

“The lack of industry standardisation, however, means advisers face challenges when dealing with the different ethical considerations of their clients. Firms have developed their own approaches, but as the industry shifts towards greater ESG adoption, more work is needed to support advisers to better compare ESG funds and explain strategies when building portfolios.”