Lower returns not a barrier to ESG investment

  • Investors with a financial adviser significantly more confident that their portfolio is invested in line with their values

  • Advisers believe there is a lack of viable ESG options for them to recommend to clients

A significant number of financial advisers believe clients would accept lower returns if their money were having a measurable social or environmental impact – and investors have endorsed this view, the Embark Investor Confidence Barometer has revealed.

Although sustainable investing is expected to produce sustainable returns over the long-term, this finding challenges an idea in the world of investment: that a perceived risk of lower returns is deterring some clients from making ESG investments.

The Confidence Barometer is a twice yearly survey of 1,000 people* conducted by the Embark Group (Embark), a leading UK retirement solutions provider. It found that almost half (45%) of surveyed advisers– and more than half (53%) of female advisers – believe their clients would accept a lower financial return if an investment had social or environmental benefits.

This belief is backed up by investors themselves, particularly younger investors with a financial adviser. More than half (58%) of younger advised investors surveyed (35-44) indicated that they would agreeto accept a lower financial return if they felt their money was having a positive social or environmental impact. However, older investors were less inclined to do so, with only 30% of those 55 or older agreeing that they would be prepared to settle for lower returns.

Fewer non-advised investors (32%) said they would agree to accept a lower return, although younger investors were again more likely to do so.

Importance of a financial adviser

The data suggests that investors should hire a financial adviser if they want greater confidence that their money is making a difference. Advised investors are almost twice as confident as non-advised investors that their portfolio is invested in line with their ESG values.

Less than a third (32%) of surveyed non-advised investors agreed their portfolio was invested according to their values, compared to 58% of advised investors. Meanwhile, 39% of non-advised investors said they were confident they knew where their money was and that it was meeting ESG principles, compared with 60% of advised investors.

Finally, young advisers (18-34) were most confident in their ability to support clients around ESG.

Lack of options

Advisers believe there is a lack of viable ESG options for them to recommend to clients. Only around half (53%) of surveyed advisers were confident they could provide clients with an adequate range of options from an ESG standpoint, with the remainder either neutral or not confident.

The financial advice industry also has work to do to truly understand clients’ ESG needs, according to the Barometer. Almost half (42%) of advisers stated they were either neutral or not confident in their ability to accurately measure clients' ESG preferences. Similarly, nearly half (46%) were either neutral or not confident in their ability to invest according to clients' ESG preferences.

Peter Docherty, CEO, Embark Platform, said:

It’s very possible those who are more likely to embrace ESG are also more likely to seek advice. But advisers carry significant weight in introducing investment concepts to their clients. The role of advisers to help guide clients through the complex world of ESG is invaluable.”

Commenting on these results, Greg Davies, Oxford Risk, said:

“It is striking that 45% of advisers are confident their clients will accept a lower return for ESG, with the same proportion of advised clients saying the same. It should also not come as a surprise – after all most people are willing to accept returns of minus 100% on the wealth they donate to charities.

“Advisers clearly have the potential to be very effective in directing investors towards ESG investing. However, they also need help to do this with confidence. Indeed, for many advisers ESG just adds complexity and hassle to an already complex problem. For advisers to most effectively open ESG doors they need the technology and tools to be able to accurately profile investor’s ESG preferences, and crucially to connect these preferences directly into tailored ESG-suitable portfolios.”

Barometer survey details

* The Embark Investor Confidence Barometer surveyed the following groups:

  • 250 advised consumers (those that have a financial adviser) with a minimum of £100k investible assets, who have a pension and are aged 35-70
  • 503 non-advised consumers (those that do not have a financial adviser), with a minimum of £100k investible assets, who have a pension and are aged 35-70
  • 251 (18+) financial advisers who have clients, whose company/firm has assets of less than £500 million

‘Strongly agree’ and ‘Somewhat agree’ answers combined.

‘Very confident’ and ‘Somewhat confident’ answers combined.

The survey was conducted by CensusWide: htttps://censuswide.com

To access the full Embark Investor Confidence Barometer, go to: https://embarkgroup.co.uk/embark-investor-confidence-barometer-3/

Editors’ notes

For further information, please contact:

Quintin Keanie

The Agency Partnership (Embark Media Relations)

Email: [email protected]

Tel: 07880 602902

About Embark Group

Embark Group is a fast growing, diversified, financial services business and one of the leading retirement solutions providers in the UK. The Group trades under the brands Embark, Advance, Horizon, Stocktrade, Vested and The Adviser Centre and operates a wide portfolio of white label services to the Wealth Management, D2C, Robo-Advice, Retail Banking and Workplace markets.

Providing a combination of deep pension expertise and leading technology integration that cover the areas of Investment Platform, Brokerage, SIPP, Multi-Asset Funds, Fund Research and Employee Benefit Consulting, Embark works closely with financial advisers and its intermediary distribution partners to deliver their retail savings and investment propositions to consumers of all levels of affluence.

The Group has more than £37bn in assets under administration on behalf of c354,000 consumer clients, operating across seven UK locations (London, Bolton, Dundee, Edinburgh, Leeds, Leicester and Swindon). Embark has been recognised as one of the most innovative Wealth Tech companies for the past three years.

In January 2022 Embark became part of Lloyds Banking Group, a leading UK based financial services group providing a wide range of banking and financial services.


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