Now, I think in many cases, there isn’t a single datapoint that will give you the complete picture. Advisers would have to use a combination of datapoint and metrics – both backward looking and forward looking – to get a comprehensive complete picture, and make sure the investment aligns with the client’s green preferences.
FTA: How can they make ESG more than a tick-box exercise on the know-your-client questionnaire?
HB: Advisers will need to educate themselves about sustainability before they educate their clients. They will need to simplify a number of complex concepts to facilitate dialogue with clients.
FTA: Many ESG stocks are growth stocks. What’s in store for ESG in the near and long term and how can investors diversify in this market?
HB: There has been a proliferation of ESG funds in recent years, so there is now a wide spectrum of strategies that result in different risk-return profiles. There are still gaps, but we expect choice to keep expanding.
FTA: What effect has market volatility this year had on people’s enthusiasm for ESG investing?
HB: ESG funds haven’t been immune to market volatility and falling markets. However these funds have demonstrated resilience.
Our data shows that amid investor concerns over a global recession, inflationary pressures, rising interest rates, and the conflict in Ukraine, sustainable funds globally attracted $32.6bn (£29.3bn) of net new money in the second quarter of 2022.
They still held up better than the broader market, which experienced $280bn of net outflows over the period.
Despite all the criticism we’ve heard recently about ESG and geopolitical events, we expect strong demand for ESG and sustainable products to continue in the coming years.
And this strong demand will be supported by global ESG standards, taxonomies, and regulatory reporting requirements, which will bring transparency and clarity about the investment options available to investors.
carmen.reichman@ft.com
