Investors, Millenials in particular, are leading and in some cases, educating, their advisors during ESG investment discussions, instead of the other way around.
It’s a “major gap,” according to Morgan Stanley Sustainability Institute in a compilation of analyses by TruValue Labs, a provider of environmental-social-governance, or ESG data, sustainability metrics and real-time analytics based in San Francisco, California.
Key Reasons
Client demand is the primary factor. More women and younger investors are more interested about ESG and sustainability investing than their advisors, who are presumably older and/or are more male.
More than half of advisors surveyed showed “little to no interest” in ESG, according to a supporting survey by Morgan Stanley Sustainability Institute.
Cognitive biases and persistent myths on the performance of conventional investing versus sustainable investing was another reason. Nearly 90% of advisors say ESG discussions are initiated by clients.
Another is the apparent disconnect between investors and their advisors. A Schroders Global Investor Study found that advisers underestimate the extent to which investors care about making responsible and sustainable investments.
Persistent and cognitive bias in investing is a big deal – read our previous post.
More Reasons
Some are playing catch-up. Bank of America which runs its Merrill Lynch wealth management unit, found that while 38 percent of its affluent clients are interested in impact investments, only 17 percent of its advisors know how to meet their clients’ needs.
Active managers are now competing with emerging passive ESG products. MSCI and Morningstar each launched products in 2016 to provide investors with how well underlying issuers in a wide variety of mutual funds are performing on ESG issues.
And nearly 90% of advisors say most ESG conversations are client-initiated. 82% of high net worth individuals say they find ESG investments appealing, as do 88% of millennials.
Read More
“10 Reasons Wealth Managers are following Investor Demand to ESG,” TruValue Labs, May 2017.
Sources: Thomson Reuters, Morgan Stanley Sustainability Institute, Schroders
