PIMFA
24 May 2023
Wealth managers and advisers want more support in accessing Sustainable Finance and ESG Investment data, report finds
Over a third (36%) of wealth management and advice firms want more support in accessing the right Sustainable Finance and Environmental, Social and Governance (ESG) investment data, a survey from PIMFA, the trade association for the wealth management, investment services and the investment and financial advice industry, has found.
The survey of PIMFA members, conducted in association with Alpha FMC, a specialist management consultancy for the wealth and asset management industries, found the ESG data market is becoming increasingly challenging for firms to navigate. As a result, only a minority (7%) of firms feel they are doing an excellent job of educating their clients on Sustainable Finance and ESG investing, as firms are unclear on the different rating systems and methodologies they should use.
PIMFA members reported data vendors providing a range of products and services, each with their own methodologies and standards. Still, they rarely offer ‘a one-size fits all’ set of standards to cover the full array of asset classes and investment products. This is leaving firms in a difficult position as to how best to use different data or reporting processes, each with their own nuances, and all the while still having some gaps to fill, the report found. It is positive to see that the UK’s Financial Conduct Authority (FCA) has recognised this and has established an independent working group to develop a code of conduct for ESG data and ratings providers.
It comes as client demand for ESG investing products and services has surged. Of the £6.2bn net inflows into UK based-equity funds in the second half of 2021, 50% flowed into funds focused on ESG factors (1) representing a significant opportunity for firms to deepen their client relationships and provide a new source of organic growth and revenue.
Over two thirds (69%) of respondent firms said they are taking into account their client’s ESG investing preferences when assessing suitability. ESG investment strategies that are proving the most popular remain negative screening (71%) and thematic investing (69%). But more advanced techniques, such as impact investing, are growing in prevalence (48%).
PIMFA members also reported a lack of consistency in ESG terminology is further making it harder for firms to support their clients in understanding this topic. But forthcoming regulation is causing apprehension, wealth managers are still unsure how the FCA’s recent proposals will impact them while prohibiting the use of certain terms is the biggest concern for wealth managers and adviser who see doing so as adding to the challenge of providing meaningful reporting to clients.
In response to some of the findings PIMFA has launched a new microsite designed to provide further information on Sustainable Finance and ESG investing with details of the regulatory being undertaken at both a national and international level, details of how to get involved in PIMFA’s Sustainable Finance Working Group and information about the Government’s Green Finance Strategy.
Maja Erceg, Senior Policy Adviser at PIMFA, commented: “There is clearly a significant opportunity for wealth managers and advisers to provide their clients with Sustainable Finance and ESG products and services. It’s also clear wealth managers and advisers want to provide such services. But as our survey has found there is confusion around data and methodology, as well as well as the correct language to use when describing such services.
“The proliferation of ESG definitions and interchangeable language used throughout financial services has caused confusion for clients and wealth managers and advisers feel they are being left to tell clients what ESG means. Clearly there is a need for standardisation both in terms of how data is used and the methodology for collecting that data and the terminology to describe ESG. As ever PIMFA will continue to work closely with member firms, the Government and regulatory bodies to address these key areas for supporting ESG investing.”
Kenn Taylor, Director and Head of Wealth at Alpha FMC, commented: “We are delighted to have worked with PIMFA on this membership survey to better understand the ESG investing approaches amongst wealth managers. The results show many firms have taken positive steps in this space but highlight the need for continued product innovation to keep up with client demand and support with education on the topic.”
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Notes for Editors
About PIMFA – the Personal Investment Management & Financial Advice Association
- The full PIMFA/Alpha FMC report can be read here.
- PIMFA’s new Sustainable Finance and ESG microsite can be found here.
- PIMFA is the trade association for firms that provide wealth management, investment services and the investment and financial advice to everyone from individuals and families to charities, pension funds, trusts and companies.
- The sector currently looks after £1.65 trillion in private savings and investments and employs over 63,000 people.
- PIMFA represents both full and associate member firms. Full members provide a range of financial solutions including financial advice, portfolio management, as well as investment and execution services. They assist everyone from individuals and families to charities and pension funds, all the way to trusts and companies. Associate members provide professional services to the PIMFA community.
- PIMFA leads the debate on policy and regulatory recommendations to ensure that the UK remains a global centre of excellence in the wealth management, investment advice and financial planning arena. Our mission is to create an optimal operating environment so that its member firms can focus on delivering the best service to clients, providing responsible stewardship for their long-term savings and investments.
- PIMFA has made numerous recommendations to the FCA regarding the Future of Advice, Future of Supervision and the FSCS levy – read more.
- PIMFA was created in 2017 as the outcome of a merger between the Association of Professional Financial Advisers (APFA) and the Wealth Management Association (WMA) with a history as a trade association since 1991 – read more.
- Further information can be found at pimfa.co.uk
Contact
For further information on this release or other press matters please contact:
Matthew West, PIMFA PR Manager – MatthewW@pimfa.co.uk, +44 (0)20 7382 0376
Sheena Gillett, PIMFA Communications & PR Director – sheenag@pimfa.co.uk, +44 (0)20 7011 9869 / +44 (0)7979 493225
About Alpha:
Alpha FMC are a specialist management consultancy for the wealth and asset management industries, with a comprehensive range of consulting solutions to help clients solve their business, operational and technology challenges. Alpha’s detailed knowledge of the industry means we are uniquely well positioned to support our clients across the operating model and support their most complex and strategic change programmes.
Alpha’s unique combination of subject matter expertise, proven tools and methodologies and strive for delivery excellence enable them to help clients tackle their most complex and strategic change programmes.
For media enquireies please contact: press@alphafmc.com
