Canadians are increasingly seeking environment-related investments, which is driving up demand for Environmental, Social and Governance (ESG) investments, a new survey shows.
A broad-based investment category, ESG encompasses corporate governance screening as well as environmental themes such as clean energy and water.
In a recent survey, 72% of advisors across Canada said they expect the percentage of clients who hold ESG investments to increase over the next two years. Of those advisors already recommending ESG funds, 93% expect the assets to rise, with 40% saying that sales of ESG products will increase 50% or more.
“We haven’t seen these kinds of results in surveys we’ve done in many different categories,” said Tricia Benn, director of research at Rogers Publishing, which conducted the survey. “It certainly looks to be a large growth area for advisors and their clients.”
Interestingly, unlike many investment products that tend to be “sold, not bought,” investors are actually driving momentum. Nearly half of all advisors said their clients had initiated discussions about ESG investments.
Advisors surveyed said that they thought the most marketable ESG investment categories for their clients were “green or environmental” and “clean energy,” due to broad awareness and media coverage.
But despite strong demand for these types of products, advisor familiarity is weak. Just 9% of advisors said they are “very familiar” with ESG investment products. In total, 45% said they are “not very” or “not at all” familiar.
“Historically there hasn’t been a depth of opportunity in the environmental fund space,” says Ian McPherson, president of Criterion Investments, a key sponsor of the research. “This may explain the lack of familiarity, comfort and experience that advisors currently have in this area.
“It takes time to educate people on the maturity of themes like clean energy or water. General global equity funds are not exposed to these themes in a meaningful way, so as awareness increases it’s natural that advisors look to better understand ESG solutions.”
When asked about the biggest challenges in recommending ESG investment products, 47% of advisors said they required more education on the topic.
Criterion Investments offers financial advisors an ESG online seminar about investing in environmental themes, available at www.vengrowth.com.
Advisors grappling with growing investor demand for green investments: survey
Lack of familiarity with ESG products is one obstacle
- By: Megan Harman
- October 24, 2008 October 24, 2008
- 09:55