Number of advisers offering RI advice slightly down

The proportion of advisers providing responsible investment (RI) advice has eased after several years of growth, according to the Australian Ethical/Investment Trends 2023 Responsible Investing Report.

According to data, 46% of advisers provided advice on RI this year compared to 49% in 2021.

The study, which included a quantitative online survey of financial advisers conducted between June and July 2023, has also found that while advisers recognised their responsibility in understanding their clients needs when it came to RI, fewer this year were comfortable trading off performance for the objectives of RI.

Also, a number of advisers reporting year-on-year increase in client demand for RI advice has fallen from 57% to 31%.

On top of the softening demand, advisers were challenged by greenwashing (47%) and relative underperformance, cited by 28% of the surveyed respondents, according to the report.

Other challenges reported by advisers participating in the study included higher fees and lower performance than comparable non-RI products, lack of standards on terminology and a limited range of investment managers and product availability on platforms as well as a lack of research coverage.

Following this, only 40% of RI advisers continued to prefer to use existing models with an ethical tilt and a growing proportion of advisers were opting for developing models to offer as a standalone options.

When it comes to platforms, advisers explicitly pointed to environmental, social, governance (ESG) ratings as the most relevant support the platforms could offer to assist them to continue to offer RI advice.

But a significant group of surveyed advisers also pointed to products comparison and screening tools as a part fo the solution.

The report has also found that advisers surveyed were found to favour ‘actively managed funds’ that met ESG principles, with Australian Ethical the most recommended provider.

At the same time, the most common method that advisers used to assess the ESG credentials of an investment product was through ratings’ house Morningstar, followed by Lonsec.