More than a third of advisers are confused by ESG regulations, almost half are fearful of greenwashing, and four in 10 say they need more training, according to new research.
The research, conducted by CoreData, polled 266 UK financial advisers in an effort to understand the state of the ESG investing market in the current financial climate.
According to the study, 46% of respondents are worried about claims of greenwashing. This comes hot on the tail of the recent adoption of the UK’s Sustainability Disclosure Requirements (SDR).
The SDR, proposed by the Financial Conduct Authority (FCA) earlier this year, helps boost market confidence by reducing deceptive green marketing claims through clearer reporting transparency. The standard recommends three investment labels to categorise sustainable investment products: sustainable focus, sustainable improvers and sustainable impact to provide a clearer picture of the commodity.
Despite the SDR not coming into effect until 2023, nearly one third (29%) of advisers agree their knowledge of the standard is poor. With less than one in five claiming to have a solid understanding of the incoming regulation.
More than a third (35%) of participants admitted they are also confused by the growing array of ESG regulations intended to combat greenwashing, with the UK’s SDR being used in conjunction with the EU’s Sustainable Finance Disclosure Regulation (SFDR).
The study also highlighted that advisers recognise the need to enhance their ESG knowledge base, but are struggling to get the necessary support. Only a third (34%) say their firm provides ESG training, with this dropping to 23% of mass affluent advisers, those holding between $100,000 and $1 million in investable assets. Furthermore, just one in five (20%) advisers say their firm has, or plans to have, at least one member of staff in a dedicated ESG role.
“Financial advisers are battling against a hazardous set of headwinds including inflation, interest rate rises and a cost of living crisis which has sent UK investors running for cover,” said Andrew Inwood, founder and principal of CoreData. “But as advisers swim against these currents, they also need to contend with a wave of ESG regulations. So it is little wonder that some are feeling confused and calling for additional training. This situation provides an opportunity for asset managers and providers to bridge the ESG knowledge gap through the provision of educational and training materials for advisers.”
