Adapting to rising ESG demand

As the interest in responsible investing continues to gather pace, financial advisers must shift to include a greater focus on sustainability.

Australia’s responsible investment market has seen an influx of capital, with assets under management reaching a record-breaking $1.54 trillion in 2021 and still growing. That represents 43% of total professionally managed funds in Australia, according to the Responsible Investment Association Australasia (RIAA).¹

The uptick in responsibly invested capital comes as Australians become increasingly concerned with how their money is being invested. As consumers’ enthusiasm towards ESG and responsible investing grows, it’s changing what they expect from their financial advisers.
 

Advisers must adapt their advice 

The RIAA’s latest two-yearly survey into consumer attitudes confirms ESG concerns will be playing a much larger role in financial advice.²

The survey was conducted in early 2022, and its key findings include:

• 64% of consumers expect their financial adviser to be familiar with responsible investment options (up from 54% in the 2020 survey)
• 50% expect advisers to consider their personal values when helping them invest (an increase from 43% in 2020)
• 47% expect their adviser to include responsible options within their investment recommendations (up from 45% in 2020)
• 74% are concerned about social as well as environmental issues when investing (64% in 2020).

By contrast, only 48% expect their adviser to “be knowledgeable about financially lucrative investment options” – down from 51% in the previous survey. However, 58% still want their advisers to prioritise maximising their investment returns.

And in a warning to fund managers, almost three-quarters (74%) of respondents said they would consider switching their provider if they learned their current fund was investing in companies engaged in activities that didn’t align with their personal values.

Investment market keeps pace 

This growing interest in responsible investing has been met with a corresponding increase in available ESG-related investment products, according to Simon O’Connor, the RIAA's chief executive.

Mr O’Connor said that more than 300 products have now been certified as ‘responsible’ by his organisation. He added that products are springing up across different asset classes, return profiles and investment horizons.

This broad range provides advisers with a greater toolkit to tailor a client’s portfolio to meet their specific needs and align with their values.

AMP’s Director for Platforms, Edwina Maloney, noted that the company has invested into strengthening its ESG offerings, tripling the number of responsible investment products available through North in 2022 alone.

Two new risk profiles were also added to MyNorth Sustainable Managed Portfolios, which Ms Maloney said gives clients greater ability to choose the right strategy for their needs.

“By putting values at the heart of the investment process, ESG investing can play an active role in making Australia a better place for future generations,” she said.

“After all, just because people want to build their wealth doesn’t mean they need to lose sight of what they believe in.”

To learn more about our sustainable portfolio series, reach out to a North Business Development Manager.

1. Banhalmi-Zakar Z, Goodwin M, Parker E et al, Responsible Investment Benchmark Report 2022 Australia, Responsible Investment Association Australasia, September 2022, accessed 24 February 2023. 

2. Banhalmi-Zakar Z & Parker E, From Values to Riches 2022: Charting consumer demand for responsible investing in Australia, Responsible Investment Association Australasia, March 2022, accessed 24 February 2023.