Financial advisors are increasingly leaning into ESG investing, and even outpacing institutional investors in doing so, at a rate of 76% to 65%, according to a newly released report from RBC Global Asset Management. But for financial advisors, ESG investing is heavily focused on equities over fixed income, real estate, and infrastructure. The study found that:
- 91% of financial advisors selected equities as an asset class in which they integrate ESG factors, compared to 80% of all US respondents including large institutional investors
- Only 55% of financial advisors surveyed incorporated ESG in fixed income in, 22% in real estate, and 16% in infrastructure, trailing larger institutional investors.
RBC’s “Responsible Investment Report” states that ESG adoption among financial advisors is generally an investment decision, rather than the result of requirements from shareholders or a result of specific investment guidelines from the firms with which they may be affiliated.
About half (53%) of the financial advisors surveyed cite fiduciary duty as a reason for incorporating ESG principles, and about the same percentage (48%) indicate that their firms believe that integrating these factors will lower their risks and increase their returns. Those results were consistent with all US respondents — 51% of whom cite fiduciary duty and 49% lower risk.
Only 20% of financial advisors say they incorporate ESG factors because they are required to do so, which is also nearly identical to all US respondents.
In terms of ESG disclosures, the study found that financial advisors are somewhat more pleased with the amount and quality of ESG-related disclosures provided by issuers. But few respondents in either group are “very” satisfied in either category.
About half of the financial advisors report being “very” or “somewhat” satisfied with the amount (49%) and the quality (44%) of these disclosures, compared to all US respondents (41% and 38%, respectively).
Only 12% of financial advisors and 10% of all US respondents from both groups are “very” satisfied with the amount of disclosures, while a mere 4% of financial advisors and 8% of all US respondents are very satisfied with the quality of these disclosures.