The latest ESG Attitudes Tracker from the AIC reveals that the new FCA labels are set to enhance trust in sustainability claims among financial advisers and wealth managers.
According to IFA Magazine, the annual survey conducted by Research in Finance, nearly two-thirds (64%) of intermediaries believe the labels will increase their trust in sustainability claims. This sentiment is even stronger among wealth managers, with 78% expressing increased trust compared to 55% of financial advisers.
The study, which surveyed 202 intermediaries, also delves into the preferred use of the four new FCA labels. The Sustainability Focus label emerged as the most popular, with 54% of respondents indicating they would use it for screening purposes. This was followed by the Sustainability Impact label at 52%, Sustainability Improvers at 47%, and Sustainability Mixed Goals at 37%.
Despite the positive reception, there are concerns regarding the limited number of funds currently bearing these labels and the potential impact on existing funds used by intermediaries. One wealth manager expressed uncertainty about the placement of their existing funds, especially those based outside the UK, highlighting the challenge of building a diversified portfolio under the new regime.
Private investors have also responded positively to the labels, with 63% stating they would trust sustainability claims more, rising to 71% among those already holding sustainable investments. Nick Britton, Research Director of the AIC, commented, “Advisers and wealth managers have given a cautious welcome to the FCA’s new labels; it’s clear they would increase trust and that many would use them for screening purposes. However, questions remain about whether the universe of labelled funds will be large and diverse enough to build a portfolio, as well as concerns about what happens to funds that have been presented as sustainable but don’t claim a label.”
The tracker also indicates a stabilising opinion on ESG investing, with 57% of intermediaries reporting no change in their views since last year. Additionally, 73% believe that investing should make a positive difference alongside providing financial returns. However, expectations regarding the performance of ESG investments have become more cautious, with only 19% expecting improved performance compared to 30% anticipating a decline.
Looking ahead, 60% of respondents forecast an increase in demand for ESG strategies over the next 12 months, although this growth appears to be slowing compared to previous years. The recommendation of sustainable funds remains steady at 89%, maintaining consistent client asset allocation in sustainable investments.
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