A survey on sustainable investing finds that a third of registered investment advisors (RIAs) experienced increased client interest amid the pandemic and the racial equity movement.
The results are based on a survey conducted by SEI in late 2020 among nearly 800 registered investment advisors (RIAs) on core sustainable investing topics, including education, investment strategy and sustainability priorities.
“COVID-19 and the racial equity movement accelerated the already pronounced investor effort to match their investments with their sustainability priorities,” notes Jana Holt, Global Director of Sustainable Investing Solutions at SEI. “RIAs play a central role in supporting their clients’ portfolio construction, so it’s crucial that they are well positioned to provide the insight and support clients need to determine how they can best allocate in alignment with their values.”
According to the findings, RIAs predominantly (80%) point to client demand as the primary driver of incorporating sustainable investing strategies in a portfolio. Roughly 4 in 10 (42%) RIAs report that their clients express interest in sustainable investing at least sometimes, yet only 34% of RIAs have implemented sustainable investing strategies for their clients.
Among RIAs with clients who express interest in sustainable investing strategies, SEI found that demand was similarly balanced across Millennials, Baby Boomers and Gen Xers.
ESG Integration
Nearly half of RIAs (47%) say they are most interested in ESG integration strategies, with a nearly equal number of them preferring impact investing (27%) and exclusionary (25%) strategies.
Climate and climate-related issues—including alternative or renewable energy and natural resources—are the most often-cited priorities for RIAs, with nearly three times more interest than issues like multicultural and gender diversity, SEI notes.
Utilization and Uptake
Familiarity still appears to be an ongoing issue, as 20% of RIAs remain unfamiliar with sustainable investing and do not plan to use sustainable investing strategies with clients within the next two years. In addition, 40% of RIAs feel that they still do not know enough about sustainable investments to make suitable sustainable investing recommendations to clients.
Nearly one in three RIAs (30%) say that sustainable investment strategy performance is the biggest barrier to implementing ESG funds in client portfolios, while 19% cite their lack of information and education. SEI notes that just 9% of RIAs point to so-called “greenwashing” as a concern, which Investopedia defines as an unsubstantiated claim to deceive consumers into believing that a company’s products are environmentally friendly.
“Our research demonstrates that RIAs are committed to addressing the rising client and prospect demand for sustainable investing, but don’t yet feel prepared to deliver appropriate counsel or investment strategy,” observes J. Womack, Managing Director of Investment Products & Services for SEI’s advisor business. “It’s critical that we continue to educate advisors so that they can confidently embrace the increasing demand and empower all investors to achieve their financial and sustainability goals.”
