Commissioned by Rathbones |
Researched by Core Data Research
To understand the commercial value ESG adoption has brought adviser businesses to date, we then asked both groups (in pure terms rather than just in relation to ESG) ”How would you rate your business growth over the past five years?“ And while both groups had increased in size, the ESG sample had grown considerably faster.
96% of ESG-focused advisers said they had experienced ‘fast or steady growth’ in the past five years. This contrasted with 80% for non-ESG businesses, with no wider data variables (bar adoption) separating the two groups. Again, while 20% of the non-ESG group defined recent growth as ‘stable, fluctuating or reducing’, just 4% of the ESG group had experienced growth this low.
Separately, we then asked the two groups how they saw business growth (again in pure terms, not in relation to ESG) over the next three years. Here the figures were more comparable, with 76% of ESG advisers expecting ‘fast or steady growth’, compared with 72% for those not fully integrated.
Figure 5: How would you rate your business growth over the past five years and your expectations for the next three years?
Client engagement and tenure being critical to business stability and growth, we next asked advisers to draw on the role and importance ESG investing played within their client relationships.
We first sought to understand whether ESG investing, per se, contributes to clients being ‘more engaged with the investment process’. Both groups believe this is definitely the case, with almost two in three (64%) of the non-ESG group – and 76% of the ESG group – attesting to this.
Figure 7: What is the average tenure of your clients?
Figure 6: Please state whether you agree or disagree with the following statements about the role of ESG investing in client relationships.
We then progressed to understanding the correlation between ESG investing and the business dimension of client retention. Here, 64% of the non-ESG group believed it ‘facilitated client retention’, perhaps surprising given their business is currently invested at only 20%. A higher 80% of the ESG group expressed they felt the same way, providing a combined 72% for the two groups.
Furthermore, analysis of the two groups demonstrates that ESG advisers enjoyed far higher retention than their non-ESG colleagues. 82% of the ESG group had enjoyed average client tenure in excess of ten years, compared to an average 52% for non-ESG. This gap widened further for client tenure of 15 years and more (56% versus 20%).
Both groups were then asked if, in their experience, ESG investing led to increased levels of new business referrals from clients. A high 72% of ESG advisers either ‘agreed or strongly agreed’ with this reality, compared with just half that (36%) of the non-ESG group.
Figure 8: Please state whether you agree or disagree with the following statement “It leads to increasing referrals among advisers”.
Performance has always been a fundamental proof point for the success of advisers’ investment strategies for clients, and in turn a key part of their value.
Therefore, in constructing this research study, understanding advisers’ perceptions of ESG investments’ overall performance was essential. Especially in the light of historically-held views based on the smaller, less-sophisticated ESG investment choices of yesteryear.
Perceptions appear to have been replaced by a new reality in 2020. Over two thirds (68%) of the non-ESG group now confirm their belief in ESG investments’ ability to ‘enhance investment returns’, rising to 82% for ESG advisers.
Moving from belief to personal experiences of clients’ ESG performance, 84% of the non-ESG group ‘agree or strongly agree’ that they are satisfied with the performance of their clients’ ESG investments. A 92% positive sentiment for the two groups combined.
Figure 9: Please state whether you agree or disagree with the following statements about the relationship between ESG investing and performance.
I am satisfied with the performance of my clients’ ESG investments
ESG strategies can enhance investment return
of ‘non-ESG investors’ are satisﬁed with their clients’ ESG performance
“People are more engaged by ESG than they are with general investing. It encourages a two-way dialogue. They want to know and understand. You talk through the companies that they’re investing in and how the funds have performed. So yes, it’s a lot more engaging.”
ESG Adviser 50-£100m