NextWealth: ESG badged funds lead over full ESG integration

Following from their first report that was published in April, NextWealth’s latest update of their ESG Tracker Study focused on ESG badged funds, finding that they continue to lead financial adviser preference.

According to the report, financial advice professionals say that they expect two thirds of their clients’ investments to be in non-ESG funds. One fifth will be in funds which have full ESG integration, while 13% will be in badged funds or solutions with specific sustainable investment or carbon reduction objectives.

It notes that among advisers that are using badged funds, ‘ESG’, ‘Ethical’ and ‘Sustainable’ are the most popular.

 “Whether or not one agrees with the recent flurry of ESG badged product launches, fund managers have recognised that in order to capture assets for clients interested in investing in this way, they will need badged funds and solutions,” said Heather Hopkins, managing director of NextWealth.

“It is currently what financial advisers are most comfortable using. Interestingly, there is significant overlap in usage of these products, suggesting that the badge itself is less important than having a badge.”

Peter Chadborn, director of Plan Money, who was interviewed for the report, said: “You go so far, and you realise you need some help with it. Whether we would be full or partial with a solution and talking to clients, most are saying, I do not want a full ESG solution. But I want part of my portfolio in that direction.

“It is all very well, picking your badges and saying I want some of this, I want some of that. And then underneath that it’s understanding, how can I monitor the risk within that?”

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