360 ESG

Financial advisers, pension schemes and pension consultants recognise that change in the investment world is being driven from an increasingly diverse array of sources, from demand for investment solutions that target social or environmental outcomes, to the potential economic consequences of climate change, geopolitical unrest and other global trends. ESG considerations are moving centre stage and new directives from policymakers and regulators have brought the importance of ESG integration into sharp focus.

This report summarises how financial advisers and pension schemes are approaching ESG integration and responding to those who want to “invest well” either directly, or by means of their pension contributions, and what kind of support they seek from the investment management industry. This 360-degree perspective on the views of consumers, advisers, pension professionals and consultants, reveals that there is a degree of ‘disconnect’ between investor demand, good intentions and access to investment solutions.

The findings highlight an appetite for sustainability in the widest sense of the word and point to the importance of forging better connections between investors and their investment providers so that today’s and tomorrow’s generations of investors benefit from the positive outcomes needed to sustain them and the world we share.

At Aberdeen Standard Investments, ESG considerations are integrated in our investment process and have been for many years. We are long term investors and that means knowing and understanding the ESG factors affecting the prospects of the investments that we make on behalf of clients. Investors can be confident that we are working hard to enhance the value of their investments while contributing to a sustainable world.

Amanda Young, Head of Global ESG Investment Research, Aberdeen Standard Investments

Research Objectives

There were two main lines of inquiry:

  1. The perceived value of integrating ESG factors into the investment process.
  2. Attitudes to values-driven approaches i.e. ethical, sustainable, socially responsible and impact investment.

Research Methodology

Qualitative and quantitative research was undertaken by Gabriel Research & Management Ltd on behalf of Aberdeen Standard Investments.

Individual investors

Qualitative and quantitative research was conducted among a nationally representative sample of almost 9,000 UK adults. 8,958 UK adults responded to an online survey hosted by YouGov. 18 respondents attended focus groups in London, Manchester and Edinburgh. All consumer verbatims quoted in the report are drawn from these three focus groups. Fieldwork was carried out in August, 2018.

Financial Advisers

Independent Financial Advisers (IFAs) from ten UK firms, five of which specialised in ethical investment plus five ‘generalists’, one of which employed an ethical specialist, took part in telephone interviews. All quotes under the section ‘The Adviser Perspective’ are drawn from these telephone interviews. The quantitative research comprised a nationally representative panel of UK IFAs. 207 IFAs took part in the online survey.

A smaller online survey among predominantly ethical specialists also informed the qualitative research. Overall, the research canvassed the views of 240 IFAs. Qualitative and quantitative fieldwork was carried out in October and November, 2018.

Professionals and Consultants

Telephone interviews with 11 senior pension investment decision-makers and consultants were conducted with participants from the UK, France and Australia. A further 100 responded to an online survey among members of the Pensions Management Institute. Some quotes featured under the section ‘The Pension Perspective’ are attributed. Other participants wished to remain anonymous. Fieldwork was carried out in October and November, 2018.

Executive Summary

  • There is a growing interest in, and understanding of, how ESG issues are shaping investment decisions among all four audiences surveyed but a number of misconceptions about the difference between ESG integration and responsible and values-driven investment persist.
  • The benefits of integrating ESG factors into the investment process are becoming better understood by the institutional investment community but much more education on this topic is needed.
  • Consultants are especially mindful of the need to explain to their clients the difference between ESG integration as part of the risk management process and ESG policy, which might dictate investment style or selection, a point that was not clear to some of the advisers. Over half of the UK financial advisers surveyed do not feel sufficiently well informed about how or why investment managers adopt this approach.
  • The theme of this year’s UK Pension and Lifetime Saving Association’s conference was “understanding saver perspectives”. “We are encouraging the industry to focus on the end customer – our scheme members.”1 This was a timely topic in light of this research, which identifies consumer attitudes to saving and investing and addressed their growing interest in ESG issues.
  • New regulatory requirements are likely to hasten the pace of change and the adoption of ESG integration moving ESG considerations centre stage.

1 www.plsa.co.uk/Annual-conference-and-exhibition

Conclusions and Actions

While increasingly alarming headlines concerning ESG crises impact on people’s everyday behaviour and attitudes, awareness that they can make a difference through their investment choices is, for the average investor, a notion which is unfamiliar but attractive. This research reveals that there is a degree of ‘disconnect’ between investor demand, good intentions, and access to investment solutions, and in some cases, advice. In large part, this is attributable to a lack of awareness and the understanding needed to bridge the gap. There is a substantial opportunity for the investment industry and policymakers to provide more education on the importance of long term investing, for the benefit of people and our planet.

Ten Key Steps

In conclusion, we have identified ten key steps that would help drive forward a better understanding of, and engagement with, the benefits of ESG integration and a sustainable investment approach:

 360 ESG Ten Steps

For the full report, please click on the link below:

Read the full report as a PDF

Important Information

The views and conclusions expressed in this communication are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments.

Any data contained herein which is attributed to a third party (“Third Party Data”) is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life Aberdeen.

RISK WARNING
The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.

The views and conclusions expressed in this communication are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific security.

Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the "Owner") and is licensed for use by Standard Life Aberdeen**. Third Party Data may not be copied or distributed. Third Party Data is provided "as is" and is not warranted to be accurate, complete or timely.

To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.

**Standard Life Aberdeen means the relevant member of Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time.

Risk warning

Risk Warning

The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.