More than nine out of 10 wealth managers and financial advisers surveyed by Ortec Finance said they “need to invest heavily in new technology and systems” to improve their understanding of ESG and climate risk to client investment portfolios, as well as to funds and stocks in general.
Just 1% of those surveyed said they have ‘very effective’ tools and systems to review ESG and climate risk, with one in four (27%) only rating their tools and systems as ‘average’.
The survey of 100 wealth managers and financial advisers located in the UK, Canada, Italy, the Netherlands, Germany and Switzerland – whose organisations collectively manage approximately £1.2trn in assets – revealed participants are seeing more clients focusing on the ESG credentials of their investment portfolios, with 12% reporting a dramatic increase.
According to the research, this trend is set to continue, with 85% of those surveyed agreeing the focus from clients on the ESG credentials of their investment portfolios will increase over the next 24 months.
Tessa Kuijl, managing director of global wealth solutions at Ortec Finance, commented: “Wealth managers and financial advisors must be equipped with the right tools and systems to effectively analyse and fully understand the extent to which their clients are exposed to ESG and climate-related risks, particularly as this is an area which clients are only planning on focusing more on in the next few years.
“Our research shows that many advisers across the sector feel that they don’t have the right tools, systems and resources to do this so it’s vital that organisations invest to equip themselves and their clients to make the most informed investment decisions.”
The survey also found that 93% of those surveyed are seeing more clients who want to avoid funds and stocks that invest in companies and sectors that are harming the environment or contributing to climate change. Meanwhile, around eight in 10 (83%) of those surveyed said they are seeing more clients focusing on the climate risk their investment portfolios are potentially exposed to, with 38% of these saying they are seeing a dramatic increase.
