Financial advisors are becoming increasingly strong supporters of environmental, social, and governance investing, outpacing institutional investment demand.
According to RBC Global Asset Management’s latest research paper, Financial advisor insights from the 2020 RBC Global Asset Management Global Responsible Investment Survey, financial advisors are using ESG investments at a rate of 76%, compared to 65% among institutional investors.
Financial advisors have exhibited a much higher adoption rate of ESG-integrated portfolios as compared to all U.S. respondents. They are are more likely to anticipate “better” returns from ESG-integrated investment portfolios than other respondents as a whole.
Both financial advisors and institutional investors have cited fiduciary duty and financial performance as the top factors for the increased ESG adoption, at similar rates.
Looking at the investment markets, equities remain the most popular asset class for incorporating ESG principles among financial advisors, with 91% of those surveyed showing that they are incorporating ESG in equity strategies, as compared to 80% of all U.S. respondents including large institutional investors.
On the other hand, financial advisors are less likely than all respondents to integrate ESG principles in other asset classes, notably real estate and alternative assets. Specifically, only 55% of financial advisors surveyed incorporated ESG in fixed income, 22% in real estate, and 16% in infrastructure, trailing larger institutional investors.
Among the various ESG criteria, anti-corruption was the most concerning ESG factor referenced by both financial advisors and all respondents.
Lastly, among the minority of respondents who believed that COVID-19 had increased the importance of ESG investing, both groups pointed to supply chain topics and climate as the top factors that have been highlighted by the pandemic.
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