New survey suggests growing onus on financial advisors to develop ESG expertise
For a long time, interest in responsible investment (RI) has been high among institutional investors, who recognize the long-term benefits of ESG-friendly portfolios as well as a duty to represent their stakeholders’ ethical positions. And according to RBC Global Asset Management, that interest appears to have trickled down into Canada’s retail investment space.
In a survey of 1,500 Canadian retail investors, RBC GAM found nearly two thirds (63%) are interested in building RI portfolios, and nearly three fourths (73%) see it as the way of the future.
The respondents appeared to have a fairly strong sense of purpose, with 86% saying it’s “very important” or “somewhat important” for companies they invest in to act in a responsible manner. The majority were also not worried about a performance trade-off, as 81% expressed a belief that RI offers the same (62%) or better returns (19%) compared to traditional investment.
But taking the first step appears difficult, as nearly 50% reported not knowing where to find trustworthy information on RI. This lack of knowledge is holding back several groups, including 31% of respondents who said they were not interested in RI, as well as 42% of women and 38% of younger investors (18-34) who said they do not know enough about it to start.
When asked about their plans for future RI allocations, only 30% of respondents said they expect it to account for a larger part of their investment portfolio within the next five years. The rest, it seems, are being held back in part by their fear of the unknown — and are looking for guidance to go forward.
“Canadian financial advisors have earned the loyalty of their clients by providing advice and guidance to help them meet their financial goals,” Doug Coulter, president of RBC Global Asset Management, said in a statement. “Responsible investment … represents another opportunity for advisors to work with their clients to provide information and recommendations to help investors turn their interest into action.”
A majority of respondents said they would turn to their financial advisor to learn more about RI (61%) and that it is important for their advisor to have expertise in RI and offer RI solutions (76%). The pressure is on for wealth professionals to learn, especially as 48% of respondents said they are likely to have a conversation with their advisors focused on RI within the next year.
Those conversations could be the catalyst needed to put more Canadian retail assets into RI strategies. Among respondents who said they’ve discussed it with their advisors, 89% said they received a recommendation of responsible investments. As it stands, the groups that were most likely to have engaged in a conversation around RI with their financial advisor include younger investors aged 18 to 34 (45%), residents of British Columbia (46%), and those living in Quebec (38%).
“There is a role for asset managers, industry associations, advisors and regulators to help increase education around responsible investment, with the ultimate goal of enabling Canadians to make informed decisions,” said Melanie Adams, vice president and head of Corporate Governance and Responsible Investment at RBC GAM Inc