Cost-of-living crisis sidelines ESG investment

ESG ESG investments Adviser Ratings financial advisers

11 December 2023
| By Jasmine Siljic |
image
image
expand image

Investors are increasingly prioritising long-term financial stability over ESG investment as the cost of living bites, contrasting previous research.

New research from Adviser Ratings has revealed that Australians are keeping their sights set on safeguarding wealth as opposed to focusing on responsible investing.

While the government recently opened consultation on the Sustainable Finance Strategy to help mobilise private investment in the net zero transition, the research house observed otherwise.

“Emerging trends suggest a disconnect between this governmental push and the current sentiments of consumers and financial advisers, particularly against the backdrop of a burgeoning cost-of-living crisis,” Adviser Ratings remarked.

Its survey of 2,100 Australians discovered that just 38 per cent are considering ESG factors in their investment decisions, underscoring the majority who aren’t.

“This figure is indicative of a broader sentiment shift among consumers, who are increasingly prioritising immediate financial stability and long-term wealth protection over ESG considerations in a cost-of-living crisis.”

According to Nathan Fradley, senior financial adviser at Tribeca Financial and director at data firm Ethos, responsible and ESG investment has fallen down the list of priorities.

“When interest rates are going up, inflation is going through the roof, gas prices go up, then people stop thinking about ESG and worry about having a roof over their heads,” he told Money Management earlier this year.

“So if you ask people, ‘Do you care if your super fund considers the long-term impact of climate change?’ They just want to pay their mortgage. A client’s ESG preferences won’t be expressed as strongly because it isn’t their priority right now, and that’s something for advisers to take into consideration.”

Adviser Ratings also noted that advisers have seen the decrease in client enquiries about ESG investment, down from 45 per cent last year to 33 per cent in 2023.

The trend indicates a realignment of priorities amongst investors, driven by economic uncertainty. 

“There’s a palpable sense of ESG fatigue among clients. They feel overwhelmed by the constant push towards ESG investing, whether it’s from the industry, affluent circles, or the younger generation,” an adviser told the research firm.

Contrastingly, recent research from Investment Trends and Australian Ethical told a different story.

Its 2023 Responsible Investing Report highlighted that adviser adoption of responsible investing (RI) has substantially risen from 19 per cent in 2015 to 46 per cent in 2023.

Of the one in two firms utilising an ESG lens, 80 per cent are implementing it into their fact find and client discovery phase.

“This is a really great signal that [advisers] are actually incorporating it into a fundamental, upfront part of their advice process. This is not just something they are reacting to from client demand, whereas in the past, it has mostly been a client-led discussion,” Leah Willis, Australian Ethical head of client relationships, shared with Money Management in November.

Willis expected a “fairly strong” pipeline of demand for RI on advisers’ horizons, adding that the more they can incorporate it into their business, the greater growth they will see.

“I don’t think the questions and demand for advisers is going to stop. That next wave of investors is representative of the fact that they are going to look for guidance around navigating the various options in RI,” she continued.

Looking ahead, Adviser Ratings believes the key lies in striking a balance between meeting the immediate financial needs of consumers and promoting wider understanding and integration of ESG principles.
 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Interesting. Would be good to know the details of the StrategyOne deal....

4 days 3 hours ago

It’s astonishing to see the FAAA now pushing for more advisers by courting "career changers" and international recruits,...

3 weeks 2 days ago

increased professionalism within the industry - shouldn't that say, FAR register almost halving in the last 24 months he...

4 weeks 1 day ago

Insignia Financial has made four appointments, including three who have joined from TAL, to lead strategy and innovation in its retirement solutions for the MLC brand....

2 weeks 4 days ago

A former Brisbane financial adviser has been charged with 26 counts of dishonest conduct regarding a failure to disclose he would receive substantial commission payments ...

3 days 1 hour ago

Pinnacle Investment Management has announced it will acquire strategic interests in two international fund managers for $142 million....

2 days 5 hours ago