“There has been progress in the educational offerings for financial advisors, but it may take time for FAs to move from the learning to implementation phase,” he said.
Interestingly enough, the worry that sustainable investing will negatively impact financial returns doesn’t appear to drive the decision among the wealthy investors UBS surveyed—93 percent of those who hold sustainable investments believe they will generate equal or better returns compared with traditional investments, and three-quarters of non-adopters agree.
What does hold people back is confusion. The most common reason non-adopters gave for staying on the sustainable investment sidelines is they simply don’t know if it does any good, with 72 percent of them saying that gauging impact is difficult.
The mishmash of terminology found in the sustainable investing marketplace continues to cause confusion as well—72 percent of those surveyed (66 percent in the U.S.) said they find the terms perplexing.
“I see this as a category that has been sold rather than bought, because of all of the confusion around terminology and … really the alphabet soup the industry has created over the years,” said Sameer Aurora, head of client insights at UBS Global Wealth Management.
This makes educating advisors, who can then educate their clients, particularly important.
“The role of the advisor in demystifying and clarifying becomes really, really key,” Aurora said.
One bright spot for the U.S. sustainable investing market is that when Americans commit to something, we really commit. The U.S. survey participants with sustainable holdings had the highest average allocation of any country, with 49 percent of their portfolio committed to a sustainable strategy compared with an overall average of 36 percent.
UBS included three sustainable investing strategies in its definition: integration, where environmental, social and governance (ESG) factors are integrated into investment analysis; exclusion, which excludes certain sectors or companies, such as weapons manufacturers or fossil fuel producers; and impact investing, defined as actively investing to generate both a financial return and measurable social or environmental impact.