INVESTMENTS

Gillian Hepburn Head of UK Intermediary Solutions Schroders

1 . The rise of the ‘ S ’ and the ‘ G ’ The traditional focus on the ’ E ’ appears to be shifting as clients and advisers develop a more nuanced understanding of the interplay between environmental , social and governance factors . The Schroders Global Investor Survey showed that 57 % of investors care more about social factors than they did pre-pandemic , an even higher percentage than the 55 % of investors who now view environmental as more important . The way staff were treated during lockdown and furlough will perhaps have focussed investors ’ minds with the spotlight on working practices at companies such as Boohoo also helping them to understand the impact of social factors . In the Schroders Adviser Survey , advisers were asked to rate the importance of the ‘ E ’, ‘ S ’ and ‘ G ’ factors when they make investment decisions . They were also asked to rate how important they think each factor is to their clients . On a scale of 1 ( low ) – 5 ( high ), environmental factors were rated 4 or 5 by 62 % of advisers , while 55 % of advisers rated social and governance factors at the same level . This suggests that advisers now view the three factors as fairly close to each other in importance .

However , a slightly different picture emerges in their views of what their clients think . Advisers indicate that clients do not view social factors and governance factors as being quite as important as environmental factors , with 40 % giving a 4 – 5 rating to ‘ S ’ and 29 % to ‘ G ’ compared to 54 % for ‘ E ’. Given what investors told us in the Global Investor Survey , perhaps there is a disconnect here between what clients actually believe and adviser perceptions .

2 . Returns are now a given There has been a significant shift in private investors ’ sentiment on the return potential of sustainable investments . There are signs that investors are also now appreciating the message that a well-governed company should perform well . 42 % of private investors now believe sustainable funds can deliver higher returns while only 8 % view their return potential as unattractive . 57 % of investors also told us that they would be happy to move to a sustainable portfolio assuming the same level of risk and diversification as they wanted to make a positive impact .

3 . Client demand continues to increase COP26 put climate change and sustainability firmly on the agenda and in front of advisers ’ clients . Whilst this specifically focussed on climate change , 64 % of advisers felt that the high profile of this event would definitely lead to an increased demand for sustainable investments from clients . It will be interesting to review the position on this in our 2022 Adviser Survey later this year and identify if these predictions are correct .

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