UK IFAs report major rise in ESG allocations since start of Covid-19 outbreak

ESG Money Pots

Since the beginning of the Covid-19 outbreak, UK independent financial advisers (IFAs) have seen a sharp rise in the number of investors seeking to tackle environmental concerns and improve society through their investments.

The pervasive impacts of the Covid-19 crisis seem to be driving a reassessment of the purpose and goals of investment, according to new research by the International business of Federated Hermes. A poll of 200 UK IFAs found that 78 per cent believe that their clients would choose to divest from companies they deem to have failed to support their employees and wider society through the crisis.

 
Some 82 per cent reported an uptick in enquiries from investors about how their capital can be committed to combat the effects of climate change, raise governance standards and improve human rights. Expressions of interest have come from investors across a range of demographics; 42 per cent of enquiries have come from investors aged under 40, while 36 per cent have been from those aged 40 or over, countering the narrative that ESG investing is merely a trend among millennials.
 
The current crisis has further increased strong investor appetite for funds which integrate environmental, social and governance factors. 85 per cent of UK IFAs have seen a rise in client requests to allocate capital to ESG-integrated funds since the start of the outbreak. A total of 82 per cent believe that the current crisis and its impacts will result in more individuals investing in pursuit of environmental, societal and governance goals in the future.
 
Harriet Steel, Head of Business Development for the International business of Federated Hermes, says: “The Covid-19 crisis is driving seismic change across markets, the economy and society, so it is no surprise to see that investors are reassessing the long-term aims and outcomes of their investments. The pandemic has radically reconfigured concepts of sustainability, reinforcing our long-held belief that investment and value creation must deliver more than just strong financial returns. These findings make clear that the crisis will be a catalyst for change as individual investors ascribe more weighting to the importance of ESG factors, and scrutinise the purpose of companies, and what they deliver for society, to an ever-greater extent.”