As advisers we have noticed that more and more of our clients are interested in sustainable funds, which is now a worldwide trend. Investing in sustainability is on the rise with Morgan Stanley*1 claiming that more than three quarters (77%) of investors globally are interested in investing in companies or funds that aim to achieve market rate financial returns, while also considering positive social and environmental impact.
At the same time, 200 financial advisers were surveyed in relation to this and only 1% of advisers “completely trusted” sustainability claims, when they were asked to rate their trust in funds using a scale between 1 and 5 (with 1 being: did not trust and 5 being: completely trusted).*2 I think this speaks volumes when even financial professionals do not completely trust marketing claims.
However, a whole package of measures are now being introduced to try and improve trust in this area, including:
● Anti Greenwashing rules: Where all FCA authorised firms are required to reinforce that sustainability related claims must be fair, clear and not in any way misleading.
● Four labels: Where the product must have one of four specific sustainability objectives as part of its investment objective.
● Naming and marketing rules for investment products to ensure the use of sustainability terms are accurate.
I think the four labels will make the fund goals more transparent and build trust in the sector. These labels are as follows:
1. Sustainability Impact: Invests mainly in solutions to sustainability problems with an aim to achieve a positive impact for people or the planet.
2. Sustainability Improvers: Invests mainly in assets that may not be sustainable now, with an aim to improve their sustainability.
3. Sustainability Focus: Invests mainly in assets that focus on sustainability for people or the planet.
4. Sustainability Mixed Goals: Invests mainly in a mix of assets that either focus on sustainability, aim to improve their sustainability over time, or aim to achieve a positive impact for people or the planet.
So if you are interested in investing in sustainable funds and want help to understand this sector further, why not pick up the phone today and book a free without obligation consultation.
*1 Morgan Stanley, 29th Jan 2024
*2 PA adviser, 1st November 2022