"With an unprecedented amount of ESG regulatory transformation in progress, many financial advisers are about to face a huge change in the way they conduct business."
‘ESG: Know How’ is an online, interactive, CPD-accredited training programme for financial advisers to help prepare for the regulatory changes being introduced from early 2021.
The proposed changes to Mifid II will bring financial advice firms in line with the EU’s sustainable finance action plan through the integration of sustainability and ESG considerations. As a result, it will become mandatory for firms to include questions on ESG investing as part of their suitability process with clients.
New research from Aviva reveals many advisers are not getting access to the ESG training and resources they need ahead of the regulatory changes. Many advisers feel out of the loop on ESG issues, with nearly half (45%) admitting to having had no ESG training at all.
Despite 92% of advisers believing that ESG will constitute a larger proportion of their business in two years’ time, this doesn’t appear to be influencing current day-to-day practice. Just 35% say they take ESG into consideration every time they discuss investment options with clients. The survey results hinted that this may be due to a lack of confidence around the issue. When asked about the main reason for integrating ESG into conversations with clients, only 5% said it was because they were confident to do so.
Thomas Tayler, senior manager at Aviva Investors, said: “With an unprecedented amount of ESG regulatory transformation in progress, many financial advisers are about to face a huge change in the way they conduct business. For the first time, firms must disclose how sustainability risk is integrated into investment decisions for products, show the expected effect of sustainability risk on the product’s financial returns, and be able to prove how adverse impacts are identified and mitigated and advisers will need to help clients navigate all that information. The EU is at the forefront of this transformation and the pressure to create a “green recovery” to the Covid-19 pandemic has further increased the focus on this area.
“We see a huge opportunity for businesses and advisers to influence meaningful change in business practices and wider society. Using money to power change beyond simply making decent investment returns is fast becoming the new normal. In the second quarter of this year, over $71 billion was invested into sustainable funds; a record-breaking amount. As the public becomes increasingly concerned about sustainability, these changes have the potential to connect people with their savings and investments like never before and empower them to transform the way their money is invested.”
Apiramy Jeyarajah, head of UK wholesale at Aviva Investors, added: “ESG investing is no longer a niche discipline, but much of the terminology is yet to be standardized. Add in the pending regulatory changes and it’s unsurprising that many advisers are struggling to get to grips with this large and complex topic.
"Aviva Investors is committed to using its heritage and expertise to address the knowledge gap. Our programme is designed to inform advisers about how ESG investing works, how the regulatory changes will affect their business, and how to talk to clients about ESG criteria in an informed and accessible way.”
