A report from the Association of Investment Companies suggests demand has dropped for ethical investments.
The latest ESG Attitudes Tracker canvassed the views of 200 intermediaries earlier this year.
It found ESG reporting had improved with 54 per cent saying all or most of it was satisfactory, up from 42 per cent the previous year.
This was the highest figure since the tracker was launched in 2021.
Though there has generally been a slowdown in demand for ESG investing.
The research found 11 per cent of clients proactively raise the subject of ESG in meetings, down from 13 per cent last year and 20 per cent in 2022.
While the percentage of intermediaries who expect ESG demand to increase over the next 12 months has fallen from 60 per cent last year to just 34 per cent this year.
And the percentage who expect demand to decline has increased from 10 per cent to 24 per cent.
Nick Britton, research director of the AIC, said: “Intermediaries perceive ESG strategies to have lost money and their patience is wearing thin.
“Ongoing concerns about greenwashing don’t help, and knowledge of the new sustainability labels is still low.
“The bottom line is that if intermediaries see a trade-off between ESG investing and returns, then returns are going to come first, unless clients have specific ESG requirements.”
Just 1 per cent of intermediaries said they ‘completely trust’ sustainability claims made by funds, but the FCA’s new sustainability labels have had some impact, with 28 per cent of respondents saying they had increased their trust in such claims.
However 60 per cent believed the regulator’s new labels had no impact.
Despite all this, ESG is still a big part of the way intermediaries do business with 96 per cent recommending sustainable funds, up from 89 per cent the previous year.
One respondent said: “ESG is not an add on. It is just part of the normal process for selecting the funds within the portfolio.”
You can find out what sustainability means to you by using the ESG profiler, brought to you by EnlightenESG and FT Adviser here.
tara.o’connor@ft.com
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