Research for the Association of Investment Companies’ found an increase in sustainable recommendations.

Some 91% of respondents to its survey of 109 financial advisers and 91 wealth managers said they recommended some sustainable funds to clients, up from 89% last year.

There was also a jump in the number of firms considering themselves to be early adopters of ESG investing.

Nearly half - 48% - said their firms were early adopters and had offered an ESG investment proposition for a number of years – up from 37% last year.

Only 1% of respondents said that ESG investing was not of interest to their firm.

But there were widespread concerns about greenwashing expressed in the same survey, with only 1% of respondents stating that they completely trust funds’ sustainability claims.

The use of sustainable investment companies (investment trusts) has increased year-on-year, as has their appeal to intermediaries. Nearly a quarter (24%) of respondents to this year’s survey reported that they used sustainable investment companies, compared to 19% last year.

The increase was driven by wealth managers, 41% of whom said they used sustainable investment companies, compared to 32% last year. Investment companies invest in a variety of sustainable, environmental impact and social impact assets, many of them unquoted.  

Nick Britton, head of intermediary communications at the Association of Investment Companies (AIC), said: “Investment companies offer access to a galaxy of sustainable and impact investments that are difficult for other types of funds to invest in – from renewable energy infrastructure to social enterprises.

“Our survey suggests that financial advisers and wealth managers increasingly recognise this, and are seeing the appeal of these strategies for a wide range of their clients.”

One unnamed wealth manager told the AIC’s survey: “To have a positive impact, in my view you have to do it in the primary market so you need to do it in private equity. So I think that impact lends itself very well to the investment trust wrapper because then you can start doing private equity and unlisted and illiquid long-term projects that could have a longer-term positive impact.”

Intermediaries tend to favour active over passive strategies for ESG investing, and that attitude has hardened slightly since last year.

Nearly three-quarters (73%) of respondents to the survey agreed that ESG investing was better suited to active funds, up from 69% last year.

And less than half (41%) of intermediaries thought that ESG investing can be achieved through passive funds, down from 43% last year.