Heartwood Investment Management carried out research on the subject, which found just two in five (43%) were satisfied with what is on offer.
A quarter of IFAs have seen an increase in demands from clients to offer a wider range of ethical investing opportunities, the research suggested.
More than four in five (81%) said they would prefer to invest in a globally-diversified ethical portfolio for their clients. Just one in ten preferred investing in a single-strategy ethical fund.
The reason for their preference is attributed to managing client risk. Nearly a third (31%) of intermediaries have struggled to manage their client’s risk when buying single strategy ethical funds in the last six months, according to the report.
The research also highlighted the need for an integrated screening process when building ethical portfolios, with 62% preferring to invest in a diversified ethical strategy that applies both positive and negative screening criteria.
Matt Hollier, head of investment product at Heartwood Investment Management, said: “Our research has clearly identified a growing demand for ethical investing amongst IFAs and their clients. But digging deeper, there is a clear level of concern by advisers about whether single strategy ethical funds can deliver the appropriate risk / return trade off.
“We are struck that 4 in 5 advisers prefer a globally diversified ethical portfolio for their clients. It is also clear that a significant majority of advisers prefer an investment approach that blends a positive ethical overlay with standard negative screening.”
Noland Carter, head of Heartwood Investment Management, said: “Clients are increasingly looking to have portfolios managed in a way that is aligned with their values and ethical concerns.
“Our IFA partners provide critical input to the design of our investment solutions and I am delighted that we have been able to launch new strategies that align strongly with the feedback we have received. More broadly, we believe this also reflects the needs of a wide range of private investors, charities, trusts and institutions.”