Lack of client familiarity with what ESG stands for is the biggest barrier for advisers to recommending more ethical and environmental investment options.

Four in ten (43%) of advisers see lack of client familiarity as the biggest hurdle in comparison to 29% who said this in 2020.

A third (31%) of advisers said some clients also have concerns around performance in relation to ESG, according to the research conducted by infrastructure and private equity investment manager Foresight Group LLP.

Most advisers do not share the concern of these clients. Three quarters (72%) of IFAs said incorporating ESG considerations into investment strategies does not usually impact financial returns negatively, with just 13% saying this is the case and 15% saying they do not know.

While advisers’ own knowledge of ESG has improved, confusing terminology is another hurdle cited by advisers to recommending ESG investments.

Nearly two in five (39%) advisers cited confusing terminology surrounding ESG investment as a barrier.

Nearly half (45%) of IFAs said ESG education sessions would encourage them to suggest ESG funds more frequently, followed by learning tools (40%), available case studies (32%) and testimonials (11%). Only 11% said none of the above would help

Mark Brennan, partner at Foresight Capital Management, said: “As responsible investing increasingly becomes part of the mainstream, there is still much to do in terms of raising awareness and helping IFAs to educate and inform clients of the options available to them.

“At Foresight we pride ourselves on being a sustainability-led investment manager, and we are certainly prepared to take on responsibility in helping the investment industry to shape sustainable investing in the future.”

Research was conducted by PollRight on behalf of Foresight Group LLP among 112 financial advisers between 15 February and 12 April.