As more environmental, social and governance (ESG) and impact investment products become available to investors, it is integral that advisers become familiar with them, according to AXA Investment Managers and Responsible Investment Association Australasia (RIAA).
RIAA and AXA IM have launched a free publication - The Financial Adviser Guide to Responsible Investment to demystify responsible and ethical investment for advisers.
AXA IM head of ESG research and active ownership Yo Takatsuki said as client demand grows, advisers need to be familiar with the different options to ensure products are aligned with client values.
"Funds that have been established to target specific social and environmental objectives, often called impact funds, are becoming far more ambitious in their investment goals. They are attracting sophisticated investors who expect very clear and detailed reporting, both quantitative and qualitative," he said.
|Sponsored by BlackRock|
Looking to build resilience into your portfolio?
AXA IM head of core client group, Australia Michelle Lacey said there are many different approaches to ESG from negative screening to impact investing and ESG integration.
"The challenge for advisers is understanding the differences between the responsible investment approaches, products, and providers available in order to provide the advice that best matches their clients' needs," she said.
RIAA research reveals with $1.149 billion of funds under management are in responsible investments, up 17% from $980 billion in 2018.
In addition, 37% of all professionally managed investments are using one or more responsible investment approaches.
"RIAA's research shows Australian investors would like to increase their allocation towards impact investments more than fivefold over the next five years, so we believe this should be a particular area of attention for financial advisers," Lacey said.
RIAA chief executive Simon O'Connor said the guide can assist advisers in strengthening their knowledge to provide the best advice to clients.
"The regulation of advice is also catching up. The new FASEA Code of Ethics requires advisers to consider the broader long-term interests of their clients, arguably requiring advisers to consider responsible and ethical investments if they are in the clients' best interests," he said.