It's been said many times: For advisors to capture the next generation of investors, they have to get with the program on environmental, social and governance investing, and according to Cerulli Associates, that means getting educated on product offerings and thought leadership. One Cerulli survey found that although today less than half of households prefer ESG investing, 65% of investors under 40 prefer ESG.
But a new study shows the problem might not only be with advisors, but those who create ESG products.
Cerulli found that advisors might be "comfortable with negative ESG screens," but not as familiar with positive screens. Active asset managers should be able to fill this void with product, which thus far has lagged. That could change as Cerulli found that in 2018, 55% of asset managers stated ESG investment solutions were the top vehicle to create, versus 30% who named active ETFs and 8% who named passive ETFs.
But those developing product "need to allocate the time and resources it takes to implement ESG principles into their investment philosophies," the Cerulli report stated. That means they must "explicitly define and differentiate their strategies, … Not fully implementing or defining a coherent ESG process for strategies marketed as such, can lead to a loss of credibility for asset managers."
