Majority of HNW Managers Use ESG in Portfolios: Cerulli

Cheses also noted that HNW and multi-family offices are set up to pass down wealth across multiple generations. While many may have started with negative/exclusionary screening (e.g. tobacco, weapons) they have evolved into using more integrative strategies.

Although the survey found a steady increase in ESG/SRI investing, 55% of respondents said key inhibitors to using these strategies across all portfolios was it did not fit into client investment policy statements. Other factors for the reticence in using ESG/SRI include high cost (40%), difficulties in measuring impact (40%) and lack of track record/performance (30%).

"Given that ESG is still in early stages of development, there is a lack of available data and standardization in measuring an ESG strategy's effectiveness," Cheses said. "Therefore, conducting proper due diligence and accurately measuring the environmental and social impact of these investments has remained a significant challenge for HNW practices exploring the ESG space."

Managers need to help educate investors in this style of investing, the study noted, especially as the next generation of wealthy investors will drive the appetite for ESG solutions.

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• SRI: How Advisors Can Bridge Idea and Practice
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