US ESG demand starting to transfer to UK retail market

Added 17th June 2016

The rising popularity of ESG retail funds in the US is starting to take hold among retail investors in the UK, according to Parmenion investment manager Andrew Gilbert.

US ESG demand starting to transfer to UK retail market

With the recent launch of BNP Paribas’ ESG Risk Analytics platform, the release of Morningstar’s Sustainability Rating and most major asset managers incorporating ethical strategies into the investment process more, the trend towards environmental, social and corporate governance (ESG) strategies shows no signs of slowing down. 

While the adoption of ESG strategies has taken off most notably within the institutional space, Gilbert said retail investors are following suit, particularly in the US.   

In 2014, approximately $6.57 trillion was invested in SRI and ethical strategies in the US, an amount that is roughly equivalent to 18% of the US market, according to data released by US SIF. And between 2012 and 2014, there was a 76% increase in investments in ethical strategies in the US. 

“The UK generally follows the US, and within the US market, ESG-focused retail assets have gone up massively. As the retail market in the UK trails the US, we see a massively important area for retail clients in the future, which we’re seeing in the growth of our own ESG advisory services,” said Gilbert.

As the UK ESG fund offering continues to broaden and the number of asset managers reporting against ESG factors increases, Gilbert anticipates both institutional and retail investor appetite for sustainability and ethical investing will continue to grow.

The UN Principle for Responsible Investment reported that already over 900 UK-based asset managers have agreed to incorporate ESG factors into their investment analysis and decision making process.

ESG research company, EIRIS, found that approximately £15bn was invested in UK Ethical/SRI retail funds in 2015, an 11% increase from 2014.

EIRIS also reported that 38% of the British public showed an interest in green or ethical financial products and services and that a whopping 90% would be willing to switch to another provider if it meant they could better achieve their ethical objectives.  

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