Examining PFS Insights on Sustainable Finance
The Personal Finance Society (PFS) recently released a report titled "Sustainable Finance: Knowledge Gap," examining how the financial sector approaches and feels about advising clients on sustainable investments.
What the Report Uncovers:
Good intentions, uneven execution: While 90% of firms require advisors to follow a standardised process for client information, only 40% integrate ESG (environmental, social, and governance) and values-based knowledge into training and compliance programmes.
Greenwashing concerns: Only half of respondents say their firms actively check for "greenwashing," where companies exaggerate their sustainability efforts. Worryingly, 40% of practitioners are concerned about the quality of available sustainable investment advice.
Key pain points: Lack of consistency in standards, limited investment options, and greenwashing worries top the list of concerns for advisors. One respondent noted the inconsistency in ESG ratings across different agencies, making due diligence challenging.
PFS CEO Don MacIntyre's Take:
MacIntyre stresses the need for increased awareness and competence across the sector. He points out that while general awareness of sustainable finance exists, consistent approaches and confidence in advice are lacking. He highlights the importance of focusing on practical skills like investment selection, client education, and communication beyond just technical knowledge of ESG funds and ratings.
Recommendations for Improvement:
Firms: Establish a baseline level of competence for all advisors through training and compliance programmes.
Practitioners: Prioritise specific learning in ESG and sustainable investment advice.
Senior Management: Actively scrutinise analyses for alignment with sustainable practices.
Client communication: Proactively ask clients about their sustainability preferences and educate them on options.
Greenwashing vigilance: Train advisors to recognise and counter misleading marketing tactics.