ESG is serious business so let’s get serious

ESG is the acronym on everyone’s lips, but what is the private banking industry actually doing about it?

While high allocations for ESG in the world’s top financial centres the UK and the US are unsurprising, as well as in North America in general, wealth managers cannot afford to ignore China.

According to GlobalData’s 2021 Global Wealth Managers Survey, HNW investors allocate an average of 26.5% of their financial assets to ESG investment products globally. In addition, demand is far from saturated. 82.2% of wealth managers expect the proportion of financial client assets allocated to ESG investments to increase over the next 12 months.

However, greenwashing remains a significant challenge, presenting a growing threat to wealth managers’ reputations. This means a transparent proposition is critical amid strong HNW demand and growing supply.

While there is clear demand for ESG investments, greenwashing remains an issue in wealth management as company selection and inclusion criteria lack standardisation across most of the world. For example, some sustainable funds exclude Afterpay on the basis that the company supports consumerism among younger generations, while others include Afterpay as it provides an alternative to credit cards.

Patrick Brusnahan, editor