U.S. Advisor Adoption of ESG Strategies Remains Limited, Despite Increased Conversation

U.S. Advisors Shy Away from ESG Over Concerns of Investment Performance


June 2018, Boston. The June 2018 issue of The Cerulli Edge - U.S. Monthly Product Trends Edition analyzes mutual fund and exchange-traded fund (ETF) product trends as of May 2018. This issue also provides special coverage on the integration of environmental, social, and governance (ESG) factors into investment strategies.

Highlights from this research:

  • For advisors, one of the biggest hurdles in turning interest into actual investment, both by users of ESG and non-users, is the perceived impact on investment performance. Among ESG users, only 19% state that sustainable investment returns are a major factor driving their demand for ESG. On the opposite side of the fence, 35% of advisors not currently using ESG note that a negative impact on investment performance is a significant factor preventing them from implementing ESG.
  • Mutual funds continue to lag ETFs in terms of overall asset growth, increasing 0.8% compared to 2.1% in May. Despite the lagging growth figure, assets still total approximately $14.9 trillion. ETFs collectively added net flows of $33.7 billion, of which most are coming from index-based products. ETF assets cleared the $3.5 trillion threshold as the vehicle continues to push back toward its January 2018 high of $3.6 trillion.
  • Asset managers have prioritized incorporating ESG factors/criteria into their investment processes, but conversation with distribution partners has not necessarily led to actual investment among financial advisors. Cerulli argues that true ESG integration requires the application of material ESG factors with intentionality, in a process driven by robust data that is aggregated from both proprietary and third-party sources.

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