A recent survey by the Responsible Investment Association (RIA) indicates that 94% of investors with responsible investment (RI) assets intend to maintain or increase their allocations. This highlights a significant opportunity for financial advisors to connect with clients.

Growing Investor Interest in RI

The survey, now in its 10th year, demonstrates a persistent trend of investor commitment to RI. This comes as advisors face increased competition from AI-driven platforms and self-directed investing options.

The 'Service Gap'

Despite strong investor interest, a significant “service gap” exists. 73% of investors believe advisors should inquire about RI during the initial client onboarding process, yet only 28% report actually being asked. Deborah Debas, a senior responsible investment specialist at Desjardins, noted this gap remains consistent year after year.

RI as a Relationship Builder

The RIA’s online event emphasized that RI can be a powerful tool for advisors to build trust, understand client values, and generate referrals. Solene Hanquier, senior director and head of RI at National Bank Investments, pointed out that RI provides advisors with a distinct advantage over do-it-yourself investors, who often lack personalized guidance.

Addressing Challenges and Misconceptions

While investor interest is high, challenges remain. Awareness of RI has declined, with 71% of investors admitting they know little or nothing about it. Confusion about what RI entails is also prevalent, with 28% of investors owning RI assets but nearly one in four unsure if they do.

Greenwashing and unclear fund labels were identified as major deterrents. John McHughan of TD Asset Management noted that many investors mistakenly associate RI solely with impact funds focused on renewable energy or healthcare. He stressed the importance of clarifying fund sustainability characteristics.

Navigating the RI Landscape

David Rutherford, associate vice-president of sustainability research at Mackenzie Investments, emphasized that RI should be approached with the same process as traditional investing. He also acknowledged the complexity of the product universe, which can be challenging for advisors to navigate.

Despite these hurdles, RI remains a successful product strategy. Advisors’ hesitation to discuss RI may stem from discomfort with environmental, social, and governance (ESG) topics, according to Debas. She encouraged advisors to engage in these conversations, even without all the answers, to foster deeper client relationships.