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Expect SRI and ESG strategies to increase in popularity

Most advisors expect SRI and ESG investing to increase. These investments currently make up only a small proportion of the average client’s portfolio.

Advisors anticipate a substantial increase in their clients’ interest in SRI and ESG strategies in the near term. Over the next five years, most financial advisors (69%) expect SRI to play a larger role in their practices. By contrast, very few advisors see SRI as a passing fad: Only 4% expect it to play a less significant role in their practices in the next half-decade.

However, that increasing interest has yet to make itself broadly evident. On average, advisors report that only 8% of client assets are currently allocated to ESG strategies. In fact, most firms (51%) report that they allocate less than 5% of client assets to ESG strategies.

Nevertheless, advisors anticipate rapid growth off of that relatively small base. Survey respondents expect the percentage of client assets allocated to ESG to almost double within the next two years (from 8% to 15%).

A changing demographic mix of investors partly explains advisors’ bullish outlook on ESG strategies. Millennials, women, and Gen X clients, in particular, are inclined to consider social responsibility alongside their other investment preferences. More than one in three (34%) advisors say their millennial clients consider ESG strategies to be very important, followed by 24% of female clients and 22% of Gen X clients. While advisors say that boomer and male clients place less importance on ESG strategies, the rising numbers of younger, more diverse investors have clearly created some momentum in the industry. Two-thirds of the advisors surveyed (66%) say ESG has become at least somewhat important to their overall business.