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Options for financial advisors to learn more about environmental, social and governance-focused (ESG) investing are expanding as interest in the topic soars.
Providers of ESG courses and certification programs are preparing more diverse offerings in response to the ongoing surge in demand that’s expected to continue. The results of a CFA Institute survey published in July showed more than one in three participants (35 per cent) said they were currently pursuing more sustainability or ESG-related skills. The same proportion also said they were planning to pursue those skills in the near future.
“What we’re seeing is a real interest and demand to continue to grow upon this very foundational education that we’re offering,” says Patricia Fletcher, chief executive officer of the Responsible Investment Association (RIA) in Toronto. From 2016 to 2021, she says more than 2,500 advisors and investment professionals registered for the RIA’s coursework directly.
In late 2019, the CFA Institute launched its own Certificate in ESG Investing program that immediately started attracting about 200 registrations per month. Demand has since grown almost six-fold.
“The growth has gone from around a couple thousand in the first year to around 7,000 the following year,” says Nick Bartlett, head of practice analysis at the CFA Institute in London. “Up to the most recent fiscal year that finished in September, we were up to about 14,000 registrations in that year.”
Canadian advisors, in particular, have flocked to the CFA Institute program in droves. About 930 people in Canada have taken the course so far, Mr. Bartlett says, with 676 of them having registered within the past 12 months.
Clients driving demand
Sean Cleary, chair of the Institute for Sustainable Finance at Queen’s University’s Smith School of Business in Kingston, Ont., says the increasing demand for ESG training among advisors is correlated directly to rising interest in ESG among their clients.
“It seems to be becoming table stakes that you have some understanding of [ESG] if you’re in the financial services industry because your clients are driving this demand,” he says.
“That means upping your knowledge and understanding of the ESG space is critically important [because] if you don’t have that knowledge, your clients are going to ask someone who does.”
As demand grows, supply is beginning to respond.
“Growing and doing more and increasing the sophistication of the education we’re offering is a strategic priority,” says the RIA’s Ms. Fletcher. Recently, the RIA has expanded its offerings to include the ESG aspect of practice management.
“How do you actually build out this component of your practice? How do you talk to prospective clients about this and how do you market yourself in the space? These are questions we’re helping [advisors] answer,” Ms. Fletcher says.
The RIA has also started offering a series of product-specific programs that allow advisors to learn about individual ESG-focused funds.
“One we are doing [in September] is nine sessions [with] various different fund companies in which you can go under the hood with them about their various offerings and approaches, speak to portfolio managers and get that next-level understanding about what these products are about and the tools that are used,” Ms. Fletcher says.
The course should help advisors speak with authority about the funds to clients as they go through the know-your-client process, she adds.
For advisors looking to obtain a specialist level of understanding of ESG investing, overall, more detailed education is on the way.
The CFA Institute’s Mr. Bartlett says the current program offers a “core competency” but that “over time I expect we will see more programs dive deeper.”
Ms. Fletcher says more options to become educated on ESG are necessary just to keep pace with the accelerating number of related investment products coming to market. She points out that between 2016 and 2019, roughly 10 to 17 new responsible investing (RI) products were launched in Canada each year.
In 2020, RIA data show that number climbed to 40, then almost doubled to 77 in 2021. In the first quarter of 2022 alone – the most recent data the RIA has available – 28 new RI-focused products were launched.
“This is ultimately going to be mainstream in terms of what advisors are going to be talking to their clients about, so we want to cast as big a net as possible,” Ms. Fletcher says. “There’s room for us to be doing even more.”
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