Financial Advisers See Potential in ESG as Business Growth Opportunity

• Majority of advisers see ESG considerations as a meaningful way to evaluate investments
• Nine in 10 advisers see responsible investing as business growth opportunity
• Over two thirds of advisers have introduced subject of responsible investing to their clients

London, 18 May 2020 – Financial advisers are increasingly seeing ESG products as an opportunity to grow their businesses and forge closer ties with their clients. A global study¹, sponsored by Franklin Templeton² and conducted by NMG Consulting, shows that advisers are increasingly embracing ESG products through their knowledge of products and allocations across portfolios.

The study, which examined the attitudes of over 800 financial advisers and intermediaries towards responsible investing in 10 major markets across the globe - in EMEA, APAC and North America - found that advisers increasingly accept the value of including ESG criteria in making investment decisions.

In Europe, the research showed that Italy and France are leading the way of countries surveyed, with nine in 10 respondents allocating investments to ESG products (91% and 90% respectively). Looking at SRI or impact-focused products specifically, Swedish financial advisers led the pack with 70% and 68% respectively allocating to these products. That said, UK retail investors are slightly ahead of their continental European peers when investing in ESG products, with 87% of the UK advisers having clients invested in ESG funds, versus 85% as the average across Europe. German retail investors, on the other hand, are in line with European peers, with 84% of advisers saying they have clients investing in ESG products and 62% investing in SRI products (vs. 61% European average).

Julie Moret, Global Head of ESG at Franklin Templeton, comments: “The growing relevancy of environmental issues linked to climate transition, natural resource scarcity and efficiency is undoubtedly driving greater interest in ESG products and solutions. Regulatory pressures are also accelerating these themes. Encouragingly, the study’s findings show that advisers are responding to the increased demand from clients which will help to deepen the industry’s knowledge and innovation in this space.”

ESG as a business growth opportunity

All financial adviser respondents indicated a growing interest from clients in investment products with positive ESG impacts, in line with growing public concern about environmental issues and climate change. In addition, advisers with responsible investing expertise believe it is good for business, with nine out of 10 (90%) respondents seeing responsible investing as a business opportunity for their practice, including 42% who see it as a “great opportunity”.

The study also found that inclusion of ESG considerations in retail client discussions allows them to deepen relationships by enabling new conversations around the fundamental purpose of investing and the client’s investment mission.

Michel Tulle, Senior Director - Europe ex-UK at Franklin Templeton, says: “The asset management industry should respond by supporting advisers as they educate themselves and clients on ESG, as well as to respond to investor demand by providing a wider range of more innovative products and solutions.”

Julie Moret adds: “However, the industry needs to make sure it is aligned when discussing ESG terminology and practices. Greater transparency on ESG risks and measurement will not only better educate and inform investors in their decision-making, but also further the investment case for responsible investment.”

Environmental issues drive client interest in responsible investing

At a macro level, nearly half (46%) of advisers believe that “E” (the environmental factors) are the most important for their clients in the near term, with “G” (governance factors) cited by 34%, and “S” (social factors) cited by 20%. Furthermore, environmental issues are most likely to engage retail clients when investing for both the short and long term (46% and 63% respectively), with concerns about climate change, sustainability and resource efficiency, being the top three ESG issues advisers believe will change how people invest over the short and long term.

David Zahn, Head of European Fixed Income at Franklin Templeton, says: “At Franklin Templeton, we have a strong product suite of ESG-integrated strategies like the Franklin European Total Return Fund³, which recently was awarded the ‘Towards Sustainability’ label from the Central Labelling Agency (CLA)⁴, an independent body of the Belgian Financial Sector Federation (Febelfin)⁵. Furthermore, we continue to respond to client needs by adding climate-initiative specific investment products, such as the Franklin Liberty Euro Green Bond UCITS ETF⁶. Green bonds are already an important instrument in the attempt to reduce the CO2 emissions of the global economy, and they are likely to continue to experience rapid growth.”

“For example, our Franklin Liberty Euro Green Bond UCITS ETF aims to deliver both long-term sustainable returns, as well as to have a meaningful and positive impact on societies and the environment. In light of the current pandemic and recent market volatility, we continue looking to add quality corporate credits to the fund to broaden the issuer base and increase exposure to the corporate sector overall as issuance has continued to be robust in the Green bond sector.”

Higher allocations to ESG products

Due to growing demand, many European advisers have already changed their asset allocation to reflect growing demand in ESG. The survey found that over four fifths (86%) of advisers have already allocated to ESG products and three quarters (77%) of advisers globally expect their clients to increase their allocation to responsible investing funds over the next two years.

European advisers are now demanding more responsible investment options to satisfy client demand. Within product categories, client preference is active management over passive, and domestic over global, partly reflecting the desire to present clients with compelling responsible investing narratives.

The study also showed:

• There are big differences between European countries. In Italy, advisers led conversations with clients on ESG over 90% of the time, followed by the Netherlands (80%) and Germany (76%). Interestingly, in Switzerland, the subject was equally likely (50%) to be introduced by the adviser or the client.
• Retail investors in Sweden, Denmark and the Netherlands lead the way in adopting impact strategies. The UK is catching up, with 30% of retail clients expected to make a ‘significant increase’ in responsible investments over the next two years, in contrast to the global and European average (23% and 25% respectively).
• More than 40% of responsible investing assets are placed in domestically focused products; 29% are allocated to regional products, while another 27% are in global products.

Franklin Templeton offers a wide variety of ESG-integrated strategies, including Templeton Global Climate Change Fund, Templeton Global Bond Fund³, Franklin European Total Return Fund, Franklin Green Target Income Fund 2024⁷, Franklin Liberty Euro Green Bond UCITS ETF and Franklin LibertyQ Global Equity SRI UCITS ETF⁶.

- ENDS -

 

Contacts:

ALINA ULKINA	ERICA LEWIS
Corporate Communications Manager Franklin Templeton Cannon Place, 78 Cannon Street London EC4N 6HL Tel: +44 (0)790 090 0184 M Email: [email protected]	Senior Consultant FTI Consulting  200 Aldersgate Street  London EC1A 4HD  Tel: +44 (0)797 136 1970 M Email: [email protected]

Notes to Editors:

1. Franklin Templeton partnered with NMG Consulting to undertake a comprehensive study. NMG examined the attitudes of financial advisers and intermediaries towards responsible investing in 10 major markets across the globe, in EMEA, APAC (Japan and Australia) and North America. The survey was conducted online with 824 adviser respondents, including 388 across Europe in Denmark, France, Germany, Italy, the Netherlands, Norway, Sweden, Switzerland and the UK. Fieldwork took place between April and June 2019.

    

2. Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization operating, together with its subsidiaries, as Franklin Templeton. Franklin Templeton’s goal is to deliver better outcomes by providing global and domestic investment management to retail, institutional and sovereign wealth clients in over 170 countries. Through specialized teams, the company has expertise across all asset classes, including equity, fixed income, alternatives and custom multi-asset solutions. The company’s more than 600 investment professionals are supported by its integrated, worldwide team of risk management professionals and global trading desk network. With employees in over 30 countries, the California-based company has more than 70 years of investment experience and over $599 billion in assets under management as of April 30, 2020. For more information, please visit https://www.franklintempleton.lu.

    

3. Templeton Global Bond Fund, Templeton Global Climate Change Fund and Franklin European Total Return Fund are sub-funds of Franklin Templeton Investments Funds (FTIF), a Luxembourg-domiciled SICAV.

   Subscriptions to shares of FTIF can only be made on the basis of the current prospectus, and, where available, the relevant Key Information Document, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. The value of shares in FTIF and income received from it can go down as well as up, and investors may not get back the full amount invested.

   Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations. In emerging markets, the risks can be greater than in developed markets.

   An investment in FTIF entails risks, which are described in the FTIF’s prospectus and, where available, the relevant Key Information Document. Investments in derivative instruments entail specific risks that may increase the risk profile of the fund and are more fully described in FTIF’s prospectus and where available in the relevant Key Information Document. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund’s holding at any one time.

   No shares of FTIF may be directly or indirectly offered or sold to nationals or residents of the United States of America. Shares of FTIF are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest.

4. The Central Labelling Agency (CLA) is a not-for-profit association incorporated under Belgian law. The goal of the CLA is to enlarge the impact and substance of sustainable saving and investing, and to substantially strengthen the qualitative approach to sustainable saving and investing. The CLA consists of three bodies – The Board of Directors (responsible for oversight and updating the quality standard); the Eligibility Commission (responsible for advising the Board on awarding the ‘Towards Sustainability’ label); and the Advisory Commission (responsible to advise the Board on changes to the quality standard. The CLA relies on an independent ESG auditor to perform the technical and in-depth verification of alignment of the products that applied for the label. The CLA is governed by and functions in accordance with the Belgian Code of Companies and Associations (the “CCA”) and its articles of association. For more information, please visit https://www.towardssustainability.be/en.

    

5. The Belgian Financial Sector Federation (Febelfin) is a representative of the financial services sector in Belgium, which aims to bring together financial service providers and everyone striving to future-proof the financial sector. For more information on the ‘Towards Sustainability’ label, please visit https://www.febelfin.be/fr/journalistes/article/octroi-des-premiers-labels-dinvestissement-durable-towards-sustainability.

    

6. The Franklin Liberty Euro Green Bond UCITS ETF and Franklin LibertyQ Global Equity SRI UCITS ETF are sub-funds of the Franklin LibertyShares ICAV, an Irish Collective Asset-managed Vehicle, incorporated under the laws of Ireland.

   The views expressed are those of the investment manager and the comments, opinions and analyses are rendered as of the publication date and may change without notice. The information provided in this material is not intended as complete analysis of every material fact regarding any country, region or market.

   An investment in Franklin LibertyShares^TM UCITS ETF range entails risks which are described in the prospectus, its supplements and in the relevant Key Information Document. The value of investments and income received from them can go down as well as up, and investors may not get back the full amount invested. Past performance is not an indicator or a guarantee of future performance.

   Franklin LibertyShares^TM UCITS ETFs (domiciled outside of the U.S. or Canada) may not be directly or indirectly offered or sold to residents of the United States of America or Canada. ETFs trade like stocks, fluctuate in market value and may trade at prices above or below their net asset value. Brokerage commissions and ETF expenses will reduce returns.

7. The Franklin Green Target Income 2024 is a sub-fund of Franklin Templeton Opportunities Funds (FTOF), a Luxembourg-domiciled SICAV. This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares of the Luxembourg-domiciled SICAV Franklin Templeton Opportunities Funds. Nothing in this document should be construed as investment advice. Opinions expressed are the author’s at publication date and they are subject to change without prior notice.

    

   Subscriptions to shares of FTOF can only be made on the basis of the current prospectus, and, where available, the relevant Key Information Document, accompanied by the latest available audited annual report and the latest semi-annual report if published thereafter. The value of shares in FTOF and income received from it can go down as well as up, and investors may not get back the full amount invested.

   Past performance is not an indicator or a guarantee of future performance. Currency fluctuations may affect the value of overseas investments. When investing in a fund denominated in a foreign currency, your performance may also be affected by currency fluctuations. In emerging markets, the risks can be greater than in developed markets.

   An investment in FTOF entails risks which are described in the FTOF’s prospectus and, where available, the relevant Key Information Document. Investments in derivative instruments entail specific risks that may increase the risk profile of the fund and are more fully described in FTOF’s prospectus and where available in the relevant Key Information Document. References to particular industries, sectors or companies are for general information and are not necessarily indicative of a fund’s holding at any one time.

   No shares of FTOF may be directly or indirectly offered or sold to nationals or residents of the United States of America. Shares of FTOF are not available for distribution in all jurisdictions and prospective investors should confirm availability with their local Franklin Templeton Investments representative before making any plans to invest.

Any research and analysis contained in this document has been procured by Franklin Templeton for its own purposes. For more information, UK investors should contact: Franklin Templeton, Cannon Place, 78 Cannon Street, London EC4N 6HL. United Kingdom. Phone: 0800 305 306, Email [email protected].

Issued by Franklin Templeton Investment Management Limited (FTIML). FTIML is authorised and regulated in the United Kingdom by the Financial Conduct Authority.

Copyright © 2020 Franklin Templeton. All rights reserved.