Only half of advisers say their firm is actively checking for greenwashing, according to a new report from the Personal Finance Society (PFS).

The report, titled ‘Sustainable Finance: Knowledge Gap’, reveals what PFS members think about their company’s approach to ESG (environmental, social and governance).

It also looks at approaches to advising and key areas of concern when offering sustainable investment advice.

Overall, nine in 10 respondents said their firm requires advisers to follow a standard process to ensure clients make informed decisions.

However, only four in 10 firms included ESG, sustainable and values-based investment knowledge as part of their training and compliance regime.

Just half of respondents said their firms actively check for greenwashing, while four in 10 have concerns about the sustainable investment advice that is being provided.

Advisers’ key areas of concern with providing ESG and sustainable advice include greenwashing and mistrust in fund providers; a lack of standards/benchmarks and a lack of diversification and its risks.

On the ‘lack of standards/benchmarks’, one respondent said: “The main concern is that there are approximately half a dozen ESG & sustainable rating agencies, the definitions and ratings given by each on the same funds and companies can differ drastically, therefore until such time that this is harmonised properly it is almost impossible to have consistent process based on due diligence on funds.”

PFS interim chief executive Don MacIntyre said: “With the Consumer Duty coming into force last year, and with Sustainable Disclosure Requirements (SDR) and investment labels being rolled out during 2024, there is a need for an investment in awareness and competence across the sector, not just to satisfy regulatory demand, but to respond to growing interest from clients.

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