Advisers told the researchers recommending funds based on misleading claims puts their business at risk.
The percentage of investment advisers who say they «completely trust» sustainability claims from funds has fallen from 1% to zero, according to the ESG Attitudes Tracker from the Association of Investment Companies.
On a scale of one to five, most respondents (51%) rated their level of trust as ‘three', indicating limited trust. Advisers told the researchers that recommending funds based on misleading claims puts their business at risk.
One adviser said: «I am concerned about [greenwashing] because to recommend something on the basis that it meets my client's desires for investment and then to subsequently find out that it didn't is a dangerous position for me to be in.»
ESG investing popularity declines among UK investors over greenwashing fears
A discretionary fund manager (DFM) branded greenwashing «dreadful», and said they expected it to get worse.
ESG ratings, which aim to help investors and their advisers judge a fund's sustainable credentials, were also met with significant distrust.
Less than a fifth (19%) of respondents trusted them, and only 24% of respondents agreed they help to alleviate greenwashing concerns.
One respondent said: "‘There needs to be more industry standard regulations on ESG ratings. It is a minefield."
Despite these concerns, more than nine out of ten advisers and wealth managers recommend sustainable funds, which was stable from last year. Sustainable funds also account for more of a clients' portfolios on average, at 17% versus 16% in 2022.
Nearly three quarters (72%) of wealth managers predicted demand for ESG investing to grow over the next 12 months, although this is down on
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