Tipping the Scales: Why Sustainable Investing Matters for Advisers Now More Than Ever

From regulatory reform and new technologies to a shifting client base and rising compliance costs, keeping up with change has become the norm for financial advisers. While sustainable investing has long been part of the industry conversation, it’s now emerging as something more – a strategic opportunity for financial advice practices looking to grow and differentiate their business.

New research, drawing on the responses of over 1,000 Australian investors, reveals why sustainable investing remains relevant – and a potential growth area – for advice practices. It reveals a cohort of investors who remain engaged and committed, even as economic conditions and a changing regulatory backdrop increase uncertainty. For advisers, the findings point to clear opportunities to support clients, build deeper relationships, and position their practice for future growth.

A Market With Momentum

According to the 2024 Responsible Investment Association of Australasia (RIAA) Benchmark Report, assets under management that self-declare as responsible investments grew by 24% from 2022 to 2023, reaching $1.6 trillion. This now represents 41% of the total managed funds market, up from 36% the previous year.

While institutional investors are driving the majority of this growth, retail investors continue to seek out products that match their values. In fact, the research shows that alignment with personal values remains the number one motive for investors who choose sustainable options and 71% believe their investments are having a positive impact. Even in the context of cost-of-living pressures and increased market volatility, many investors still want their capital to make a difference.

For advisers, this shows that sustainable investing is not a passing trend. It’s part of how a growing number of Australians want to approach their investment decisions.

Sustainable Investors: Younger, Wealthier, and Advised

The research also reveals that these investors are not just values-driven – they also have a lot to offer as advice clients.
According to the survey:

The average sustainable investor holds an investment portfolio valued at $1.17 million – more than twice the average size of portfolios held by non-sustainable or next wave investors.

• Sustainable investors tend to be younger, with an average age of 45 compared to 53 for non-sustainable investors.
• They are also more likely to be receiving financial advice. Recent sustainable investors are 20% more likely to be advised, and those receiving advice are significantly more likely to hold sustainable investments outside of super (245 advised vs. 217 unadvised).

This suggests that sustainable investors are not only values-led but also actively engaged in their financial decision-making. They recognise the role of advice in navigating complex product choices and balancing multiple investment goals.

Advisers who can offer well-researched, credible sustainable investment options are well placed to strengthen relationships and supporting this type of client in aligning their investments with long-term goals.

Next Wave Investors: High Intent, Untapped Potential

Alongside current sustainable investors is another segment worth engaging with — the ‘next wave’ of sustainable investors. These individuals have not yet invested sustainably, but intend to. What’s holding them back? For many it’s lack of access to knowledge and guidance.

The survey found that:

• 43% of next wave investors do not feel they understand sustainable investing well enough to take action.
• 29% say they would be more likely to invest sustainably if they had access to professional financial advice.

These next-wave investors are more common in the 50–54 age bracket, where they outnumber non-sustainable investors, an important insight for advisers who focus on pre-retirement planning. For practices seeking to grow their client base or deepen engagement with mid-career professionals, this is also a segment worth looking at.

Product Selection: Striking a Balance

While the research highlights values as a driver of sustainable investing, financial performance is still a key part of the equation. When choosing products, sustainable investors in the survey ranked long-term performance as their top consideration — followed by the reputation of the provider and ease of access. Sustainability ratings and fees rounded out the top five.

This demonstrates that sustainable investing isn’t about compromise. Clients want their capital to be having a positive impact but they also want to know it’s working hard for them. Advisers can help them keep the two in balance.

Headwinds: Returns and Greenwashing

Despite this growing interest and engagement, sustainable investing comes with challenges. Concerns around product performance and credibility could be holding back growth in sustainable investing.
Returns remain a top consideration for most investors, and sustainable investing is no exception. While 75% of current sustainable investors believe sustainable investments offer better long-term performance, some are cautious. In the current environment, clients may need additional information about how sustainability objectives are integrated with performance outcomes.

The second major concern is greenwashing. In recent years, the Australian Securities and Investments Commission (ASIC) has increased enforcement activity in this area, including several high-profile actions in 2024. These developments have raised the bar for investors, product issuers and financial advisers. The 2024 RIAA benchmarking report found that 52% of responsible investment product providers identified greenwashing as a concern in 2023, up from 45% in 2022.

This creates an opportunity for advisers to guide and inform sustainable investors. These clients are seeking clarity, and advisers can help them understand which products are credible, how they target stated sustainability goals, and how they perform over time. By helping clients navigate product options and understand which investments are aligned with their values — and which are not — advisers can play a crucial role in increasing confidence and long-term trust.

Regulation and Reporting Are Evolving

The sustainable investing landscape is also being shaped by new regulatory requirements. From 1 January 2025, amendments to the Corporations Act took effect, requiring Australian companies meeting certain thresholds to report on their climate-related governance, risk management, strategy and metrics and targets. These disclosures can be expected to improve the consistency and availability of sustainability data for certain assets.

At the same time, the survey highlights growing interest from investors in emerging sustainability themes — including sustainable food systems, water and waste management, social inclusion, and sustainable infrastructure. However, product availability in these areas remains limited. Not every issue sustainable investors care about can be addressed through investment solutions, and advisers need to manage client expectations around exposure and impact.

The Wealth Transfer Imperative

Looking further ahead, advisers must also prepare their businesses to benefit from a significant intergenerational wealth transfer. Adviser Ratings projects that $3.5 trillion will be transferred from older Australians to younger generations by 2050.

The research suggests that this shift is not just about wealth — it’s about values. Younger investors are more likely to expect sustainable investing to be part of their financial advice strategy. They care about sustainability, and they care about having advisers who can guide them through it.

Yet the client base for many advice practices is ageing. In 2023, 62% of advised clients were over 55 — up from 56% in 2020 . Without a proactive approach to client attraction and retention among younger demographics, advice practices could find themselves facing a significant challenge to their growth in the years ahead.

Navigating the Risks and Rewards

Sustainable investing is complex. The product universe is broad, terminology is inconsistent, and the regulatory backdrop is still evolving. Plus advisers are already juggling significant headwinds: 90% cite regulatory changes as a top concern, followed closely by profitability and talent shortages . For busy advisers adding another layer might seem overwhelming. In this context, dedicating time to understanding sustainable products might seem like a burden.

But the research makes it clear that clients are looking for leadership and financial advice has a vital role to play. Survey data shows that current sustainable investors rely on financial advisers as their primary source of information. Ahead of provider websites, fund documents or media coverage, clients see their adviser as the key to navigating this space with confidence.

Sustainable investors want transparency, clarity, and support in selecting products that reflect their values and deliver results. Many are already convinced that a trusted adviser can help them make sense of it all. By understanding what clients care about, evaluating sustainable investing options carefully and communicating clearly, advisers can turn complexity into clarity — and build stronger, longer-lasting relationships in the process.

Looking Ahead

The survey findings act as an important reminder that sustainable investing is not a passing trend. These insights also provide a window into the future of advice. As values and impact become more embedded in how advice clients think about investing their money, advisers can set themselves apart by enhancing their sustainable investing knowledge and capabilities.

With new international reporting standards taking effect and sustainability data sets becoming more advanced, the sustainable investing landscape is moving into the next phase of maturity. This promises to give advisers better tools to assess impact and performance — but also requires them to continue to stay informed on regulatory updates and product quality and performance.

The payoff for taking time to understand the sustainable investing landscape is access to a loyal, informed, and growing client segment that is more likely to value and pay for expert guidance to help them invest in what matters most.

About the Research

The 2024 Sustainable Investing Report was commissioned by Investment Trends. The quantitative online survey was carried out in October 2024. The sample after data cleaning and validation was 1,010 investors.