The same was detected by Boring Money in its research, according to Holly Mackay, CEO of Boring Money, who said there was an "awful lot of confusion and continued growing scepticism about greenwashing from advisers and investors."
She said sustainable assets were the third most popular asset class with investors but the problem was “misaligned expectations as much as any wrongdoing by product manufacturers."
She said things typically went wrong when people looked into funds and found things they did not expect. Engagement and transition was becoming more popular but investors need to know what’s going on, she explained.
"It just needs a couple of lines of positioning. It’s a question of rethinking what info do investors really need, what do they want to know.. and make sure to talk to those points."
A different ESG
Alexeyev does not believe the ESG market in its current state is dysfunctional but nevertheless he said change was needed.
Part of the solution will be to get better data from corporate issuers which will be more comparable, he said, though without forcing uniformity and stifling innovation.
"I think one of the lessons that regulators got was don't ask for disclosures from asset managers that are dependent on data that does not exist in a granular and comparable way today. Start with getting corporate issuers to improve their disclosures and then helping asset managers to make use of that information."
He said there was evidence of the US regulator, the Securities and Exchange Commission, putting more emphasis on sequence, meaning recognising the data comes first from corporate issuers and is then used by asset managers "in the best way that they can".
Added to the data issue is the fact people have different ideas of what ESG is, he said, which was something he believes advisers will need to address going forward, aided by better information provided by asset managers.
"Financial advisers certainly have to become more aware and they have to take a greater role in educating their clients about the differences and managing their expectations. And saying 'hey, it's okay if there's an oil company in your ESG fund. It does not make it not ESG, there are different approaches to ESG."
But ESG ratings are not the solution, he said.
Alexeyev predicted the market would "look quite different" in 10 to 20 years' time: "We've seen tremendous changes in ESG over the last 10 years, that shift from SRI to ESG, to outcomes and impact, and we're really just at the beginning of this journey.
