“Then again, the population more broadly is more aware of sustainability issues in their lives since the 2019 bushfires, the pandemic and now the east coast flooding.

“We’ve had some pretty significant events that have affected people and they can really see how issues like sustainability, climate and labour policies are impacting society,” Pettigrew says.

Private Wealth Manager at Annex Wealth, Mark Rowell, agrees interest in ESG has spiked among his younger clients, but says there’s a “misconception that it’s primarily millennials, because a lot of pre-retirees and retirees are thinking about the impact of their investments”.

“There has been a sharp increase in interest over the last 12 months especially around clients wanting to have discussions around climate change and how it’s affecting the world,” Rowell says.

Although it’s not just climate change. Rowell points out investors are also keenly interested in broader social issues such as the number of women companies have on their boards as well as workplace practices relating to the modern slavery act.

“They’re also interested in governance and corporate responsibility in areas such as renewable energy and a company’s commitment to net zero.”

Yet while interest in ESG investing is growing rapidly - there’s no cookie-cutter type of ESG investor.”

For Rowell, the challenge is getting an understanding of what an individual investor really wants and what’s important to them as an individual “because there is a whole realm of options out there”.

“We need to have conversations with clients to uncover what’s important to them and matching those values to an investment solution.”

Pettigrew agrees it’s vitally important to understand each individual’s idea of ESG investing.

She says on one level there are those who want to be purely ethical investors whereas the institutional space is dominated by large fund managers taking into account a basket of risk factors and ESG has become one of those in recent years.

“ESG risks have become a hugely important part of what institutional investors such as super funds, including BT take into account when we’re doing investments in house,” Pettigrew says.

More pertinently, Pettigrew says there is some confusion about what ESG investing does entail. Investors in the ethical space are perplexed when an investment manager invests in a mainstream traditional fund. Reason being is the investment manager is looking at sustainability in a different manner and is taking into account a company’s ESG policies and track record.

For Pettigrew this confusion leads to accusations of greenwashing as investors and advisors aren’t necessarily clear about what they want, and asset managers aren’t necessarily great at explaining exactly what they’re trying to achieve.

Part of the problem is there is no taxonomy around defining ESG in Australia whereas there is in Europe. Put simply, there is a lot of grey.

For example, the EU’s taxonomy was expanded to include gas under some conditions and that has caused some concern in regard to how fossil fuels can be included as part of an ESG framework.

A case in point is funds under management to funds on BT Panorama’s sustainable investment list, grew over 33 per cent in the last two years.

Pettigrew says people have to remember that with sustainability issues, it’s very rarely black or white.

“There is a lot of grey in how different issues are considered and in that context, in the absence of clear regulation, clear terminology, clearly agreed processes, you do get confusion.“

“For example, if you look at a company and you look at the traditional measures of sustainability, which is their approach to material, environmental and social factors, a company can score highly,” she says.

“They can understand climate change and biodiversity loss, as well as labour rights issues, and how their board skills matrix impacts their company and they can have really good policies around that, so they’ll get a really good ESG score but, that doesn’t necessarily mean they’re creating a positive outcome.”

A good ESG score doesn’t always mean they’re doing well on the UN’s Sustainable Development Goals, nor does it mean they have a good carbon score.

“This is where the confusion comes in and good investment managers need to be really clear about what they’re trying to achieve and what they say they’re going to do,” she says.

Rowell agrees there has been some confusion, but fund managers, advisers and platform providers are getting a better understanding of ESG.

“It’s no longer a niche space and the whole industry is across it at the moment,” he says.