Environmental factors influence decisions on what will be the decade’s best long term investment
Research conducted for HSBC Global Asset Management by YouGov shows that people in the UK regard companies associated with being more environmentally friendly as being the most attractive long term investments. The online study asked a range of questions on the topic of environmental, social and governance (ESG) across over 2000 UK adults.
When asked about the companies or industries that are most likely to be a good long-term investment over the next decade, respondents chose renewable energy companies (51 per cent), sustainable food production / plant-based meat alternative companies (43 per cent) and electric vehicle manufacturers (43 per cent). Those that were thought not likely to make a good long-term investment choice included tobacco companies (62 per cent), payday lenders and fossil fuel companies (49 per cent), and fast fashion companies (34 per cent).
Stephanie Maier, Director Responsible Investment, HSBC Global Asset Management commented: “Investors are increasingly recognising the importance of incorporating sustainability considerations into their investment decisions and it’s encouraging that the wider public is also starting to view sustainability as an important consideration in long term investment choices.”
When asked which ESG factor was most important when thinking about investing, nearly half of respondents (46 per cent) said environmental issues such as climate change and sustainability were the most important. This was followed by social concerns (27 per cent) and governance factors (12 per cent). Surprisingly more (15 per cent) said none of the ESG factors would be important to them if they were to invest.
Simon Howard, CEO, UKSIF (UK Sustainable Investment and Finance Association), says: “The ‘clean and green’ consumer movement we have seen in areas such as food, transport, household and beauty products is sweeping into everyday finance and investments. The mainstream vision of an investable future is clear - it's low carbon. This should help reinforce the ambition of all types of investor to make responsible and sustainable investments aligned with a transition to a low carbon economy and away from ever growing climate-related risks.”
Maier adds: “Given the rising prominence of climate related issues over the past year it is not surprising that environmental factors are of most importance to the public. However, those investing need to think about the combination of all three ESG factors and the subsequent effect they have on portfolios.”
To address the growing demand for combining diversification and sustainability, HSBC Global Asset Management has recently added three sustainable multi-asset funds to its range. These funds offer investors, dependent on their risk appetite, a sustainable and diversified multi-asset alternative for their portfolios.
While there was a consensus on the top three best long term investments across all age groups, those aged 18-24 (30 per cent) were more sceptical of the investment potential of pharmaceutical companies than to those over 55 (45 per cent). More men (48 per cent) than women (31 per cent) thought pharmaceutical companies would make a good long term investment.
Contrastingly, a third of 18-24 year olds (31 per cent) were more optimistic about the investment opportunities of social media companies than all others surveyed (20 per cent). Additionally, a quarter of men (25 per cent) said that weapons manufacturers would provide a good return in the long term compared to a small amount of women (6 per cent).