Over three quarters of investors would consider ESG investing, but uptake lags behind
New research has found that 77 per cent of current investors, and those planning to invest, are considering investing in stocks and shares, funds, ETFs or private pensions that are classed as environmental, social and corporate governance (ESG).
If everyone followed through with their intention, this would result in almost 23.2 million people holding ESG investments in the UK.
However, there remains a sizeable gap between these positive intentions and the number of people actually investing in ESGs.
The new report, 'ESG: Is the investing landscape changing for good?' from the personal finance comparison site, finder.com, reveals that only around a third of current investors (34 per cent) have deliberately sought out an ESG investment so far.
A further 23 per cent of investors believe they hold one of these investments, despite not actively seeking an ESG product out. This brings the proportion of investors who believe they hold an ESG choice up to 57 per cent.
There have been calls for more clarity as to what makes a company or fund classifiable as ESG, and this appears to be an issue with investors - one in five (21 per cent) don’t know whether any of their investments are in ESG options.
More generally, half (49 per cent) of the UK adult population say they currently hold shares, funds, ETFs or private pensions , with a further 8 per cent planning to in the future.
The performance of ESG products is the main concern for those that are considering making any sort of future investment. Half (49 per cent) of current, and potential, investors would only consider making ESG investments if they thought they were likely to perform as well as, or better than, other investment options.
In contrast, just 28 per cent of these investors would invest in ESG products even if they thought they were likely to get lower returns than other choices.
A further fifth (22 per cent) of potential investors aren’t considering ethical investments at all; this includes 8 per cent who don’t believe ESG investments will perform as well as traditional options.
Some are ruling out these investments purely because they find it too hard to understand which funds or companies are actually ethical (6 per cent), don’t understand what ethical investing means (5 per cent) or because they don’t trust that the investments in question are actually ethical (4 per cent).
Gen Z (those born in 2010 and before) are the most likely to hold ESG investments, with 45 per cent saying they have invested in ESG products and 22 per cent saying they have deliberately sought out ESG products.
In contrast, just 16 per cent of baby boomers (those born 1946-1964) say they hold an ESG investment of some sort. Meanwhile, a higher proportion of the silent generation (those born 1945 and before) hold ESG products (22 per cent), with just 3 per cent deliberately invested in them.
Zoe Stabler, investments writer at finder.com, says: “Many of us are ditching plastic straws, consciously recycling and paying even closer attention to David Attenborough, and an increasing number are also looking at how they can invest more ethically. Robo-advisors are taking notice of the changes and introducing new ethical portfolios which can help their users to choose, but there’s more to be done. We found that a sizeable number of people who are choosing not to invest ethically put it down to a lack of trust or understanding in what makes an ethical choice. It’s especially difficult for those building their own portfolios - with no clarity on which companies are ethical choices, people are forced to do more research to find investments.
“There needs to be a robust way of filtering out non-ethical choices, such as weapons manufacturers and fossil fuel companies and comparing potential investments against others in terms of environmental, social and governance (ESG) frameworks. A new EU Sustainable Finance Disclosure Regulation, which the UK is likely to adopt, could help to prevent greenwashing, which has been a concern among investors.”