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ESG paradox – 66% of investors do not care if investments are sustainable, despite considering them a good option

Two-thirds of UK retail investors (66%) do not mind whether their investments are sustainable, according to the latest Investment Forces research from Charles Schwab UK. These investors are only focused on maximising returns.

The research also reveals only 44% of investors regularly consider environmental, social and governance (ESG) factors when making a new investment. This proportion drops to just 28% amongst the Boomer generation, born between 1946 and 1964. However, more than half of millennial (55%) and Gen Z (56%) investors state they regularly consider ESG when making new investments.

While many investors do not regularly think about ESG factors, they do like the idea of supporting sustainable companies. More than two-thirds of investors (67%) think ethical stocks are a good option for investment and 71% believe companies with good sustainability strategies provide good returns on investment. Companies involved in renewable energy are also an attractive investment option for 81% of investors.

However, the research shows only a small proportion of investors actually invest in sustainable companies. Just one in five (19%) investors state they hold any ethical investments. This compares with 39% of investors who hold cryptocurrencies and 13% of investors who hold ‘sin stocks’ such as companies which produce alcohol, tobacco, gambling, or weapons.

Investors may be put off making ESG friendly investments as they believe there will be higher fees involved; seven in ten (70%) retail investors think that sustainable investment options cost more than non-sustainable options. But despite this, 58% of investors said they would be willing to pay additional fees for sustainable investments.

Richard Flynn, UK Managing Director at Charles Schwab, said: “Despite being a major focus for asset management firms, our research shows ESG is not always a priority for retail investors. Looking at the trends, we found that considerations around environmental and social factors are often down to the social conscience of individual investors rather than their financial judgement.

“Most investors clearly have good intentions; however, many appear to be conflicted between moral andpractical investment motivations. Investors often want to invest in companies that help to improve the environment, such as renewable energy producers.

“However, there is a reluctance to sacrifice investment performance or pay higher fees in return. This suggests that initially good intentions when investing are not always acted upon.”

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