Foster Denovo research highlights 60% of investors are not aware of ESG

by | Jul 20, 2022

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  • Six in ten (60%) investors are not aware of ESG investing.
  • 63% of investors have changed their minds over the past three years about the importance of the environment.
  • Over two-thirds (68%) of non-ESG investors would be willing to consider investing sustainably.
  • Half of investors (50%) believe that ESG investing would mean lower returns.
  • Seven in ten (70%) investors have not had a discussion with a financial adviser about sustainable investing.

Many investors are not aware of ESG investing despite an increase in interest in sustainability and what impact their investments are having on the environment, a new report from Foster Denovo has found.

The report – “Investing with the Dynamic Portfolios: The latest research surrounding investors’ opinions on ESG investing” – found that six in ten (60%) investors are not aware of ESG investing despite a shift in public concerns about the environment.

However, there are clear indicators that investor perception about the environment and the impact of their investments has grown significantly over recent years. Almost two-thirds (63%) of investors surveyed have changed their minds over the past three years about the importance of the environment.

Just over half (51%) felt very strongly or strongly about the impact that climate change could have on their savings and investments, and nine in ten (89%) were concerned about the impact corporate practices and some large businesses are having on the environment.

One quarter (25%) of those surveyed had invested with ESG factors in mind. Of these, more than four-fifths (83%) said they would risk performance for a more sustainable investment, and 79% would avoid investing in companies not taking sufficient action on ESG issues. However, there is a sizeable proportion of those investors who haven’t invested using ESG factors who are interested in sustainable products. Over two-thirds (68%) said they would be willing to consider investing sustainably.

However, the research found that of these non-ESG investors, half (50%) said they aren’t currently engaged in ESG investing due to perceived lower returns. This is at odds with the majority of recent investment research[1] which found that three-quarters of ESG-screened indexes outperformed their broad market equivalents.

Advisers play an important role in giving investors the knowledge and confidence to invest sustainably. 70% of non-ESG investors had not had a discussion with a financial adviser about sustainable investing. Of those who had invested using ESG factors, 72% have worked with a financial adviser. However, while nine in ten (89%) had a discussion with their financial adviser about sustainable investing, the research revealed that 82% had initiated the conversation about ESG themselves, suggesting that advisers could do more to ensure their clients are fully aware of the options available to them.

Declan McAndrew, Head of Investment Research at Foster Denovo, said: “It’s clear that many people – including those not currently investing sustainably – are interested in and willing to learn more about ESG and want to put their money towards positively benefiting the planet as well as making returns. However, a lack of awareness about the availability of such products, what ESG means and a persistent misconception about lower returns are clearly having an impact.

“Advisers are in a key position to offer guidance and clarity, helping to dispel some of the myths and get more people onboard with using their savings to have a positive contribution to the planet. Above all, it is about being client focused.

“Interest in sustainability is only going to increase, and making sure clients have the right information available to make an informed decision that is best for them should be the driving force behind every conversation, particularly in light of Consumer Duty. 

“Our advisers are having regular conversations with clients on ESG, which has highlighted a disconnect between people living their lives more sustainably versus where their funds are invested.  These conversations have resulted in more clients now investing in ESG, which is not only the right decision for the client, but a move in the right direction for the planet too.”

An online survey was conducted by Atomik Research on behalf of Foster Denovo among 1,001 UK respondents who had investments. The research fieldwork took place between 24th March – 28th March 2022.

To access the full white paper please click here.

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