Few investors are actually making investment decisions on environmental social governance (ESG) grounds, despite stating their intentions to do so.
The Schroders Global Investor Study 2019 found that while 61 per cent of investors believe investing should take a sustainable approach, only 16 per cent actually invest in ESG.
Investors who identified themselves as being expert or advanced were most likely to invest in sustainability, with 23 per cent of those surveyed investing in ESG. Beginner or rudimentary investors were the least likely, with only 8 per cent investing in ESG, while intermediate investors came in at 11 per cent.
The survey of 25,000 investors found that ESG concerns were ranked number five in the list of factors investors considered when making investments, lagging behind concern about fees and investment return expectations.
“There remains a gulf between people’s sustainable investment aspirations and the reality of how they prioritise these factors in their investment decision-making,” said Jessica Ground, global head of stewardship at Schroders.
“This will unfortunately leave investors vulnerable to the global impacts caused by the issues such as climate change.”
Climate change is one of the primary risks to investors. In September, Frontier Advisors downgraded its annual outlook, reporting that investors would see a 0.25 per cent drop across all asset classes due to the effects of global warming and extreme weather events.
The new is not all bad. Two-thirds of investors surveyed said that changes to regulation would encourage them to invest sustainably. Two-thirds of investors also said that independent ratings confirming that a fund invests sustainably would also drive them to invest this way.
“Focusing on the evidence will help investors understand that, far from detracting from total returns, high-quality investment approaches that integrate sustainability can actually help ensure that total returns remain competitive,” said Schroders Australia CEO Chris Durack.
“Clearly there is a role here for further education.”
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