A troubling picture for the importance for ESG
Investors say ESG is not a key driver of their decision making.
According to a new survey by communication agency MHP, ESG concerns are failing to attract investors as people are looking for healthy bottom lines.
Only one percent of investors believe ESG claims are the key driver of their decision making. While a little over half of professional investors surveyed do consider ESG to be an important factor, however, 16 percent of professional investors wrote it off entirely.
In the case of amateur retail investors, the number increased to 45 percent. According to experts, investors fail to link ESG concerns to the performance of their investment in the long run, and some are suffering from 'ESG fatigue.'
Conversely, some 39 per cent said the health of the bottom line was the top driver of their investment decision making.
On the other hand, more than half of professional investors believe ESG is crucial when deciding on investments, indicating that there are positive reasons to back ESG credentials. The study also reveals that investors are confused about the importance of ESG in their investment decisions.
The study also found that while nearly everyone agrees that climate change is an important issue, not everyone agrees on the best way to address it. While professional investors are more likely than amateurs to believe that investing in renewab le energy is good for the planet, they are also more likely to believe that this is not an effective way to tackle climate change. The study found that amateurs are more likely than professionals to prioritize investing in renewable energy above all else.
The numbers paint a troubling picture for the importance for ESG credentials after a turbulent few years in which investors have been hammered by volatility on the markets.
Experts said today that investors were failing to tie ESG concerns to the performance of their investment over the longer term.
“It is likely that many retail investors still don’t understand that ESG concerns are intrinsically linked with these financial priorities over the long term. Added to this, there is some ‘ESG fatigue’,” said Laura Houet, global co-head of ESG at law firm CMS.
“It is a broad term that has been used so widely within investment funds that, while we still do not have regulation to more identify specific strategies, it risks becoming a bit of a catchall term for investors that they struggle to apply to their own investments.”
The acronym dominated debate in the City over the past decade but concerns have spread over the veracity of many claims and rampant ‘greenwashing’ by businesses.
Regulators globally have looked to tighten the guardrails around ESG claims, with the FCA drawing up rules to flush out unsubstantiated claims from the market.
However, the UK Sustainable Investment and Finance Association (UKSIF) told City A.M. today that the backing for ESG credentials among professional investors showed there were reasons to be positive.
“This report finds that more than half of professional investors think ESG is an important factor in decision making – more than three times the number who don’t,” UKSIF chief James Alexander said.
“That’s because it is extremely difficult for investors to make the best decisions for their clients and savers without looking at the full range of material environmental, social and governance (ESG) risks.”
It begs the question; of the Leaders & delegates attending #RAOEurope on the 25th of October, which side of the ESG investment strategy are they on, and who can they rely on as partners to collaborate with?
Find out, first hand at #RAOEurope23
Get tickets here
