“These results underline the importance of the regulator in getting the disclosure rules right, especially the new labeling system. A new regime with high standards that investors can trust is essential to help investors interested in ESG find products that align with their values and beliefs.”
Did investors just give up?
The percentage of investors who say sustainability is important to them in their daily lives has hardly changed since 2021. It was 69% that year, dropped to 64% in 2022, but rose to 68% this year.
Greenwashing concerns asidepoorer performanceof the ESG mandates over the past two years may also have had an impact. Only 22% of investors now believe ESG investing is likely to improve performance, compared to 33% in 2021, and 24% believe it will hurt performance, compared to 20% two years ago4.
The research was accompanied by in-depth interviews. A 44-year-old investor said of their ESG investing: “I was just thinkingthis just isn't for me. They weren't delivering the return I was looking for, so I felt I would rather do my bit for the community by buying more fair trade items, recycling even more and helping the local community and local charities.”
ESG investing is also perceived as risky by some investors. Nearly a third (30%) of respondents think this is likely to lead to a higher risk, compared to 14% who think it will lead to a lower risk5.
Another investor said: “The ESG funds I invested in were underperforming and at my age, 70, I need to maximize my returns and cannot take unnecessary risks. I contribute to ESG through my own lifestyle.”
Not everyone is pessimistic
Not everyone feels the same. One investor said: "A year ago I was 100% committed to performance. I am now increasingly taking the wider world into account and wanting to contribute more, if only by leading by example."
Another commented: “I think greenwashing has been tackled to some extent – and at least a lot more people are being smart about it.”
When respondents were asked what should be done to tackle greenwashing, the most common answers emergedstandardized verification by a reputable third party, biggertransparency, and industryregulation.
A 59-year-old investor said: “If you want to compare one fund against another,Then there must be standards.You can't give everyone their own definition.”
“Something big has to change”
There is also a minority of investors for whom ESG issues are extremely important. When asked whether they agree with the statement 'I am a fan of investments that take ESG factors into account',almost a fifth (19%) strongly agreed6.
A 70-year-old investor said: “I'm a big believer in thatsomething big needs to change. I am not a climate denier. I think we have a very big problem. Not for my generation, but certainly for those who follow us. In a sense, ESG is the only way normal investors can influence the big issues.”
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Notes for editors
- ESG Attitudes Tracker is the new name for AIC's annual survey of investor attitudes and expectations regarding ESG investing. Three waves of research were conducted by Research in Finance in 2021, 2022 and 2023. The final wave consisted of an online survey of 407 retail investors and in-depth interviews with twenty individuals selected to represent a range of views on ESG. The online survey was conducted between July 19 and August 6, 2023, and the interviews were conducted between August 1 and August 14, 2023. You can read more about the 2022 survey waveherand the wave of 2021her.
- Investors were asked how important environmental, social and governance issues were to them when investing, on a scale of 1 (not at all important) to 5 (extremely important). Respondents who chose 4 or 5 are considered among those who consider each topic important.
- Of the 47% of respondents who said they did not consider ESG when investing, 56% said they prioritized performance over ESG issues, and 51% said they were not convinced by ESG claims from asset managers. Other reasons chosen were “I've never really thought about ESG” (17%) and “I don't understand how to invest with ESG considerations in mind” (8%).
- In 2021, 33% of respondents said ESG investing was more likely to improve performance, 20% said it was more likely to detract from performance, 29% said it was unlikely to have an overall impact on performance would have, and 18% did not know. In 2022 these figures were 22%, 25%, 31% and 21% respectively and in 2023 these were 22%, 24%, 34% and 20%.
- In 2021, 20% of respondents said ESG investing was likely to be lower risk, 23% likely to be higher risk, 43% said it was unlikely to impact risk, and 14% didn't know. In 2022 these figures were 14%, 29%, 43% and 14% respectively and in 2023 these were 14%, 30%, 41% and 14%.
- 19% strongly agreed with the statement 'I am a fan of investments that take ESG factors into account', 31% somewhat agreed, 28% neither agreed nor disagreed, 12% somewhat disagreed, 9% strongly disagreed, and 1% didn't know.
- The Association of Investment Companies (AIC) represents a wide range of closed-end investment companies, including unit trusts and other closed-end investment companies and VCTs. AIC members believe that the industry is best served when it is united and speaks with one voice. AIC's vision is that investment companies should be understood and considered by every investor. The AIC has 347 members and the sector has total assets of approximately £264 billion.
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