For a long time, sustainability issues have been of secondary concern to investors. The primary goal for many has been to maximise investment returns. However, over the last few years, more investors have become interested in sustainable investing. This is an approach that takes into account environmental, social, and governance (ESG) factors when choosing investments.
According to new research, the passion for sustainable investing has grown so much, particularly among new investors, that many are now demanding greater sustainability expertise from their fund managers to ensure that they are actually investing with a positive impact. Here’s the lowdown.
Investors and sustainability: what does the research show?
According to a new study by Triodos Bank UK, eight in 10 current investors (rising to nine in 10 for new investors, who have started investing in the last 12 months) want or expect their fund manager to upskill in sustainability issues to avoid greenwashing accusations from financial providers.
Investors also want their managers to be proactive in aligning with their sustainability values.
For example, eight in 10 existing investors (rising to 9 in 10 new investors) expect or want to see their fund managers divest from harmful investments and challenge companies directly on sustainability.
What’s behind the increased push for sustainability?
The focus on sustainability could be to do with world events and ongoing coverage of the climate crisis.
For example, 56% of new investors say COP26 has made them think more about how their investments impact the environment.
Passion for sustainable investing has grown so much that 60% of new investors actually believe financial institutions should only offer sustainable investment ISAs. Meanwhile, 78% believe that financial providers should do more to help combat the climate crisis.
Michael Kind, senior campaigns manager at ShareAction, says that it’s not surprising “to see increasing numbers of retail investors understand the impact of their money on the world, and to recognise that impact on people and the planet is just as important as returns”.
He added, “A true responsible investor sees negative impacts as just as important as financial return, and takes steps to mitigate or avoid these impacts.”
Indeed, as a true testament to their desire to make a positive difference in the world, six in 10 new investors (63%) say they would be willing to accept lower returns in order to invest in industries they believe in.
However, recent data shows that investors don’t actually have to sacrifice returns when pursuing sustainable investing. According to Refinitiv, ESG funds have outperformed conventional funds returns-wise over the past three to five years.
How can investors get started with sustainable investing?
If you are an investor hoping to get started with sustainable investing, it’s relatively easy to do. All you need is a share dealing account. Check out our list of top-rated share dealing accounts to see if you can find one that meets your needs.
After you’ve opened your account, you’ll be able to choose from a variety of investment options. You can choose to invest in individual shares of companies whose values align with yours. You can also choose to invest in funds that invest their money in these companies. Many brokers provide tools that you can use to screen the funds available and find those that match your values.
Another way to invest in sustainable investments is through a stocks and shares ISA. The benefit of a stocks and shares ISA is that you do not pay tax on your returns. This means that you get to keep more of your money. Check out our reviews of some of the top-rated stocks and share ISAs in the UK right now to learn more.
Finally, keep in mind that when it comes to investing, there are no guarantees of positive returns. Your investments can go up or down, and you may end up with less than you put in. So, do your research and only invest at a risk level that you are comfortable with.
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