Hardly a day goes by without at least a handful of financial services firms launching ESG or sustainable products, often “in response to overwhelming customer demand”, according to their respective marketing and comms teams.
But research from Charles Schwab found a staggering 66% of retail investors are not concerned about the sustainability of their investments.
When asked more broadly, just over two thirds of respondents believe ethical stocks are a good option. Companies involved in renewable energy are also seen as an attractive opportunity (81%), similarly those with good sustainability strategies (71%).
But those views don’t translate into action, as only 19% of retail investors hold ethical stocks, compared with 39% who are invested in cryptocurrencies. Just over one-in-10 (13%) hold ‘sin stocks’, which as companies that produce tobacco, alcohol, gambling or weapons.
A matter of age?
When it comes to taking into consideration ESG factors in investment decisions, just 44% pay attention to them, a number that falls to 28% for the ‘Boomer’ generation – those born between 1946 and 1964.
Unsurprisingly, the proportion rises to 56% for Gen Z and 55% for millennials.
Such a big disparity seems fuelled by the belief that making investments more ESG-friendly will mean higher fees (70%). Yet 58% said they would be willing to pay higher charges for more sustainable investments.
Richard Flynn, UK managing director of Charles Schwab, said: “Despite being a major focus for asset management firms, our research shows ESG is not always a priority for retail investors.
“Looking at the trends, we found that considerations around environmental and social factors are often down to the social conscience of individual investors rather than their financial judgement. Most investors clearly have good intentions; however, many appear to be conflicted between moral and practical investment motivations.
“Investors often want to invest in companies that help to improve the environment, such as renewable energy producers. However, there is a reluctance to sacrifice investment performance or pay higher fees in return. This suggests that initially good intentions when investing are not always acted upon.”
