Two thirds of investors are focused on returns NOT ethics, but still reckon green stocks – especially renewable energy – are worth putting money in
- Some 56% of 18 to 25-year-olds consider ethics when making investments
- This falls to 41% among 38 to 55-year olds, and 28% among over-55s
- However, 19% of investors hold ethical assets, while 13% hold ‘sin’ stocks
Most investors are focused on maximising returns rather than whether businesses they put money in pursue sustainable policies, new research reveals.
But a similar number believe ethical investments are a good option that will also bring decent returns, and four out of five regard reneweable energy as a promising sector.
Three quarters of people who hold at least one type of investment already – including stocks, funds and trusts – believe companies with strong environmental, social and governance credentials are becoming increasingly attractive investment options, according to the research by Charles Schwab.
Investing trends: Four out of five investors regard reneweable energy as a promising sector
However, the investment broker found that 19 per cent of the 1,000 nationally representative investors it surveyed hold any ethical investments at present.
That compares with 13 per cent of investors who hold ‘sin stocks’ such as companies involved in alcohol, tobacco, gambling or weapons, and 39 per cent of investors who hold cryptocurrencies.
Charles Schwab also found 44 per cent of investors regularly consider ethical factors when making a new investment, made up of 33 per cent who said usually and 11 per cent who said always.
A further 34 per cent sometimes investigate how responsible or sustainable their investment target is while 11 per cent say they do so rarely and 11 per cent say never.
The investors who take ESG issues into consideration usually or always were far more likely to be younger, with 56 per cent of 18 to 25-year-olds saying they did so and 55 per cent of 26 to 37-year-olds.
Some 41 per cent of 38 to 55-year-old also took this approach to researching investments, and 28 per cent of over-55s.
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The Charles Schwab survey also found:
– Some 78 per cent would be willing to switch into sustainable investments if all else remained equal, such as fees and returns
– However, 70 per cent of people believe sustainable investment options cost more than non-sustainable ones, and 58 per cent say they are prepared to stomach this if necessary
– More than half, or 55 per cent, say they don’t mind if investments underperform as long as they are sustainable – though this finding in the survey appears to conflict with the 66 per cent who state they just want to maximise returns
– Some 69 per cent were unsure how to check the sustainability of an investment before making decisions – see the box above.
The broking firm’s UK managing director, Richard Flynn, says: ‘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.’