ESG investors pessimistic on net zero targets
Three quarters of retail investors believe that environmental, social and governance (ESG) themed investments will not generate the money needed to achieve the UK’s net zero targets.
According to a new survey by peer-to-peer lending platform Abundance Investments, retail investors are aware of ESG as a concept but don’t fully understand the benefits yet.
70 per cent of Abundance’s investors said that they had heard about ESG investing, but only 60 per cent said that they had a clear understanding of exactly what the ESG label meant.
The survey also asked if investors trust ESG investments to deliver on their impact claims. Less than one in 10 said yes.
“Given that by definition, our investors do have a particular interest in much of what the ESG banner is supposed to be all about, this very low score suggests that those with a passion to invest to green and ethical outcomes are a long way from being convinced about the value of the wider ESG label,” said Abundance in a blog post.
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“The confusion that this finding exposes says much about how something has been lost in the attempt to bracket ‘good’ investments together.
“Whilst most people would ‘get’ what an environmentally sound investment is, perhaps fewer would instinctively know what a positive ‘societal outcome’ means. Fewer still will understand what ‘good governance’ is all about — or at least what positive impact under this category means to them.”
Abundance concluded that ESG investing as an idea is positive for the industry, but noted that investors require more transparency, and greener business practices which deliver a tangible benefit.
“There needs to be greater transparency and clarity,” the platform added.
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“Investment companies need to ask themselves how their product is genuinely delivering change.
“Whatever the impact an investment makes, we believe it is the responsibility of the investment companies to be honest in how they market their investments, and make it clear to potential investors of the impact their money can make.
“If everyone in the sector can do that then, over time, ESG can become a label that has real meaning for investors looking to make greener choices.”
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