Some 53% of private investors consider ESG factors when investing, but its popularity has declined slightly since 2021, according to the latest annual ESG Attitudes Tracker from the Association of Investment Companies (AIC).
The research, conducted by Research in Finance, found that almost two-thirds of respondents (65%) in 2021 said they considered ESG when investing, a figure which fell to 60% in 2022 before falling again to this year’s figure of 53%.
Meanwhile, a majority of respondents admitted to having concerns about greenwashing, a response which has increased in frequency since 2021. In that year, 48% of respondents agreed with the statement “I am not convinced by ESG claims from funds”, which subsequently rose to 58% in 2022 and hit 63% in this year’s survey.
“Our ESG Attitudes Tracker suggests that 2021 may have been a high point for enthusiasm about ESG investing,” said Richard Stone, chief executive of the AIC. “There is plenty of residual support for the concept but concerns about greenwashing are increasingly dominating private investors’ mindsets.
“These findings underline the importance of the regulator getting disclosure rules right, in particular the new labelling regime. A new regime with high standards that investors can rely on is essential for helping investors who care about ESG find products that align with their values and beliefs.”
All three elements of ESG – environmental, social and governance – had declined in importance since last year, with environmental factors remaining the most important to private investors. Responses suggest the poor performance of ‘ESG’ mandates over the last two years, and a perception of there being an increased element of risk, were also factors in a cooling of opinion towards ESG in private investment.
However, despite these worrying trends, there is cause for optimism. One investor said: “A year ago I was 100% committed to performance. I now increasingly consider the wider world and wish to make more of a contribution if only by example.”
A notable number of investors also considered ESG issues as extremely important. When asked whether they agreed with the statement “I am a fan of investments that consider ESG factors”, nearly a fifth (19%) strongly agreed.
One 70-year-old investor said: “I am a very strong believer in the fact that something major needs to change. I am not a climate denier. I think we have got an absolutely mega problem coming up. Not for my generation, but certainly for the ones that follow us. In a way, ESG is the only way that normal investors can impact on the big problems.”