The demand for sustainable investments remains strong
Hello, I am back from my summer hiatus. Did you miss me? I doubt it. Anyway, here we go for the second part of the year…
Over the last two years or so, there has been increasing pushback on sustainable investments. This pushback has been particularly strong in the US, where the SEC has been forced to shelve its new climate disclosure rules in the face of an avalanche of lawsuits. In Europe and the UK, meanwhile, the pushback has been mostly focused on taking the edge off of excessive regulation, but nobody doubts the need for businesses to take ESG factors into account. But what are investors thinking? Have their minds changed since the cost-of-living crisis and the underperformance of ESG darlings like renewable energy stocks?
Throughout May of 2022, right when the cost-of-living crisis became the number one issue for consumers and shares of renewable energy companies tanked, the FCA asked a representative sample of 19,145 UK citizens about their financial lives. This Financial Lives Survey is done every two years, but the 2022 survey was the first one to ask participants, particularly about responsible investments.
Unfortunately, the FCA did not make the results of the specific questions on responsible investments available to the public, but a new study by researchers from the University of Sheffield showed the data. Below are the results from the main questions asked in the survey.
UK consumer attitudes toward responsible investments
Source: FCA, Montagnoli and Taylor (2024)
It is really impressive to see that four out of five investors agree that businesses have a responsibility to conduct their business with a view to more than just profits and to include the impact they have on the environment as well.
Similarly, three out of four people either have already made responsible investments in the past or are planning to do so in the future. However, people do not want to pay higher fees for these investments or accept higher risks.
All that makes sense, though I am surprised how large the demand for responsible investments is. Remember, this was not a survey of Millennials and Gen Z people or city elites. This is a survey representative of the entire UK population.
The study from the University of Sheffield found no meaningful difference in attitudes toward environmental and social issues between men and women, though admittedly, women are somewhat more likely to emphasise the importance of these issues than men. Interestingly, there was no discernible age effect, which surprised me since my impression always was that older investors are more sceptical about responsible investments.
The only meaningful determinants of interest in responsible investments found in this survey of UK investors are educational attainment and financial literacy. In essence, a higher level of education in general and financial knowledge in particular leads to higher demand for responsible investments.
And finally – and this is I think the key takeaway for providers of investment products – people who are more likely to invest in responsible investments are on average 7% more likely to hold shares and on average have 77% more money invested in financial assets than people who are not interested. In other words, the people who have the money want to invest in responsible investments, even at a time of financial difficulties.
Welcome back JK.
Private shareholders are recognizing the problems with ethical investing, Renewable Energy & ESG.
My own view is that Climate Change is a real threat; but the measures being taken to counter it are often ineffective; while the misleading methods of ESG are now acknowledged.
If all this encourages companies to identify realistic counter CC measures and, with HMG support, make them profitable, then private shareholders will respond.
Welcome back. Investors may say that but do they really care? Folk will still put convenience above changing their own carbon-reducing behaviour, like shopping at Amazon. Bearing in mind the 1% own 2/3rds of all stock and not only create over 50% of all carbon emissions but control the Boards I can't see any meaningful movement on climate breakdown by publicly traded companies. And Anglo American governments can't backtrack fast enough from their climate commitments. Governments have had 30 years to do something and they've done nothing. Maybe when cities like Shanghai, Manhattan and Miami are underwater folk might start to think about doing something...even then I'm not sure.