High Net Worth individuals are being put off ESG investments due to poor returns, scepticism and mistrust, according to a new study by a Chartered Financial Planner firm.
Four out of five HNW clients (80%) do not see climate change as a priority, the study by wealth manager Saltus Wealth found.
This attitude and poor returns prevents most from investing in green and social impact funds, according to the third edition of the Saltus Wealth Index.
Saltus surveyed more than 1,000 people in the UK with investable assets of more than £250,000.
It found that the “vast majority” (80%) do see climate change as an important investment criteria.
Concern about the level of returns generated from ESG investments is still a major barrier but cynicism and mistrust are also top reasons why most do not hold ESG investments, says Saltus.
The research found that despite the fact that 44% of HNW investors invest in ESG, there are “rising levels of scepticism” about the robustness and legitimacy of green and social impact funds, as well as high levels of apathy.
Of those respondents that do not invest in ESG, the top reasons were similar to last year.
Comments included: ‘they do not generate sufficient returns’ (30%) and ‘I haven’t got round to it yet (30%)’.
The number of respondents who said they think ‘sustainable investing is just hype’, do not believe ESG investments are ‘truly environmentally friendly’ and are concerned about ‘greenwashing’ have all increased significantly.
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Why do you not invest in ESG?
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2023
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2022
|
|
I have not got round to it yet
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30%
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26%
|
|
They don’t generate sufficient returns
|
30%
|
32%
|
|
Sustainable investing is just hype
|
26%
|
20%
|
|
I don’t think they are truly environmentally friendly
|
25%
|
15%
|
|
I don’t understand the jargon around sustainable investing
|
23%
|
19%
|
|
Doing so will be classed as ‘greenwashing’
|
23%
|
15%
|
|
I don’t think they make a difference
|
22%
|
22%
|
|
I don’t believe reporting and analysis of ESG initiatives is robust
|
22%
|
22%
|
|
I don’t believe climate change is a priority
|
20%
|
19%
|
|
Other
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1%
|
2%
|
Source: Saltus Wealth Index
Mike Stimpson, partner at Saltus, said: “Concern about ESG investing is perhaps an inevitable consequence of the sector gaining maturity and being held to the same standards as other parts of the portfolio. It seems likely that this sector will be a permanent feature of many investors’ decision making. This kind of questioning is consistent with the approach a robust manager would take with any investment, but it does speak to the need for transparency and a common set of standards and definitions.
“Interestingly, despite our data revealing millennials are driving the popularity of ESG investments, even they aren’t immune to this scepticism. They, like most of the respondents, state that a lack of trust and returns in the products are the main reasons for not investing in this space – rather than a lack of appetite for ESG investments overall.”
• 2,007 UK 18+ respondents took part including 1,002 who have £250k+ investable assets, as well as 1,005 with investable assets under £250k. Respondents were all UK-based. Research was conducted by Censuswide between November and December 2022.
