Developments and commentary in and around the ESG investment space.

Consumers are acting more sustainably – just not with their savings. That is the conclusion of a detailed study from The Wisdom Council which found that the majority of investors don’t believe that the investment industry has much of a role to play in creating a more sustainable world. They see it in actions taken in their daily lives, and expect companies to behave responsibly, but few are making the connection to their financial planning or investments.

Six in 10 are not aware that they have choices in this respect to tackle challenges such as climate change, and the attitude has changed little over three years, even as sustainble investing has begun dominating the airwaves. 

In fact, the study of 2000 UK investors with pensions shows them ranking the investment industry just above mining, aviation and fossil fuels in its ability to operate sustainably.

“When someone looks for ways to be more sustainable in their lifestyle, they think about recycling or reducing plastic or choosing a green energy supplier – they are not thinking about where their pension or ISA is invested and where they could arguably have a bigger impact,” head of research at Wisdom, Josh Blundell, said.

He said the study underscores a worrying lack of awareness and knowledge coming from the industry about how it can respond to big environmental and social challenges, and retail investors in particular are being left behind.

The Wisdom Council says that providers aren’t cutting through to where it matters.

The good news is that once investors are engaged by advisors on the topic, demand for sustainable investing is strong. The study found that two-thirds in this educated group want at least some or all of their pension invested using responsible principles. But they showed little discrimination for how this is achieved, either through exclusions, ESG integration or just more engagement on sustainable themes. Their message to advisors was to implement responsibly on their behalf but not at the expense of higher fees nor on sacrificing returns. Two-thirds still expect the core service to be about performance.

While Wisdom's research points to an untapped demand for responsible investing (double the number of investors want to learn more about responsible investment than in 2017), only around 9 per cent are actively engaged today, and these tend to be older, wealthier clients.

“Our research highlights that the messages the industry is putting out are not landing. It is becoming a hygiene expectation much faster than we might have imagined,” he said, and the industry needs to move quickly to communicate its role.

Blundell sees sustainable investing as the “the central battleground” for wealth and asset managers seeking to stand out in a saturated market.

Sam Turner, head of responsible investment at St. James’s Place, a partner in the study, added that the research reinforces that "clients care deeply about sustainability." It is up to the industry to “break down the jargon and demonstrate the role savings and investments are having on bringing about positive change."