Charles Schwab UK, a financial services provider, released new research entitled Investment Forces this week, looking at the attitudes and behaviour of UK investors in the current financial climate.

Despite the increasing number of ESG-led funds, research by Charles Schwab UK shows that UK investors are less concerned by environmental, social and governmental factors in their investments now than two years ago, amidst the cost-of-living crisis.

Since February 2021, the number of investors who believe that companies with strong ESG credentials are attractive investment options has dropped by 7 per cent, from 75 per cent to 68 per cent, the survey reveals.

The true value of ESG-led investments is being increasingly scrutinised amidst the current cost-of-living crisis, with UK investors placing more emphasis on the returns their investments are making instead, the firm said. 

In December 2021, more than half of investors prioritised ESG investments, regardless of whether they underperformed. This has dropped by 8 per cent in just over a year. Sixty-seven per cent now prioritise maximising returns over choosing sustainable investments, the survey shows. 

The number of investors who consider ESG when making new investments is also dwindling, down 6 per cent since December 2021 to 38 per cent, the firm continued. Across generations, Boomer investors are the least likely to take ESG factors into consideration when investing, followed by Gen X investors, Millennials and Gen Z investors, the firm said.

Charles Schwab conducted an online survey to understand the attitudes and behaviours of UK investors in the context of current conditions affecting financial markets. Respondents were aged 18 or over and held at least one type of investment (based on a list of different asset classes, vehicles and other investment instruments). Survey responses were collected and analysed from 1,000 UK respondents. The survey captured a natural spread of demographics across age, region, gender, working status, income and total value of savings and investments.

Investors losing confidence in ESG 
According to the firm, the belief that ESG investments provide investors with good returns is deteriorating. Now only 65 per cent think they yield better returns, as opposed to 71 per cent in December 2021. Appetite to pay additional fees for sustainable investments has also decreased by 8 per cent, meaning that now only half of investors are willing to take on the associated charges, the survey shows. 

Richard Flynn, managing director for Charles Schwab UK, said: “With the need to maximise returns seemingly growing in importance amid the cost-of-living crisis, fewer investors seem to be factoring in ESG-related considerations into their investment decisions.” 

“The return on investment is increasingly being called into question, with the fees often associated with sustainable investments now actively discouraging investors in this current climate. It will be interesting to see how any economic rebound and reduction in inflation impacts this attitude in the coming years,” he added.