Pandemic means over half of investors eyeing ESG

But research shows a gap in consumer understanding of ethical investing.

The pandemic has pushed the desire for more ethical and sustainable investments up the agenda for investors, research shows.

A report by insurer Prudential today found that 51% of investors want to move into ethical and sustainable investing (ESG).

The insurer’s research found 61% of advised adults now care more about the environment and the planet than they did before the pandemic.

• Young investors more drawn to ESG funds than over-55s
• Mind & Money: investing in line with your values

The report, which looks at intergenerational planning and wealth transfer between advised families during the pandemic, found 26% of respondents are more concerned than they’ve ever been about the environment.

One in five said they are more worried now that they have children or grandchildren.

Despite the desire for ethical and sustainable investing, 36% admit they actually have no idea what their current investments - including workplace and private pensions - are invested in, as they have little to no control. 

Catriona McInally, investment expert at Prudential UK, says: “Once perhaps viewed as a fad, sustainable investing is becoming normalised, making it a fundamental building block within intergenerational financial planning. It also enables clients to leave their children more than just a financial legacy in terms of planet, environment, and society.”

• Investor ESG interest grows, even if it means lower returns

• Want to invest ethically? ii’s ACE 40 list of ethical investments can help

David Macdonald, founder of advisory firm The Path, which focuses on impact investments, says the number of ESG-focused funds has skyrocketed, but warns that definitions vary.

He adds: “Finding an investment with good management and positive growth prospects is hard enough in usual times - add an ESG overlay and the picture becomes a whole lot more blurry.

“Buzzwords such as ‘ethical’, ‘ESG’, ‘SRI’ and ‘sustainable’ are often used interchangeably despite each having a very different meaning. Plus, where is the line drawn?

“Something which is deemed acceptable to one fund manager may not be acceptable to the next. So, instead of one straight divider which separates right from wrong, we end up with endless shades of green.”

• Ethical investing jargon buster
• Are you saving enough for retirement? Our calculator can help you find out

Macdonald says definitions will eventually become more established.

Research by interactive investor (ii) backs up the Prudential findings that there is a trend towards ESG investing.

ii found that, of the investors investing within an ethical framework via its ethical investing long list (a list of all the fund and investment trusts in this universe available on the platform), environmentally focused choices are attracting the top buys.

Some seven out of the 10 most-bought ethical investments over the year to date are environmentally focused. 

ii also has an ACE 40 list of ethical investments.