Around 76% of UK high net worth individuals (HNWIs) believe the idea of environmental, social and governance investing is important, according to research.
However, taking proactive action doesn’t appear to match up to good intentions.
A survey by Canaccord Genuity Wealth Management (CGWM) has found only 12% of HNW investors surveyed seek out companies and funds that are “well governed” and have a “respectable” environmental and social reputation.
Almost a third (28%) seek out companies that provide a decent return and don’t apply any restrictions to the types of businesses they invest in.
Canaccord surveyed 500 HNWIs with £750,000 or more in investable assets.
Good intentions
Patrick Thomas, head of ESG investments at CGWM, said: “This research is pretty telling – most people have good intentions and believe that socially conscious investing is the way forward – but many are baffled by the variety of definitions and approaches.
“Why? Apathy undoubtedly plays a part. But there is also a misguided belief that if you invest your money ethically, you forgo a decent return.
“That is absolutely not the case – in 2018, our three risk-rated ESG portfolios outperformed their traditional equivalent risk-rated portfolios that do not have any such criteria.
“We saw a diverse range of ESG fund managers in the US, UK and emerging markets significantly outperform their equivalent non-ESG peer group.”
Women are more responsible investors than men
The research also shows that women are more “conscious” investors than men.
Some 82% of female HNWI respondents think that investing in responsible companies is important, compared to 74% of men.
However, this is still in its infancy, as currently only 19% of women surveyed proactively seek out companies and funds that have a positive ESG reputation, compared to only 11% of men.
Thomas continues: “Our research shows that it’s more important for women to invest responsibly (nearly one in five compared to only one in 10 men), whereas men tend to prioritise returns (nearly one in three men compared to one in five women).
“But as the popularity in ESG investing grows and historic data proves that companies that are badly governed, have poor environmental records and are socially irresponsible are less likely to do well, that perception will start to change.
“Recent successful advertising campaigns from both Nike and Gillette have shown that being socially conscious is very powerful for brands, so this is a genuine business strategy for a lot of global companies.
“Irrespective of gender, if investors want to ensure they are being responsible, ESG investing does not require clients to sacrifice performance at the altar of their values. ESG is not just a fad – it’s here to stay.”
