For UK financial advisers only, not approved for use by retail customers

Investors recognise climate responsibility, but ambivalence to act remains

  • Responsible investing less important to younger investors

  • Concerning findings ahead of landmark climate summit

The Embark Investor Confidence Barometer has revealed that the majority of investors believe that it is their responsibility to invest in a way that doesn’t contribute to climate change. However, despite this, investors appear ambivalent to acting with a half of respondents saying that responsible investing is not important when making decisions about their portfolio – a concerning insight as COP 26 draws near. This is particularly the case for the youngest investors, even though most do not believe it hinders returns.

The Confidence Barometer, a half-yearly survey of 1000 people* conducted by Censuswide for the Embark Group (Embark), a UK retirement solutions provider, found that:

Investors believe they have responsibility to the environment…

Most advised (61%) and non-advised investors (62%) agree it is their responsibility to invest in a way that doesn’t contribute to climate change. Significantly, very few investors actively disagree with this sentiment (19% of advised and 10% of non-advised) either.

This viewpoint resonated most strongly with non-advised investors aged between 35-44 (73%) and non-advised female investors (68%).

…however, people appear ambivalent about acting…

Around half of both advised and unadvised investors (50% and 51%) respectively agreed that responsible investing was not important to them when making decisions about their portfolio. This was slightly split along gender lines, with 54% of advised men stating that responsible investing was not important to them, compared to 46% of advised women. Only a quarter (24%) of advised investors disagreed and this was even lower for non-advised investors (18%).

And the younger the investor, the more indifferent they appear to be. 61% of those aged 35-44 agreed that responsible investing was not important to them in making decisions about their portfolios, compared to 42% of 65-70 year olds, and 40% of 55-64 year olds.

…although they are bullish that responsible investing won’t hinder returns…

Only 16% of investors believe that responsible investing reduces returns. This is even lower for younger (35-44 year-old) non-advised investors (8%). And, more than half (54%) do not believe investing responsibly hinders returns, though older investors are more likely to be unsure, or suspect it does.

However, a significant minority remain unsure (28% advised and 36% non-advised). Advised female investors are less certain about whether responsible investing hinders returns – 49% of women are confident it does not, compared to 58% of men.

This uncertainty is not just amongst investors: it is reflected amongst financial advisers, where 31% of those polled are neither confident or unconfident on the question of whether responsible investing impacts returns.

More to be done?

Commenting on these results, Sara Wilson, Head of Platform Proposition, Embark, said: “Pretty much everything we read tells us millennials are prioritising responsible investing. In some ways, the findings of our latest Barometer reinforce this view: almost two-thirds of investors agree it is their responsibility to invest in a way that does not contribute to climate change. However, this does not appear to be influencing on-the-ground investment decisions.

“So, while investors are talking a good game, our Barometer suggests that many of those with investable wealth – i.e. those in a good position to do something about it – don’t yet consider it important enough to influence their investment choices. With the UN Climate Change Conference kicking off in Glasgow shortly, this is a concerning insight.”

The Confidence Barometer also identified a clear hurdle for the industry to overcome: confidence in the accuracy of ESG information provided in relation to portfolios.

The survey revealed that nearly a quarter of advised investors (23%) are unsure if the information provided on ESG in relation to their portfolios is accurate. This number was even higher for non-advised investors (43%). That 70% of advisers are confident that the information is accurate suggests that this is an issue of education for investors.

Encouragingly though, it seems that investors are simply unsure rather than believing that information is incorrect, so an opportunity to change perceptions exists. Furthermore, with 61% of investors believing their financial adviser provides them with an adequate spectrum of ESG options, there is an opportunity for advisers to do more with ESG for their investors.

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