More investors are concerned about the credibility of their ESG stocks, according to new research.
Consumers are increasingly interested in the potential power of their investments to drive positive change, but remain cautious around greenwashing claims.
Among 2,000 UK adults polled by Triodos Bank, 26% of those who wouldn’t invest in an ethical fund said it’s because they don’t know whether their ESG credentials are valid. Last year, only 17% of respondents said so.
Over half of the people surveyed said that providers aren’t helpful when it comes to revealing what their money is invested in, with 71% calling for more knowledge and transparency.
It emerged that younger and first-time investors were more likely to focus on the sustainability of their portfolios.
Newbies are choosing to invest for a wide range of reasons, including to build greater financial stability, because of low-interest rates and the impact of inflation, and having amassed more savings during the Covid lockdowns, the study said.
They are also paying closer attention to how funds are structured and managed to ensure they are responsible, and want to see a full list of the companies involved in the funds they invest in or their impact.
“Your money can help drive real, measurable positive social and environmental change, while also delivering on competitive returns. But with many different investments labelled as ‘ethical’ or ‘sustainable’, it can be difficult to sift through the greenwash to find funds that actually deliver the impact investors are hoping for,” said Gareth Griffiths, head of retail banking at Triodos Bank UK.
“Looking at independent websites and digging into which companies a fund invests in can really help you to understand how sustainable the product actually is and what aligns with your values.”
“Fund managers also need to draw clear lines and boundaries on what is sustainable and what is not – for example on fossil fuels, arms or food and farming. In the absence of clear product labelling or guidelines they must be transparent on their approach and align investment choices to the UN Sustainable Development Goals. Active engagement as part of fund management is also critical to actually show positive impact of the investment.”