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Investors demanding climate focused investments
Australia’s longest standing responsible investment firm, Australian Ethical, recently combined with research house, Investment Trends, to survey investors on their ESG views. The survey covered 2,854 investors and 321 financial advisers, all of whom are based in Australia.
Despite the growing popularity of ESG strategies and headlines being dominated by “green-focused” policies in the US and Europe, some 43% of respondents that were not currently using ESG investors thought their performance would be worse in an ESG-focused strategy. On the other hand, 82% of those consumers invested into ESG products believe their returns will be better or about the same than the alternatives, according to Sarah Brennan, CEO of Investment Trends.
The survey was seen as somewhat of a temperature check for the industry, as more investors demand ESG-focused strategies but advisers continue to come to terms with what their offerings looks like. The questions were targeted at both those who currently invest in ESG options and those who do not, separated into millennials (aged 25 – 39), Zoomers (18 – 24) and Boomers.
Some 78% of existing ESG investors indicated they will be basing further investment decisions on environmental rather than other ethical considerations; 46% were prioritising governance issues following a series of board missteps and failures of the “pub test,” with 34% seeking to have a positive social impact with their capital.
Advisers remain among the most cautious, with just 40% saying they discussed ESG investing with their clients in the last 12 months. It is yet to be seen whether this is a generational issue, or if advisers are struggling to understand their own ESG views let alone craft a response for individual clients.
The result has been that 55% of new inflows into ESG products were driven by pressure from their clients, rather than a proactive approach. On the sector- or theme-specific issues, millennials remain focused on supporting “clean and renewable energy sources”, Zoomers on “energy consumption reduction” and all other age groups on the “recycling of non-biodegradable waste”.
As client books continue to age, advisers may need to pay more attention to the younger cohorts, with 74% of Zoomers also saying they had bought an investment or stock based on environmental factors.
“This is why we’ve ensured climate-friendly frameworks are integral to our investment philosophy, which has driven a 34-year track record of above-market returns” said John McMurdo, CEO and managing director of Australian Ethical.
