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ESG not a priority for retail investors, study finds

25 April 2022

A new survey by Charles Schwab suggests sustainable investing is not at the forefront of most investors’ minds.

By Jonathan Jones,

Editor, Trustnet

Two-thirds of investors are unconcerned whether their money is put into environmental, social and governance (ESG) portfolios, according to a study by Charles Schwab.

In its latest Investment Forces survey, the firm found the majority of savers want to maximise their returns, regardless of whether their cash is put to a worthy cause.

This dropped to just 28% among the ‘boomer’ generation (those born between 1946 and 1964), while more than half of millennial (55%) and Gen Z (56%) investors said they regularly considered ESG when making new investments.

Richard Flynn, UK managing director at Charles Schwab, said: "Despite being a major focus for asset management firms, our research shows ESG is not always a priority for retail investors.

“Looking at the trends, we found that considerations around environmental and social factors are often down to the social conscience of individual investors rather than their financial judgement.”

The survey of 1,000 investors found that many liked the idea of ethical investing, with two-thirds of respondents noting that ethical stocks make for good investments and 71% suggesting sustainability strategies provide good returns on investment.

Yet only a small percentage actually invest in ethical strategies, with one in five owning dedicated ESG strategies. In comparison, 39% held cryptocurrencies while 13% actively bought sin stocks such as alcohol, tobacco, gambling or weapons.

“Most investors clearly have good intentions; however, many appear to be conflicted between moral and practical investment motivations. Investors often want to invest in companies that help to improve the environment, such as renewable energy producers,” said Flynn.

“However, there is a reluctance to sacrifice investment performance or pay higher fees in return. This suggests that initially good intentions when investing are not always acted upon.”

Investors may be put off making ESG-friendly investments as they believe there will be higher fees involved, he noted. Around 70% of investors in the study said that sustainable investment options cost more, although 58% said they would be willing to pay additional fees for sustainable investments.

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