Returns have always been a key concern for investors. But now, ethics are also playing a part in their decisions.
Sustainable investments are becoming increasingly more common. Findings from the latest Schroders Global Investor Study, discussed on YourMoney.com, reveal that UK investors no longer believe that ethics and investment returns are mutually exclusive.
The fund group’s research shows that over the past five years, 56% of UK investors have increased their allocation to sustainable investments. Meanwhile, 68% confirmed that investing more ethically has become increasingly important to them.
According to the study, it’s millennials who are leading this shift towards more sustainable investments. Ethics are a key concern for 85% of respondents aged 18-36 years, compared to 47% of those aged 65 years and over.
Looking at investment allocation, 31% of millennials had more than half their portfolio allocated to sustainable investments, compared to 9% of those aged 65 plus.
For many years, sustainable and ethical investment providers have struggled with the assumption that environmental, social and governance (ESG) factors compromise performance. However, those preconceived ideas may be fading, with just a quarter of investors in the UK believing investing sustainably would hamper their returns.
Speaking about the study’s findings, Schroders’ global head of stewardship, Jessica Ground, stated: “This survey underlines the rapid growth of interest in sustainable investing. The fact that 56% of investors have increased their allocation to sustainable investments in the past five years tells you how important this is for so many people.”
She also said it was encouraging to see investors are no longer holding back from sustainable investment for fear of weaker investment outcomes.
Of course, certain barriers preventing many investors from embracing a more ethical approach remain. Lack of awareness is one of those challenges, with 8% of investors saying that because they don’t fully understand what sustainable investing is, they would not consider it as an option.
This goes some way in explaining why ethical funds account for just 1.3% of total assets invested in funds available to UK investors. According to data from the Investment Association, £15.4 billion of investors’ assets are currently in ethical options.
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