Why are people avoiding investing in ESG?
The financial industry can be full of complex terms, complicated messaging and jargon fuelled marketing. And for those who are looking to invest their money, it can seem confusing and overwhelming.
Whilst sustainable investment options such as ESG (environmental, social and governance) aren’t particularly new, there is a real lack of knowledge surrounding them, both from professionals and individuals.
We recently conducted some research into people’s understanding and opinions around ESG investing and 68% of our respondents said they would consider investing with ESG factors. However, the research highlighted there are some key concerns as to why people may avoid ESG investing.
The top 3 most voted concerns were:
Perceived lower returns
Many people believe that by investing using environmental, social and governance factors they will be accepting lower returns. However, this is not necessarily the case due to its focus on long-term sustainability and profitability.
Not enough evidence to back it up
ESG investing is growing in popularity due to the increased publicity around climate change, increased calls for better working conditions and equality and diversity rights, all causing people to think about how and where their money is invested. But even though many people are only just learning about sustainable investment options such as ESG, they have actually been around for decades.
Potentially more costly
Due to the lack of knowledge surrounding ESG, some investors believe it would be more costly to them. However, according to a study published by FTAdviser, European portfolios that were invested to a high degree of ESG principles, persistently outperformed their benchmark.
Our research results really bring to light that investors believe ESG investing will be more costly to them. It also highlights that there is a misconception about the performance of sustainable and ESG investing. However, one key area it highlights is that there is not enough clear and accurate information and awareness around sustainable investment options.
For more information about how investors perceive ESG investing and to find out the truth behind the myths, download our full research whitepaper here.
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
The FD Sustainable Dynamic Portfolios are investment portfolios provided by FD Dynamic Portfolios Limited (FDDPL) which is an appointed representative of Foster Denovo Limited (FRN 462728), and is authorised and regulated by the Financial Conduct Authority (FCA). FDDPL has issued this document in its capacity as investment adviser to the investment manager, AB Investment Solutions Limited (FRN 705062), which is authorised and regulated by the Financial Conduct Authority (FCA).