Investments into ESG funds look set to double during 2021, according to new research, with investors planning to move funds to support companies with higher sustainability ratings that are making a positive more impact on society and the environment.
The study, which is by an ESG-focused investment house, states that just one in 10 (9 per cent) of investors currently hold ESG investments. However its research suggests this could increase significantly with 12 per cent of investors who currently do not hold ESG funds planning to move into this area in the year ahead.
Furthermore, an additional 17 per cent of investors surveyed said they are planning to move to ESG in 2022 or later, showing the potential the market has to grow in the coming years.
ESG is now a key factor for investors when making decisions about their portfolio, with the research suggesting investors are becoming increasingly concerned about global environmental issues such as climate change.
Three quarters (75 per cent) say investing in businesses that tackle climate change or have a positive impact on the environment is important to them. One in seven (70 per cent) investors say they would avoid investing in a business with a negative societal, corporate governance or environmental impact, showing the influence a company’s ESG credentials can have on the value placed on them by investors.
The research also found that almost three in 10 (28 per cent) investors would consider higher risk/higher return investments that tackled climate change over safer, more traditional stocks.
It is often assumed that ESG investment are more popular with younger investors. However this report showed there was little difference across the age groups. Three in four (77 per cent) of 18-35 year olds, and 35-55 year olds, say ESG is important to them when investing. This only drops slightly for over 55s with 71 per cent saying the same.
As the UK economy plots a course to economic recovery post-Covid 19, it is clear that there is a very real opportunity for this recovery to be built upon investment in green business and technology.
OnePlanetCapital co-founder Matthew Jellicoe says: ‘We are hugely encouraged to see a real desire amongst the investor community to invest in ESG as we plot a course for the post-Covid economic recovery.
“ESG is highly regarded among investors. The world is waking up to both the positive and negative influences that businesses can have on the environment, and a company’s ESG credentials, or lack of, is not going unnoticed by investors.
“Our research shows that over a quarter of the investor community said they would be interested in taking on ‘riskier’ investments if they felt they would have a positive impact on the climate.”
“It is now clear that investment performance does not need to be sacrificed in order to tackle the environmental problems of the day. UK sustainable funds are likely to outperform the market over the short, medium and long term.
“In order to meet the goals set out in the Paris Climate Agreement, and the UK’s commitment to end its contribution to global warming by 2050, unprecedented change is required to our global economy. We are on the verge of a green industrial revolution and we have the opportunity here to emerge from Covid-19 with a much greener, and more sustainable economy.”
Earlier this year, OnePlanetCapital launched a specialist sustainability EIS Fund to invest in businesses tackling climate change.
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