Climate risk is a key concern for savers, but less than one in five people say they are currently using their money to invest in greener funds, according to new research.
Aegon asked savers what practical steps they were taking to make a positive impact and support a more sustainable society.
However, while 95 per cent of respondents said they recycled, just 15 per cent said they invested in ESG funds or other responsible investment strategies.
Overall people were more likely to cite tangible day-to-day activities, such as recycling, avoiding single use plastics (cited by 59 per cent of respondents) or buying local produce (49 per cent). Investing in ESG funds was bottom of the list of options.
Despite the low usage of ESG investments, almost eight out of 10 savers said climate change is an important risk to consider when investing, which Aegon says suggests a disconnect between people’s beliefs and the way they invest their money.
However, there are signs that ESG investments are gaining significant traction and a growing proportion of the population will have some exposure to ESG strategies through their pension and investments.
UK savers put almost £1 billion a month on average into ESG funds in 2020, up 66 per cent on the previous year. And 41 per cent of financial advisers said there has been an increase in demand for ESG investments.
Supporting this demand, regulatory change is driving reforms to both workplace pensions and the financial advice sector, with ESG considerations becoming more firmly embedded into fund selection processes.
The survey also asked what would help people make more sustainable investment choices. Just over 50 per cent said they’d like more information to help them understand ESG investing and this was closely followed with requests for clear labelling (43 per cent), more ESG investment choice (39 per cent), and better articulation of the benefits and ESG impact (45 per cent).
Aegon UK’s managing director of investment solutions Tim Orton says: “It’s clear few people understand what is meant by ESG investing and that’s not surprising given that within the investment industry there are debates about what it constitutes.
“But the reality is many people will now have a proportion of their pension in ESG strategies – although they may not be aware that this is the case.
“Workplace scheme default funds like Aegon’s, which are used by 95 per cent of defined contribution scheme members, are increasingly integrating ESG considerations into their investment processes.
“Over the long-term, investing in a sustainable way can have a meaningful impact on how businesses are run and how they interact with society and the environment. It can also have a positive impact on the value of people’s savings.
“These actions will have a greater impact if we can engage customers and help them understand how their savings are contributing to a more sustainable world, and how easy it can be to select a fund with a sustainable investment agenda.”
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