Investors in London are more likely to prioritise Environmental, Social, and Governance (ESG) criteria compared to other areas in the UK, according to research from wealth management and financial planning firm, Saltus.
The Saltus Wealth Index found that three quarters of high-net worth individuals (HNWIs) living in London invest in ESG stocks. In contrast, just 50% of investors in Scotland are investing in green stocks, with evenless than that in the Midlands,South West and Wales.
The survey conducted by the investment management company took place in August 2021, and included over 1,000 respondents with investable assets over £250,000. It revealed HNWIs’ concerns about the economy, personal finances and the lifestyle they lead, especially after adapting to the coronavirus pandemic.
Climate change was also a topic of concern, with some scepticism remaining on whether investing in ESG makes a notable difference to the environment and society.
The research also discovered that around two thirds of respondents are actively investing in ESG at present, with the younger generation in particular, having a desire to make greener investment choices. In fact, 80% of those surveyed aged between 18 and 24 said they are investing in green stocks. This percentage decreases with age, as the Wealth Index reveals — for those aged over 65, only 24% are investing in ESG.
Scepticism over ESG investments
Despite the fact majority of HNWIs under 45 think that investing in ESG is impactful, at the other end of the scale, most over 45s think responsible investments do not make a tangible difference to the environment or society in general.
According to the Saltus Wealth Index, just over a quarter of respondents believe that ESG investing does not make a difference, with some suggesting that sustainable investing is just hype. One in five of those surveyed,think that green funds are not truly environmentally friendly, whilst one in four believe the reporting and analysis of ESG investments are not robust enough.
The main reason given by those not currently investing in green stocks, is the fact that ESG investments do not generate sufficient returns for their financial goals – with 31% of respondents believing so.
What is ESG investing and how does it work?
ESG investing is based on a set of criteria that helps investors assess a company’s behaviour and policies. The criteria to evaluate companies can be categorised into three areas:
- Environmental performance — this focuses on the company’s impact on the environment, and considers aspects such as their carbon footprint and sustainability in the supply chain.
- Social impact — this covers the company’s social impact internally and within the wider community, including their diversity and inclusion within the hiring process.
- Governance issues — this considers the company’s board and management, and how they strive for positive change or impact, for example through diversity in leadership or interactions with shareholders.
For some, choosing to invest in ESG aligns with their financial priorities, but also their concerns about environmental and social problems. It can be a way to invest in the companies or sectors that are leading in the ESG movement.
Climate change is just one of the concerns that HNWIs are facing, with post-pandemic uncertainty, rising inflation and the impact of Brexit to consider. With a significant change to our lives after the pandemic, and perhaps a shift of focus on the cards, it highlights further the importance of having a financial plan in place, to ensure both financial and personal wellbeing in the future.
Disclaimer: Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested.