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High net worth investors hold ‘sin stocks’ at odds with their ethics

Emma Lunn
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Emma Lunn

Three-quarters of wealthy individuals admit they hold stocks and shares in their portfolios that conflict with their own values.

Eight in 10 (81 per cent) of UK investors with assets of more than £250,000 said they were interested in investing their money ethically – but three quarters (74 per cent) admit to holding so-called “sin stocks”.

The figures come from research from Rathbone Greenbank Investments in Good Money Week. It found that investors claim lack of choice of ethical funds and concerns about spreading risk as the main reasons for picking stocks in contrast to their beliefs.

The proportion was highest amongst those aged 35 to 44-years-old (77 per cent), with half (50 per cent) of this group admitting they had several investments in their portfolio that they did not support ethically.

Rathbone found that the environment is an area where high net worth individuals (HNWIs) find it hardest to reconcile their principles with their investment approach.

Respondents claimed to care most about climate change and plastic waste reduction yet 38 per cent continued to invest in fossil fuels and 34 per cent in mining companies. HNWIs also commonly invested in alcohol and tobacco – 35 per cent and 33 per cent respectively.

When asked to explain this apparent contradiction, the top reasons given were they felt there was a lack of choice when it came to ethical funds (45 per cent), along with concerns about spreading risk (41 per cent). An unstable economic environment was a reason for 38 per cent, suggesting a lack of confidence in the returns investors would expect to receive.

Meanwhile, just over a third were concerned about the money they would lose selling their existing investments and buying new ones.

Interestingly, one in four investors cited their own lack of knowledge and awareness of the benefits of ethical investing as reasons for not investing in ethical stocks and funds.

The research also found that the majority of HNWIs (72 per cent) had the same attitude to investing in their pensions as with their broader investment portfolio. Given that pensions are the single largest investment held by UK consumers, this gives an indication of just how much money is being invested in this way.

John David, head of Rathbone Greenbank Investments, said: “In a short space of time, ethical concerns from the environment to social injustice have gone from the fringe to part of the zeitgeist. It has become normal for people to make conscious decisions about their impact on the planet, with awareness growing every day. The fact that 81 per cent of HNWIs care about their money being invested for good, aligned to their ethical beliefs, suggests we are on the right track. However, there is still work to be done.

“The research suggests that even some of the shrewdest investors still believe the myths about ethical investing, thinking they have no alternative other than stocks and funds that go against their values. The truth is there is a huge choice of ethical stocks and funds offering good diversity to spread risk across a portfolio, even in an uncertain economic environment. And most importantly, this money makes a huge difference to companies’ attitudes, and the way companies conduct their business.”