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Responsible investing suffering from ‘lack of information’

John Fitzsimons
Written By:
John Fitzsimons

A lack of clarity over what ESG, or responsible, investing really means is holding back investors from backing these products, a new study from Aegon has suggested.

The research found that half of investors would like more information to help them understand ESG investing, while two out of five (43%) want more clear labelling of ESG products. Other issues identified by the investors include the demand for more investment choice (39%) and better articulation of the benefits and impact of ESG investing (45%).

The study found that just 15% of respondents were actively invested in ESG products as a way of supporting a sustainable society. 

Growing demand

Nonetheless, it appears that interest in responsible investing is on the rise. Figures from the Investment Association in March revealed that UK savers put almost £1bn a month into ESG funds across 2020, a jump of a whopping 66% on the year before. This followed reports of funds ‘exploding in popularity’ in the aftermath of the pandemic.

Chris Cummings, chief executive of the trade body, argued that responsible funds were starting to “capture investors’ imagination”, accounting for more than 40% of all net sales over the year.

Meanwhile, a separate study by Aegon last year found that 41% of financial advisers had seen a jump in demand for ESG investments from their clients.

Investors have previously been urged to remember that not all green investments are the same and to bear those differences in mind before proceeding with an investment.

Being responsible without realising

Tim Orton, managing director of investment solutions at Aegon, said it was clear that few people really understand what ESG investing even means, with arguments within the industry about what it constitutes too.

He added that the reality was that many people will have at least a portion of their pension invested in ESG strategies, with increasing numbers of default funds integrating ESG investments.

“The industry has a role to play in communicating how ESG investing works and to spell out the benefits of investing in this way,” Orton continued. “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.”