Climate change and environment top ESG investor driver

Climate change and environmental factors is the top driver of investment decisions by investors who consider environmental, social, and governance (ESG) factors, according to Australian Ethical and Investment Trends. 

The superannuation fund and the research house’s survey found 78% of ESG investors intended to invest based on environmental factors over the next 12 months, followed by corporate governance (46%), ethical beliefs (43%), social issues (34%), and indigenous issues (31%). 

These figures were all up from last year where environmental factors were at 58%, ethical beliefs at 34%, corporate governance at 25%, social issues at 20%, and indigenous issues at 11%. 

However, only 40% of advisers said they discussed ESG investing with clients, and it was investors who predominantly initiated ESG investment decisions at 55%. 

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The survey also found that the provider’s reputation was the most important factor when choosing an ESG product at 87%, which encompassed investment track record, distribution network, brand name recognition and ESG values.  

Accumulators were most likely (35%) to say they would invest in companies focused on creating a positive social or environmental impact, while Zoomers (18 to 24 years old) were most likely (32%) to actively avoid companies that create social and environmental harm. 

Another 74% of Zoomers said they had bought an investment or stock based on environmental factors. 

Investment Trends chief executive, Sarah Brennan, said: “ESG will further become a key component of the investing landscape, and this is set to continue to grow. Licensees, platforms and product issuers who ignore it do so at their peril.  

“Our new research shows that not only are investors living their ESG values and partaking in a range of climate-conscious activities, the vast majority want to tackle climate change issues as they build wealth.” 

Brennan said the climate activities and themes which Australian investors were most interested in were new technologies such as for clean and renewable energy, carbon emission reduction, as well as initiatives to reduce energy usage, and recycling. 

 “When it comes to their views of how ESG investing impacts long-term returns, Australians have different perceptions depending on how they are currently invested,” she said. 

“82% of consumers who are invested in ESG believe returns will either be better or about the same than other investment strategies. In contrast, 43% of non-ESG investors believe they will be worse off.”