The Ethical Investing Report 2018

The concept of ethical and sustainable lifestyles has been becoming more mainstream and finding its way into the investment debate. In 2018, 55% of UK adults remain in a cash account (compared to 16% who delve into stocks and shares ISAs), does the option of ethical investing make the stock market any more appealing?

According to the Investment Association, the UK holds about £17 billion in ethical funds. This is about 1.4% of the broader market, and this trend is on the rise. New ethically focussed products are being continuously built and launched. Since we launched our Ethical Investing Report on 18th October, BlackRock has become the latest product provider to launch new products in this space, adding model portfolios and ETFs to its ESG range.

The deluge of press and communication strategies are actively stoking consumer engagement. However, current consumer understanding and awareness of ethical investing remains low. Our research has shown that less than 50% of consumers are comfortable explaining what a fund is. Attempting to engage them on arguably a more complex, or at least more nuanced, sub product is putting the cart before the horse.  With just 36% of people admitting they have heard ethical investing, and 2% knowing what ESG is, there is work to be done.

'Ethical’ or ‘impact’ investing bares resemblance to the job of eCommerce Manager 20 years ago. That sounds anachronistic today because most of us in business are all eCommerce managers. It’s no longer a side show, but the way in which we work. The eCommerce manager is also the CEO. There was no singular inflection point, this was economic fundamentals dictating a natural evolution of trade.

At odds with this progression however, is the dynamics of supply and demand currently being expressed in the ethical investing landscape. Currently people have to ask their advisers for ethical investment options. This means that consumers must demonstrate demand. This is peculiar, as financial services is a supply led domain. People confess to lacking confidence and needing guidance, making it difficult to influence supply through demand alone – people don’t explicitly know what they want. This places the ball in the court of the providers. Can providers and adviser influence the adoption curve by incorporating ethical options into their standard offering? Perhaps the most exciting role of fund managers in this big capitalist merry-go-round, is to act as catalysts for change? When asked about how they would prefer to be invested ethically, investors and savers agree, they would much prefer to have someone else manage it for them, further emphasising the need for genuine advice and guidance.

Understandably, there is a huge amount of scepticism associated with ethical investing. Ethics and capital gain are not common bedfellows and our research echoes this sentiment. Groups that are more interested in investing are less concerned with doing so ethically and vice versa, However, there is one notable exception. Younger people.

Younger people have a far higher interest in the prospect of investing ethically, albeit with their access to capital being lower than their reported scepticism.This reinstates just how much influence the industry has in guiding the appetite for the future. Can we raise the awareness around these options, will we give the next generation of investors the choice to invest ethically, will this move the dial away from ballooning cash savings?

We will continue tracking this section of the industry as it evolves.

 

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With data from YouGov and The Times readers, supported by insights from the Boring Money readers, our new report will offer insights such as:

  • How many people have heard of ethical investing, crucially how many investors have heard of it? - 36% of people have heard of ethical investing, rising to 59% of investors.
  • Are people familiar with the phrase ‘ESG’? – No, just 2% of people have heard of ESG. 
  • Are there observable gender differences in responses? – Women are much more likely to be interested.
  • Who are the ‘baddies’ and the ‘goodies’ for consumers? - no surprises that arms/weapons top the list of companies to avoid!
  • Which indicators of behaviours can correlate with views/propensity to invest this way. Can we correlate which eggs people buy, what they drive, and what papers they read?
  • Our focus groups dig deep into the nuances – appetite, sentiment, concerns and barriers.

All of this is supported by hundreds of verbatim comments. We’re running these through our data platform to extract sentiment and drivers by age, gender and other segmentation methods. What can the language tell us?

Find out more about our reports.

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