Returns are still more important than ESG when picking investments, according to research from the Association of Investment Companies (AIC).
In fact, ESG came in fifth out of five factors below an investment’s performance record, fees and charges, the fund manager’s reputation and the asset management company’s reputation.
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This was true for private investors across the board: men, women, investors under 45, and those aged 45 and over.
However, ESG is more important to women than men, and more important to younger investors than those over 45.
Only 26% of respondents in the survey rated ESG as their most important or joint most important concern when investing. Of these, nearly half were aged over 45.
Among the reasons why ESG came so low in the list of priorities, investors said that they simply valued performance over it, lacked trust in asset managers’ sustainability claims or just hadn’t thought about it.
“In my personal life I do give consideration to these things, I drive an electric car, I have a plant-based diet, I definitely have quite strong feelings about that – but hand on heart when it has come to my investments, the first thing I would look at is returns,” a 59-year-old female respondent said.
Many people also said that they supported these issues but struggled to research them.
“I’m not sure I know enough of what I don’t know! It is a massively complicated area and there are huge gaps. I think it’s very hard to say for example ‘an ESG score of 19 out of 20 is good’ because it’s impossible to judge on that sort of basis,” a 56-year-old male investor commented.
Some people noted that ESG is likely to affect performance, but responses were mixed.
Some 33% believe investing with ESG considerations in mind is likely to improve performance, while 20% think it is likely to have a negative impact, and 29% mentioned no overall impact.
“Private investors do care about ESG issues, but some care more than others, and there is still a lot of confusion about funds’ ESG claims. Investors also have different priorities when it comes to ESG, which are complicated and sometimes competing,” said Annabel Brodie-Smith, communications director at the AIC, which recently launched ESG disclosures on its website to help investors sift through the offering.