British asset owners are less concerned by environmental, social and governmental (ESG) factors in their investments now than two years ago, according to new research shared with Net Zero Investor today.
Over a two-year period, the number of investors who believe companies with strong ESG credentials are attractive investment options has dropped by 7%, from 75% to 68%, the latest Investment Forces research by Charles Schwab UK found.
The true value of ESG-led investments is being increasingly scrutinised amidst the current cost-of-living crisis, with UK investors placing more emphasis on the returns their investments are making instead.
In December 2021, more than half (55%) of investors prioritised ESG investments, regardless of whether they underperformed; this has dropped by 8% in just over a year. About two thirds (67%) now prioritise maximising returns over choosing sustainable investments.
The number of investors who consider ESG when making new investments is also dwindling, down 6% since December 2021 to 38%.
Across generations, Boomer investors are the least likely to take ESG factors into consideration when investing (23%), followed by Gen X investors (32%), Millennials (49%) and Gen Z investors (50%).
Investors losing confidence in ESG ROI
The belief that ESG investments provide investors with good returns is deteriorating. Now only 65% think they yield better returns, as opposed to 71% in December 2021.
Appetite to pay additional fees for sustainable investments has also decreased by 8%, meaning now only half (50%) of investors are willing to take on the associated charges.
Richard Flynn, Managing Director for Charles Schwab UK, said: “With the need to maximise returns seemingly growing in importance amid the cost-of-living crisis, fewer investors seem to be factoring in ESG-related considerations into their investment decisions."
He added that "the return on investment is increasingly being called into question, with the fees often associated with sustainable investments now actively discouraging investors in this current climate. It will be interesting to see how any economic rebound and reduction in inflation impacts this attitude in the coming years.”
