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Embark Investor Confidence Barometer

Why ESG investment market has an age problem

  1. Ahead of COP26, a surprising investor trend in ESG importance

  2. Why investors’ eco-anxiety presents an opportunity

  3. Do advisers agree with ESG returns claims?

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Responsible investing is of least importance to the youngest investors, even though most do not believe it hinders returns, according to the latest Embark Investor Confidence Barometer.

Ahead of the 26th UN Climate Change Conference (COP26), half of more than 750 affluent investors said Environmental, Social & Governance (ESG) factors were not important to them when making investment decisions – and the younger the investor, the more indifferent they appear to be.

More than six in ten (61%) investors aged 35-44 said ESG was not important to them, falling to 49% of those aged 45-54 and again to 40% for 55-64 year-olds.

A quarter of those aged 55-64 disagreed ESG was not important to them, compared with only 16% of 35-44 year-olds.

However, a significant proportion of each age group also said they neither agreed nor disagreed that responsible investing was important to them. This was the case for around a third of those aged 45 and above.

Does eco-anxiety present an opportunity?

While half of investors declare ESG is not important to them when making investment decisions, many agree they have a responsibility to the environment when investing.

Younger investors feel strongly on this point.

According to the Barometer, most advised (61%) and non-advised investors (62%) agree it is their responsibility to invest in a way that doesn’t contribute to climate change.

Almost three-quarters (73%) of non-advised investors aged in the youngest bracket (35-44) agree it is their responsibility, compared with 64% of 45-54-year-olds, and 58% of 55-64-year-olds.

Significantly, very few investors actively disagree with this sentiment (19% of advised and 10% of non-advised).

Investors positive on ESG returns

More than half (54%) do not believe investing responsibly hinders returns, though older investors are more likely to be unsure, or suspect it does.

While almost two-thirds (63%) of investors aged 35-44 agree responsible investing does not hinder returns, this falls to 49% of 45-54-year-olds, 40% of 55-64-year-olds, and only 30% of 65-70-year-olds.

Almost half of the 65-70 age bracket (49%) indicated they neither agree nor disagree that responsible investing hinders returns.

Only 9% of younger non-advised investors (35-44) indicated they believe responsible investing may hinder returns, compared with more than a fifth of those aged over 55.

“The question of whether younger investors care about sustainable investing and are putting money into appropriate funds is rhetorical, isn’t it? Pretty much everything we read tells us millennials are prioritising responsible investing.

In some ways, the findings of our latest Barometer reinforce this view: almost two-thirds of investors agree it is their responsibility to invest in a way that does not contribute to climate change, with the youngest investors (35-44) caring the most.

However, this does not appear to be influencing on-the-ground investment decisions. More than
60% of investors aged 35-44 said ESG was not important to them when making decisions about their portfolio.

So, while investors may be talking a good game, our Barometer suggests that many of those with investable wealth – i.e. those in a good position to do something about it – don’t yet consider it important enough to influence their investment choices.

With the UN Climate Change Conference kicking off in Glasgow shortly, this is a concerning insight.”

Sara Wilson
Head of Platform Proposition, Embark Group

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