Talking about terminology

Talking about terminology
  • Investment Insight
  • 5 minute read

As the interest in responsible investing has grown, so has the vocabulary associated with it.

Unfortunately, not all of the terms used in the industry are fully understood or used in the same way – either by investment professionals or investors. For example, the vast majority (82%) of investors aren’t confident in their understanding of the term ‘SRI’. Similarly, 80% of investors are unsure about ‘ESG’, and 76% about ‘greenwashing’.

That means around four in every five potential investors who speak to an adviser are unlikely to be completely comfortable with the terminology. There’s an age gap here too – younger investors are more likely to be confident in their understanding of these terms.

Positively, investors who use a financial adviser are much more likely to be confident in their understanding of these terms. Those with an adviser are more likely to have both heard of every term, and be confident in their understanding, but there is still some way to go in giving investors more clarity around responsible investing.

% confident in understanding

 

Use an adviser

Don’t use an adviser

Responsible investing

41%

37%

ESG

26%

12%

Sustainable investing

39%

34%

Impact investing

32%

17%

SRI

24%

11%

Ethical screening

33%

19%

UN Sustainable Development Goals

31%

18%

Greenwashing

28%

18%

Beyond the terminology, investors don’t fully understand the opportunities within the sustainable investment universe either. We asked investors to tell us which asset classes they thought it was possible to invest in sustainably.

"I think it's possible to invest sustainably in..."

Property

36%

Small company shares

26%

Gold

26%

Bonds

25%

Large company shares

25%

Cryptocurrency

22%

This could mean one of two things. It could suggest that investors are confident in their knowledge of what investing sustainably means, but they think it’s largely impossible across most traditional asset classes (shares, bonds and alternatives), or it could be they don’t fully understand what sustainable investing means. The latter could very well be true; 22% thought it was possible to invest sustainably in cryptocurrency, which is surprising given the environmental impact of cryptocurrencies’ energy consumption.

Either way, it’s clear there’s a need for education.

Personal financial planning

Explore the full results of the Responsible investing survey 2021

Source: Close Brothers Asset Management, Responsible investing survey 2021

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