The myth about returns

The myth about returns
  • Investment Insight
  • 5 minute read

Some investors have concerns that screening investments based on ESG, or similar, criteria reduce the ‘universe’ that they’re able to invest in. They may question if a strategy like this omits potential opportunities and limits returns. Others are firm believers that the best performing investments over time are those with positive ESG characteristics.

With these varying opinions, we wanted to find out; are UK investors convinced they’ll need to sacrifice financial returns in order to invest sustainably? So we commissioned Censuswide to survey over 2,000 people with an average of £320,000 invested in a general investment account, stocks and shares ISA, self-invested personal pension or share dealing account. When we asked them this question, it turned out that most investors don't believe there’s any sacrifice required.

An overwhelming 85% believe that investing sustainably will either improve or provide the same returns as traditional investing. The devil is in the detail though – when we break this down by generation, younger investors are far more confident in the ability of sustainable investments to provide better returns, while older investors are slightly more sceptical.

 

For those investors who believe sustainable investing improves returns:

  • 38% think it's because companies which align with sustainable investing will do well in the long-term.
  • Another 38% think consumer demand has increased for sustainable businesses.
  • Around 1/3 think that government regulation will impact companies which are not sustainable.

Richard Stroud, co-fund manager of the Close Sustainable Balanced Portfolio Fund comments on these findings; "The reduced investable universe does not necessarily make returns harder to find. Interestingly, we’ve found a strong positive correlation between our proprietary quantitative valuation model upsides and ESG ratings. This means, on average, we see higher potential upside in companies with better ESG ratings."

By ensuring that your clients have clarity around what their investable universe looks like, we will instil confidence as an industry. Partnering with an investment manager can help with this, by offering educational resources and expert guidance.

Personal financial planning

Explore the full results of the Responsible investing survey 2021

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