Ethical finance is not an oxymoron. Nor is it a niche product for religious fanatics and militant vegans. Indeed, the demand for ethical finance – particularly sustainable investment – has been growing steadily over the past decade and shows no signs of slowing down.
Below, we highlight six recent reports that show the steady and growing number of people across the world that now wish to make profits with principles.
The sustainable investment industry has exploded in recent years. According to figures from the Global Sustainable Investment Alliance – which covers Europe, the US, Canada, Australasia and Japan – total sustainable assets have increased 68 per cent since 2012, up from $13.6 trillion to $22.9 trillion in 2016. According to a paper by global accountancy firm PwC, this growth is light years ahead of that for global investments as a whole, which grew just 7.4 per cent over the same period: from $63.9 trillion in 2012 to $84.9 trillion.
As the report outlines, this massive growth underlines a momentous global shift toward sustainable development and investment. This is best seen in the landmark 2015 UN COP21 Paris agreement, in which world leaders pledged to curb carbon emissions to keep the planet out of the danger zone of 2 degrees of warming. This has influenced many big investors to change their ways, including the world’s fifth largest bank HSBC, which last year moved £1.9 billion of assets from its pension fund into a new environmentally responsible fund.
The 2017 Schroders Global Investor survey – which collected data from 22,000 investors across the world – found that 78 per cent of investors say sustainable investment is more important to them than it was five years ago. These people are also putting their money with their mouth is, with 64 per cent claiming they have increased their exposure to sustainable investments since 2012. Additionally, 42 per cent say they often or always invest in sustainable funds.
Sadly old Blighty is a little behind global averages, with just 67 per cent of UK investors saying sustainable investment is more important to them now than it was, while 57 per cent say they’ve upped their exposure and 33 per cent claim they often or always invest sustainably. The leaders in this space are India and China, where climate change and toxic pollution are highly visible, and where both appetite for and adoption of sustainable investment is above 85 per cent.
Want to put your money into a better world? Read our Good Investment Review, with star ratings and listings of the good (and the not so good) impact funds available in the UK
Almost every investor survey conducted over the past five years shows that younger investors – particularly the so-called ‘millennial’ generation – are more interested in sustainable investment than their elders. In the UK, UKSIF found that 54 per cent of millennials want to be offered fossil free investments “as standard” by their pension providers, compared to 40 per cent overall. Additionally, 44 per cent of active millennial investors think it’s possible to create positive social and environmental change through their portfolios, compared with 34 per cent overall.
This is echoed in a report commissioned by ethical financier Rathbone Greenbank, whose 2017 survey of 1,500 UK adults found those aged between 25 to 34 were more likely to engage with social impact investing (36 per cent) compared to over 45s (just 6 per cent). Additionally, 28 per cent of 25 to 34 year olds said that using shareholdings to positively impact a company’s activities was the best way to use money for good, which again contrasted sharply with a meagre 5 per cent of over 45s.
Morgan Stanley’s 2017 Sustainable Signals survey of 1,000 US investors found that a staggering 75 per cent of investors are interested in sustainable investing, up from 71 per cent in 2015. Again, they are also putting their money where their mouth is, with 38 per cent reporting an increase to their sustainable investments since 2015.
Like UKSIF it also found increased interest among millennials, with 86 per cent of 18 to 35 year olds stating they were interested in sustainable investing. Like their British counterparts, American millennials want more options in their pensions – with 90 per cent stating they would pursue responsible investments if they were offered in their pension plans. Women of all ages also showed more interest in responsible investment than men, at 84 per cent versus 67 per cent.
Women, as the Morgan Stanley report suggests, often have a greater interest in ethical finance and sustainable investment than men. Despite this, women do not invest more sustainably. Moxie’s Understanding Female Investors report – which is based on a survey of 500 female investors across the world – sought to understand why. Its findings suggest that the finance industry is not doing enough to cater for women.
Moxie found that 83 per cent of female investors care about where their money is invested, 69 per cent feel a sense of urgency to invest responsibly, and 63 per cent are motivated to be responsible investors. Despite this, though, nearly half said they didn’t feel confident making investment decisions, with European women feeling particularly uninformed. As such Moxie is calling for the industry to step up and potentially unlock a tidal wave of sustainable investment.