Non-financial factors are increasingly business critical for appealing to investors

Promotional Business Feature: Pictured - Ria Shepheard, from Charles Stanley in Oxford
Charles Stanley Ria Shepheard

Ria Shepheard from Charles Stanley Wealth Managers in Oxford looks at how businesses are facing changing expectations and having a clear purpose and positive impact on the planet has been brought into sharper focus by Covid-19.

Every aspect of a business is in the spotlight like never before, from how you treat your employees, your supply chain right through to your environmental credentials.  ESG (environmental, social and governance) must be embedded in your strategy and the ESG rating of your business is critical for investors and will determine who will, and can do, business with you in the future.

According to research by Charles Stanley, into investor attitudes towards Socially Responsible Investing (SRI):

  • Almost half of UK investors (48%) expect to increase their exposure to ESG investments over next three years
  • Nearly one fifth (18%) of UK adults expect to significantly increase their exposure to SRI/ESG
  • Nearly one in five (18%) adults admit they’re not aware of SRI/ESG

Almost half of UK investors (48%) expect to increase their ESG investments over the next three years, with one in six (17%) planning to do so significantly.

Our findings highlight the growing role that SRI is currently playing among UK investors, as well as the growing awareness of both SRI and ESG.

SRI awareness and exposure increasing

Among UK adults currently with an investment portfolio, 43% say they have exposure to either SRI or ESG. There is also a clear trend among age demographics, with younger investors much more likely to have SRI/ESG exposure. On average, 64% of those aged 44 and under, currently with an investment portfolio have exposure to this type of investment. This falls to 31% among those aged 45-54 and then further to 15% among those aged 55 and over have said the same.

Nearly one in five (19%) UK adults say their awareness of SRI/ESG has increased over the last 12 months, and a similar proportion of respondents (18%) expect to significantly increase their exposure to SRI/ESG over the next three years. But there is much work to be done if the potential of SRI/ESG is going to be realised with many admitting they were not aware of SRI/ESG.

Why people are choosing socially responsible investments

The most popular key factors for choosing SRI/ESG among those currently with an investment portfolio surveyed are creating a more sustainable world for future generations, delivering better returns, and influencing company behaviour. But the findings are clear that the key to unleashing the power of SRI are delivering on both profits and principles.

Among the UK investors that do not have SRI/ESG represented in their portfolio surveyed, the top factors that would induce a change are revealed to be a more attractive yield, lower fees and tax incentives.

It’s often assumed that SRI means sacrificing performance, but Charles Stanley analysis found that’s not necessarily the case.  Investors have been significantly more likely to generate outperformance over the past 3, 5 and 10 years from ethical or sustainable funds than from standard funds.

Socially responsible investing needs to become the norm

There continues to be a significant movement toward SRI among UK investors. But while awareness and appetite are increasing, more needs to be done to complete the shift from niche investing to the mainstream. Not only is it important that returns from SRI are able to adequately contribute to a long-term investment strategy, it’s also essential to demonstrate the positive impact this type of investing can have. This comes through more transparency, better reporting, and a more informative and user-friendly investment portals. Getting this right will enable investors to put their money to work, safe in the knowledge that it’s delivering for the global good as well as their financial future.

Scrutiny on businesses

Investors and asset managers are increasingly asking questions of companies surrounding the reporting of carbon emissions and how they can reduce them. By allocating capital wisely, championing good practice and engaging with firms perceived as laggards, investors can play a vital role. Ultimately, money talks and companies deemed unsustainable will likely find capital to fund their activities increasingly scarce.

Individuals can also help by choosing socially responsible investments with strong ESG credentials, as well as good engagement and voting records on key practices. In this way companies can increasingly be held to account on this and other issues.

For more information about Charles Stanley’s Bespoke Discretionary Managed service please contact Office Manager, Ria Shepheard on 01865 987485 or email ria.shepheard@charles-stanley.co.uk

www.charles-stanley.co.uk/oxford-office

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