Confusion continues to plague ESG investment: CFS
New research has highlighted Australian consumers’ ongoing confusion around ESG and sustainable investing, with less than 10 per cent fully understanding these terms.
A survey of 1,496 Australians commissioned by Colonial First State (CFS) found that just 6 per cent are certain they understand ESG or sustainable investing.
Only 29 per cent are aware of these terms, while nearly half of respondents (48 per cent) said sustainability investment claims are confusing.
The research also discovered that Australian consumers struggle to differentiate between different ESG investment options.
Just 9 per cent of those surveyed expressed confidence in their ability to identify differences between a “sustainable fund” and an “impact fund”. Meanwhile, 58 per cent don’t know how to compare ESG funds.
Nearly half of respondents lack knowledge when it comes to common industry terms such as “net zero” (50 per cent) and “carbon offset” (43 per cent).
“At the heart of the issue is the lack of agreed definitions across the industry and the broader economy, the subjectivity of the underlying ESG considerations and the inherent trade-offs between them,” CFS said.
Earlier this month, it was announced that the CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) collaborated to harmonise definitions for five terms, namely:
- Screening
- ESG integration
- Thematic investing
- Stewardship
- Impact investing
Intended for investors, regulators, policymakers and other market participants, the development of the resource is a response to noteworthy shifts in the responsible investment landscape.
In light of the research findings, CFS urged the Australian government and regulators to work alongside each other to develop more consistent consumer labelling standards.
The investment manager also expressed support for the government’s open consultation on Australia’s sustainable finance strategy.
The consultation paper noted the country’s transition to net zero will require a significant amount of private and public investment, and it’s crucial that financial markets are well-placed to finance this transition and therefore support the government’s emissions reduction target.
“The strategy will help mobilise the private investment needed in coming decades, enable Australian firms to access the capital needed to finance their own transitions and take advantage of new opportunities that arise, and ensure that the financial opportunities and risks presented by climate change are identified and well-managed,” the paper stated.
CFS said it will engage during the consultation to support objectives of the strategy.
AUTHOR
Jasmine Siljic
Recommended for you
BlackRock, in collaboration with iCapital and GeoWealth, has unveiled a model portfolio that delivers access to both private and public market assets in a single account, following adviser demand.
Magellan has confirmed the new leadership of its active infrastructure ETF once head of investment, Gerald Stack, exits in July.
Vanguard has indicated it is actively trying to meet the demand for international ETFs with its next ETF launches sitting in this space.
Dubious marketing strategies involving financial advisers are among reasons that research house SQM Research has put the private credit space on alert.
